Social media guru fears new rules may be 'devastating'
A leading figure in promoting social media compliance in the finance sector has warned that new rules on making senior managers more accountable could have a “devastating impact”.
Kitty Parry fears that the extension of rules, which were originally designed to force bank bosses to take responsibility for misconduct, could drive away talented professionals scared off by the potential implications.
The Government last week published details of proposals to widen the Senior Managers and Certification Regime to incorporate advice firms and the sector as a whole.
Some 17,200 investment firms, a category which includes financial advisers, would be subject to the new rules.
Ms Parry, who founded the Social Media Compliance Platform, said that the risk of adverse implications from the changes was heightened by the increased prevalence of websites such as Twitter and Facebook, which have become commonly used among finance firms.
She believes the rules “maybe a step too far, despite the reviewing of the reversal of the burden of truth”.
She said: “It's time the regulator took heed of their advice of 'what is reasonably practicable' and considered the implications, particularly with the rise of social media use. This could mean the loss of talented professionals from the finance industry who don't want to take the risk of the SMR, which would have a devastating impact.”
She added: “The SMR provides the regulator with powers which may not have adequate regard to the fundamental principles of justice or the individual's constitutional rights.”
Ms Parry does believe, however, that the reforms are in essence correct, saying: “The FCA are right in their thinking that we need to consider how individuals can hide behind the deep pockets of their big firm employees.”
A Treasury report, released last week, stated: “The government considers that it is now appropriate to extend the SM&CR more widely, creating a more rigorous, comprehensive and consistent approach across the financial services industry.
“Many firms beyond the banking sector – such as large investment firms, insurers and those involved in shadow banking – can pose a threat to financial stability.
“Misconduct by firms of any size can have serious impact on the welfare of consumers or on market integrity, which will in turn harm consumers, investors and the businesses that depend on fair and effective markets. Such misconduct can be caused by similar failings to those identified by the PCBS in banks.”