What was your vision for the business when you founded the Prudential division here at Cosegic, nearly three years ago now?
Philip and I have worked together various times in the past 13 years and he got in touch when he became CEO of Cosegic. Together we had a vision to create a team that provided practical client focused advice. At the time Compliancy Services had a strong reputation in the market but Philip felt that the establishment of a dedicated prudential team would offer our clients a fully rounded service, from the start of their journey as a regulated business to long established firms, and everything in between.
The increased focus on adequate financial resources (FG20/1) in 2020 has made sound practical prudential advice even more critical for regulated businesses. In fact, I would go so far as to say, that it has never been more critical. I was impressed with the vision and direction of the company and I took the decision to move across to Cosegic at the end of 2020.
My first objective was to consolidate the existing expertise within the company and bring together well-regarded specialists within the prudential space. Once this was achieved, my next priority was to introduce a graduate scheme, as I wanted to ensure that we would always have access to specialists that had been trained first and foremost to work within this niche prudential services sector. It was obvious to me that we could, to expand our capabilities in-house, start training up the next generation of experts ourselves.
Obviously, when I started, I experienced a unique set of challenges as we were about to head into another lockdown, which although daunting was an exciting challenge. It was a breath of fresh air working with Philip as he gave me a clear mandate and the resources I needed to make it happen and I haven’t looked back since.
What noteworthy trends/developments have you noticed at the FCA over the past three years?
Where do you want me start! Obviously, the economic uncertainty that we have seen means that the FCA are more focused on capital and liquidity than ever before. The regulator has been leveraging key touch points such as CiCs and VoPs and increased regulatory reporting to get greater insight into firms’ financial adequacy.
The FCA’s approach has been to combine formulaic rules-based requirements with a more principles driven approach focussed on firms’ own assessments of the harm that they might pose to clients and the wider market. So, in short, it is not enough just to comply with the rule-based minimum requirements, firms must establish their own framework for managing risk, capital, and liquidity. A great example of this is the implementation of IFPR for the investment firm sector in 2022, which was an overhaul of regulation for investment firms.
The implementation was a challenging time for our fledgling team as we had to overlay the new rules and the FCA’s expectation and apply this to our understanding of our clients’ business. So, as you can imagine this was a huge opportunity for us, but we rose to the challenge.
Further, we have seen changes in the financial services sector with a proliferation of Fintech and payments firms and the FCA’s approach has been towards convergence with the rules in place for investment firms, with a particular focus on wind-down planning and liquidity. Now it is a waiting game to see how this approach will be formalised under PSD3.
How has the industry responded to this upheaval?
Many firms have tried to do their best to navigate the new regulatory landscape and the FCA’s expectations and continue to do so. However, there are large areas of uncertainty between the prescribed rules and the FCA’s expectations. Many firms believe they are meeting the regulator’s expectations, but with the FCA’s increased scrutiny some of them are seeing adverse outcomes following supervisory interaction. As a consequence, we are seeing an unprecedented number of firms continually reassessing their approach to managing risk, capital, and liquidity. Other firms that are simply repapering their existing approaches are now finding themselves in breach of their threshold conditions, laying themselves open to FCA enquiry and scrutiny and on occasions censure and costly remediation. So, in short, many firms have found the changes challenging.
How have you navigated your clients through these changes?
From day one, I wanted to establish a team that would provide direct, clear, and practical advice to our clients and I passionately believe that this can only be done by a team of specialists.
We use our deep understanding of clients’ businesses, and marry it to our technical knowledge and our experience of working with the regulator to ensure that we can simplify complex issues and boil them down to practical solutions. Making the complex simple is at the core of what we do.
Three years ago, it was just me and Philip with a vision. Today, I couldn't be more proud of the incredible journey our team has embarked on. From a one-person show to a dynamic team of five, our business unit has truly blossomed and continues to do so.
If you had three top tips for you clients to manage their prudential obligations in the next 12-18 months, what would they be?
Firms should expect further scrutiny from the FCA on the harms their business can cause, how they would wind-down and the liquidity they require, so with that in mind these would be the team’s three top tips:
- Wind-down planning isn’t the poor relation of the ICARA – make sure you put the effort in.
- Document your assessments and discussions thoroughly. Not only is it good governance, if you don’t write it down it will be assumed you haven’t thought about it nor done it.
- Involve SMEs from across your business when assessing harm – not just finance, risk, and compliance.
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