Other parts of this series:
The UK has led the world in the conduct and culture agenda as part of the European Union (EU) and as John Griffith Jones (Chairman of the Financial Conduct Authority) posed in a recent speech the question we are all pondering is: “How important will ‘conduct’ be in the future?”3
As banks, insurers and capital markets firms start to plan for BREXIT, I am going to discuss some of conduct items on the short and long-term horizon and offer some suggestions for firms to consider.
The referendum result has meant the UK has entered a period of market volatility and ever increasing uncertainty. The sterling hit its lowest level in 31 years.4 There have been many headlines about firms moving staff outside of the UK5 and as many headlines denying this will happen.6 There is uncertainty as to whether EU citizens will be free to work in London post-Brexit. This uncertainty, variability and confusion has several significant conduct risk implications for firms to consider:
- Market Conduct: The conditions seen post-Brexit include a significant risk for market abuse (the market volatility and continued future uncertainty, potential for the firm’s staff feeling fearful and anxious about their jobs, their potential alienation from the public at large, as well as greater pressure on firms’ profit margins are all risk factors for this behaviour). No doubt the Financial Conduct Authority regulator will be scrutinizing this period closely and should want to know how firms are managing this risk.
- Vulnerability: Staff should be increasingly alert to vulnerable customers as market volatility could lead to many more customers entering “at risk” situations. Firms should have plans in place to help identify these customers and manage these situations fairly.
- Staff Turnover: Many firms have found that high staff turnover leads to an increase in conduct risk. Firms should take steps to make their staff feel valued and supported throughout this period to help prevent an exodus of regrettable resignations as FinTech firms and jobs overseas look increasingly desirable.
In times of uncertainty staff look for strong leadership to know how to respond. Tone from the top will be key to firms continuing to deliver good conduct outcomes in the short term.
- “Statement on European Union referendum results,” Financial Conduct Authority, June 24, 2016. Access at: https://www.fca.org.uk/news/european-union-referendum-result-statement
- “Global regulation in the post-crisis era,” Financial Conduct Authority, June 30, 2016. Access at: https://www.fca.org.uk/news/global-regulation-in-the-post-crisis-era
- “Post-Brexit pound slump: Should you buy dollars or euros?,” The Week, June 28, 2016. Access at: http://www.theweek.co.uk/brexit/70408/post-brexit-pound-slump-should-you-buy-dollars-or-euros
- “HSBC ‘to move jobs to Paris if UK leaves single market’,” BBC News, June 26, 2016. Access at: http://www.bbc.co.uk/news/business-36629745
- “HSBC chairman Douglas Flint commits to keeping UK base,” Financial Times, June 30, 2016. Access at: https://next.ft.com/content/512fa242-3eb0-11e6-9f2c-36b487ebd80a?ftcamp=published_links%2Frss%2Fcompanies%2Ffeed%2F%2Fproduct