After a prolonged period of remote working for many roles in financial services firms there has been a recent shift back to office working, whether on a full or part-time basis. If a firm is considering allowing remote working (at least some of the time for some employees) on a permanent basis, they should consider the FCA’s recently published guidance on remote and hybrid working to ensure that they meet the regulator’s expectations. The guidance applies to all firms regulated by the FCA as well as to those applying to be regulated. Importantly international firms are expected to retain an “establishment or physical presence” in the UK although the guidance is silent on whether it would be possible for all UK employees of an international firm to work remotely. The FCA’s Approach to International Firms requires an ‘active place of business’ in the UK rather than merely a registered address. This suggests that, whilst remote working may be possible (subject to appropriate steps to ensure the firm continues to meet the minimum standards), the FCA would expect some element of the work to be carried out from the UK place of business.
The FCA has produced a list of focus areas for planning in its guidance. As you would expect, the FCA’s primary concerns are to ensure that firms continue to meet the threshold conditions, provide accurate, complete and timely information to the FCA and that customers can contact a firm using the contact details on the FCA’s register. The FCA also wants to avoid any adverse effect on management oversight of functions and outsourcing, financial crime prevention, market integrity, treatment of customers and competition, taking into account the challenges of effectively supervising employees working away from the office. The FCA’s list is non-exhaustive and firms will be expected to conduct their own risk analysis of a wide range of systems and safeguards, such as IT security, client onboarding, and order and data analysis. The guidance indicates that firms should be able to “prove” that they have undertaken adequate planning in relation to remote and hybrid working. It should also be noted that any material change in a firm’s business operations, including in working arrangements for employees, may need to be reported to the FCA (and PRA, if applicable) under Principle 11 of the FCA’s Principles for Business.
Ultimately, the guidance reflects the FCA’s desire to focus on building and maintaining a positive culture, which in turn promotes good conduct. It is recognised that it is more difficult to maintain an appropriate culture, including governance and oversight by senior managers, in circumstances where employees are working remotely and in different locations. In fact, in many respects, the challenges that employers face on a day-to-day basis have become harder to manage as they navigate the complexities of a more spread-out workforce. Going one step further than the guidance, firms might also want to give consideration to whether there needs to be a renewed emphasis on whistleblowing policies, or whether the messaging on sexual harassment needs to be updated to reflect the different types of non-physical behaviour that can arise in a remote working environment, for example.
And so, similar to the adjustments required at the start of the pandemic, the FCA expects firms to identify potential risks arising from employee working arrangements, consider what systems and controls are appropriate to support those working arrangements, and document any decisions made and procedures followed in this regard. Firms will want to give due consideration to the FCA’s guidance, and embrace the realisation that some changes to working arrangements are here to stay.