FSA’s corporate governance framework and intensive supervisory approach – Corporate governance is currently high on the FSA’s radar and it is clear that issues relating to corporate governance are a key component of the FSA’s new intensive supervisory approach. This briefing discusses some of the recent regulatory proposals relating to corporate governance, notably those found in a recently published FSA consultation paper entitled “Effective Corporate Governance (Significant influence controlled functions and the Walker Review)” (Consultation Paper 10/3).
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How does corporate governance fit in with the intensive supervisory approach?
Corporate governance should be viewed as an integral part of the FSA’s intensive supervisory agenda, with the threat of regulatory intervention where the FSA has major concerns about the judgments made by a firm in relation to its internal corporate governance arrangements.
The FSA will use the extended scope of the approved persons regime and the more intrusive approach to the approval of candidates being put forward to perform SIF roles to articulate its expectations of firms’ corporate governance arrangements and to ensure that their expectations are taken into account in practice.
To view Table B, which illustrates how various strands of the FSA’s intensive supervision approach fit together and the range of regulatory responses that the FSA has at its disposal.
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Enforcement action against those performing SIF roles is likely to become more commonplace where problems occur, consistent with the FSA’s stated policy of credible deterrence.
The fact that the FSA has thus far failed to articulate the regulatory standards expected of NEDs and CF00 approved persons and the associated potential liability is undeniably a matter of real concern. It is also a matter of fairness that those who are approved to perform SIF roles should have a clear idea of what they are subject to in terms of potential regulatory responsibilities and liabilities. It is hoped that the FSA will clarify and articulate its thinking on the issues raised in this briefing in its policy statement, due in the third quarter of 2010.
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