Sarbox for the City?

The FT (17/12/12) reports that chief executives of investment businesses face a new risk of being prosecuted following the recent “Dear CEO” letter from the FSA requiring them to attest that their companies comply with FSA rules regarding conflicts of interest. The FT article widens the subject to cover compliance with client money regulations, citing the big fine imposed on Towry Law last year. Must directors take a more active interest in the detailed operations of the business, not just leave it to the CF10a appointee? Are we seeing a City version of Sarbox?

With the backdrop of MF Global it is hardly surprising that asset managers have to improve their systems.

It seems that, the more the FSA peels away the layers in the arcane administrative processes by which asset managers comply, the tighter the FSA CASS rules become. This is especially true of CASS 7 client money regulations including a more widely imposed Method 1 daily calculation and more precision in CMAR, and the deployment of the on line Gabriel system.

The juxtaposition of on line investment systems and off line configurations of accounting, reconciliation fill-ins and spread sheets, is surely an anachronism that CEOs would not tolerate if they were the direct users of such technology. And it looks as if CEOs will indeed become direct users. After all cash is not simply the by-product of a more exciting and sophisticated business.

With the launch of the Financial Conduct Authority in 2013 to replace the FSA, it does not stretch the imagination too far to expect it to quite rapidly show that it has teeth with the result no doubt that more cases will hit the headlines.