After a thorough consultation in respect of the application of the planned regime, Singapore is the next jurisdiction to announce the launch of the IACG, for those firms providing financial and insurance related services that fall within the regulatory perimeter of the Singaporean regulator, MAS. The IACG takes an outcomes-based approach, requiring organisations to demonstrate the following:
- Outcome 1: Senior managers responsible for managing and conducting the FI’s core functions are clearly identified.
- Outcome 2: Senior managers are fit and proper for their roles, and held responsible for the actions of their employees and the conduct of the business under their purview.
- Outcome 3: The FI’s governance framework supports senior managers’ performance of their roles and responsibilities, with a clear and transparent management structure and reporting relationships.
- Outcome 4: Material risk personnel are fit and proper for their roles, and subject to effective risk governance, and appropriate incentive structures and standards of conduct.
Unlike some of the other accountability regimes we have seen implemented across the world, with one of the most impactful being the extension of FCA's Senior Managers and Certification Regime (SM&CR) to virtually all regulated UK firms, the IACG has some distinct differences:
- The IACG is being rolled out to all relevant Financial Institutions (FIs) simultaneously, rather than being phased;
- The IACG is non-prescribed in terms of inputs and is instead outcomes based, allowing firms latitude in how they meet the outcomes;
- The IACG joins up expected practises for FIs in terms of culture and conduct with supplementary guidelines issued in respect of areas such as hiring, and communication channels;
- Rather than the application of the IACG being based upon metrics such as revenue or balance sheet, the key metric used to determine application is based upon FI headcount, and finally;
- The IACG is very specific about territorial scope and cross-jurisdictional application.
Conversely, the regime also has some very consistent tenets with what we have seen in other suitability regimes, such as the expectation on senior managers and those in position of responsibility affecting client outcomes. Training expectations and regulatory notification events are similar when considered alongside other accountability regimes. Additionally, the Fitness and Propriety expectations for those persons subject to the regime is also aligned with other accountability regimes, providing congruence of expectations internationally, as exercised by home state regulators for the conduct of every professional involved in financial services and insurance.
From what we have experienced, particularly in terms of assisting firms with implementing the SM&CR, launching and embedding the IACG should not be underestimated. This is a framework that touches every area of an organisation and virtually all of those within the organisation, depending on their job role. From lessons learned, we know that successful implementation requires close dialogue and 'from the front' leadership at the C-suite level to confirm functions, roles and responsibilities. Close counsel is required with HR to adherence to the regime, update job descriptions and handle sensitive discussions, as individuals' roles could be substantially change. Last but not least, Compliance is a key stakeholder in the implementation; While we would not encourage that this is a compliance-led project, the compliance function will need to be the gatekeepers, with particular value in the process given that the regime is outcomes based. Their input and interpretation as to 'what good looks' like will be key in how firms present an articulation about how they have interpreted and met MAS requirements.
We can help firms subject to the IACG avoid some of the pitfalls and challenges experienced in other jurisdictions and make the most of this relatively short 12-month implementation window, as it is nowhere near as long as to sounds to implement a new accountability and conduct regime into your organisation and to ultimately re-tune your culture. Please do not hesitate to get in touch with one of the contacts below for more information in relation to the IACG.
We have a depth of experience in terms of advising firms around all aspects of individual accountability across multiple jurisdictions, from implementation and how compliance can be demonstrated at an organisational level, to advising and defending individuals in terms of how they demonstrate the reasonable steps taken in discharging their role and responsibilities in respect of relator conduct requirements.
To find our more, please contact Andrew Jacobs or Ben Constance, or download our recently published insight report: Individual accountability and the key considerations.