FSA confirms changes to the rules for approved persons

Folllowing through with its revamp of SIFs (Significant Influence Functions) approval process, the FSA has issued a policy statement confirming the changes. Recent events in financial markets, forced a re-think on the competency of SIFs and there is widespread belief that if certain senior people in banking had a better understanding of the banking world, the crisis may have been less severe. The FSA intents to inteview senior appointments to determine whether they have a good understanding of the risks specific to the business they will be managing.

See below, for the press release and policy statement:
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The Financial Services Authority (FSA) has confirmed an extension of the approved persons regime for those that perform a ‘significant influence’ function at firms.
In its supervisory enhancement programme (SEP) the FSA stated that it would place greater emphasis on the role of senior management, including non-executive directors (NEDs). Today’s policy statement sets out changes to the approved persons regime which improves FSA’s approach to ‘significant influence’ functions by ensuring that those likely to exert a significant influence on a firm fall within the scope of the approved persons regime.

In particular, the FSA has:
· Extended the scope and application of CF1 (director function) and CF2 (Non- Executive Director) to include those persons employed by an unregulated parent undertaking or holding company, whose decisions or actions are regularly taken into account by the governing body of a regulated firm;
· Extended the definition of the significant management controlled function (CF29) to include all proprietary traders who are not senior managers but who are likely to exert significant influence on a firm; and,
· Amended the application of the approved persons regime to UK branches of overseas firms based outside the EEA.

Graeme Ashley-Fenn, director of permissions, decisions and reporting division, said:
“It is important that directors and senior managers at firms understand their regulatory obligations and have the relevant competencies and experience to carry out their roles with integrity.
“Since October 2008, the FSA has carried out 115 interviews for ‘significant influence’ posts at high impact firms. Nine applications have been withdrawn as a result. Once in post, where individuals fail to meet the required standards the FSA will consider enforcement action.”
These changes will come into effect on 6 August 2009 with a transitional period of six months. Firms should now begin assessing which individuals require approval and submit timely applications to comply with the end of the transitional period.

Full Policy Statement: http://www.fsa.gov.uk/pubs/policy/ps09_14.pdf

Powerchex's monthly employment offers survey makes it in the FT

Powerchex has a finger on the pulse of employment offers in financial services firms. With over 300 clients in the industry, we are the first ones to see a downturn or pickup in employment offers. Since September we have been publishing a monthly survey of job offers in financial services. Our findings have been picked up by several publications, most recently by the FT. Read on:






Spoilt for choice on ex-banking employees
By Ruth Sullivan
Published: July 19 2009 08:53 Last updated: July 19 2009 08:53

Asset managers keen to recruit new talent have never had it so good as banks, reeling from the financial crisis, have cut employee numbers, putting a lot of teams out on the street.
Earlier this month, Morgan Stanley Investment Management’s global portfolio solutions team left en masse to set up a new Dutch global macro fund, linked to Worldview, while the real estate team at Citi Alternative Investments, headed by Daniel Pine, has decamped to Forum Partners, a real estate investment manager.
Henderson Global Investors has also been on the look-out for good people for its structured products team, recruiting from banking ranks in the past few months. The asset manager has picked up Ganesh Rajendra from Deutsche Bank to head its advisory team. It has also secured Dan Maynard from Morgan Stanley and hired a five-strong currency team from Fortis investment bank.
But in spite of a wealth of choice, it is important to make sure senior management, analysts or traders from an investment banking environment will fit in an asset management culture. Those who were involved in investment management at banks are more likely to suit asset managers than former traders.
Hermes, the UK asset manager owned by the BT Pension Scheme, has been hiring in the past 18 months, adding 55 people to its headcount with 95 new hires and 40 job losses. “Investment banks have been an obvious area that we have recruited from where investment management had become an integral part of their business strategy but that no longer applies in many cases,” says Rupert Clarke, chief executive.
But ex-prop desk traders that Hermes talked to were not such a good fit. “Very often they are incredibly smart individuals but in many cases they do not demonstrate the sense of responsibility that recognises this is somebody else’s money,” says Mike Webb, head of business development at Hermes.
Boutique asset managers have also been hiring from the large pool of ex-banking employees, taking on analysts and senior managers up to managing director level, says Andrew England, managing director at Morgan McKinley, a City recruitment consultant. “It is a huge coup for a boutique to take on a senior banker with specialist skills and good client relationships,” he says.
Rather than seek employment again, some former bank employees have set up their own fund management businesses, says Alexandra Kelly, a director at Powerchex, the pre-employment screening firm for financial services.
“More than 50 bankers have set up 13 hedge funds and asset managers in the past three months,” she says.
Asset managers are not the only ones taking advantage of the glut of talent on the market. Stockbrokers are also dipping into the pool, making up one of the biggest recruiters in recent months.
Job opportunities in brokerages rose by 77 per cent between April and June compared with the first three months of the year, says Powerchex.
Sarah Dudney, a partner at Lockwood Gibb & Associates, a financial services executive search group, attributes some of the brokerage hiring to “a new breed of small debt advisory and trading boutiques setting up in the past six months as investment banks struggle with deleveraging [and job cuts]”.
However, many bankers are fighting to get back into the big investment banks as the industry shrinks, she says. “If your career has been defined by high revenue in the world of investment banking, it is hard to change. Nobody wants to leave the party.”
Amin Rajan, chief executive of Create-Research, identifies several other directions unemployed bankers are taking in countries including the UK, US, Netherlands, France and Germany, where some of the biggest job cuts have been made.
These include financial engineering, debt restructuring, and mergers and acquisitions.
“Many have been developing good personal relationships with clients in their previous jobs, ready for starting up their own businesses,” he says.
However, he believes the biggest group of “banking refugees” are those “in denial [about their chances of getting back into the industry]. They are the complacent ones who have made a lot of money, are taking life easy and waiting for demand to pick up,” he says.
In the past two years, some bankers sought employment overseas in the Middle East, Singapore and Hong Kong but many have returned after those jobs, in turn, have been cut after a three or six-month period, says Ms Kelly.
Fewer job offers are on the horizon in investment banking than in many other areas of financial services. Eighty per cent fewer jobs were available in the second quarter this year compared to the same period a year earlier in the UK, Europe, and Asia, according to Powerchex.
And the outlook so far this year continues to be limited, with 50 per cent fewer job offers in the second quarter compared with the first three months.
Asset managers may be spoilt for choice for some time to come as ex-bankers, looking for longer-term, less precarious roles compete for a niche in the industry. The test will be whether they stay put when investment banks start hiring again.

Copyright The Financial Times Limited 2009

Vetting tenants - What should you check before letting someone into your property?

In this weekend's FT there was an article about the increase in the level of checking tenants. This is fully undestandable in the current economic environment, but what kinds of checks are appropriate for a tenant?

"Letting agents are putting prospective tenants through rigorous credit checks as property owners want to see proof of income, including bonuses, as well as highly personal information such as the value of investment and share portfolios and savings accounts.
Knight Frank, the agent, said it had reviewed its reference process for new tenants to make sure it could provide enough data for landlords. Rather than using traditional credit checking agencies it is now conducting manual checks itself.
In some cases it is having to procure an indication of the tenants’ net wealth from their banks as well as guarantees from their employers that their jobs are permanent and not under threat, and details of their anticipated bonuses. " states the article in the FT.

Considering that the risk to the landlord is similar -if not greater- to the risk to an employer, then it would only make sense that checks that confirm the likelihood of the tenant remaining in employment should be conducted. Obviously an employer is unlikely to confirm whether they intend to make someone redundant in the near future, but asking the right questions may give you a good indication as to the relative job security of a prospective tenant.

FSA fines director for appointed representative control failings

HOT OFF THE PRESS - FSA PRESS RELEASE

The Financial Services Authority (FSA) has fined Richard Holmes, a director of insurance broker AIF Limited, £20,020 for control failings in relation to an appointed representative firm (AR).
In September 2006, Holmes appointed an AR without carrying out the necessary checks, using only assurances from two business contacts. These individuals were subsequently banned by the FSA on 2 November 2006.
The following February, an insurance underwriter advised Holmes that the AR had premiums outstanding and rather than checking further, he relied on assurances from the AR that the premiums had been brought up to date. Again, when the AR appeared to have problems paying insurance premiums promptly to AIF, Holmes failed to increase his monitoring in any way and nor did he investigate the way the AR was carrying out its business.
Finally, following a complaint made by a client of the AR in September 2007, regarding its failure to put insurance in place, Holmes terminated the AR’s status.
Holmes subsequently became aware that the AR had received clients’ premiums but failed to pass them on to the underwriter, leaving the clients uninsured. In addition, the AR had also instructed AIF to arrange insurance policies on behalf of clients but had failed to pass on the client premiums to AIF.
The FSA is satisfied that Holmes then ensured that AIF took steps to arrange alternative insurance for the clients who had been left uninsured and also ensured that cover was maintained where AIF had already provided instructions to the insurer. The cost to AIF of ensuring clients remained on cover was approximately £27,000.
Jonathan Phelan, head of retail enforcement, said:
“Senior management at firms are responsible for the standards and conduct of the businesses they run – this applies to all firms both large and small. In particular, senior managers should ensure that their appointed representatives are appropriately overseen.
“As a director of the firm, Richard Holmes failed to carry out sufficient initial checks and then failed to monitor adequately the activities of the AR over a period of almost a year despite identifying a number of concerns early on during the AR agreement – this falls below the standards that FSA expects of firms. Directors who fail to discharge their personal responsibilities, including monitoring ARs properly, give rise to a risk of consumer loss and we will take action against them.”
The FSA took into account that Holmes did not deliberately set out to contravene its requirements; co-operated with the FSA and took remedial action to ensure clients were not left uninsured.
Holmes agreed to settle at an early stage of the FSA’s inquires and therefore qualified for a 30% discount under the FSA’s executive settlement procedures. Without the discount the fine would have been £28,600.