The Financial Conduct Authority is recruiting private law firms to help process applications and has spent almost £1m on headhunters this year as it battles to deal with almost twice its typical number of vacancies after a wave of departures, Travel & Tips.
The news comes after Nikhil Rathi, the head of the UK’s financial services watchdog, defended his transformation project to the Treasury select committee last Wednesday, telling them that while there would be “noise” about the changes for some time to come, the FCA was headed in the right direction.
Rathi’s team has provoked a fierce backlash from staff over attempts to change the FCA’s work practices and pay structures, efforts that management say will deliver a more efficient regulator better placed to prevent future scandals like the 2019 implosion of London Capital & Finance, which cost 12,000 savers £236m.
The grievances of FCA staffers have been publicly aired by trade union Unite, which is pushing to represent them. A person familiar with the FCA’s operations said vacancy levels were now running at about 500, versus typical levels of 300. The FCA’s staff is about 4,000.
Against that backdrop, the financial watchdog has been advertising contracts for consultants to pick up the slack, including a recent tender for lawyers to help with the “change of control” applications that financial services groups file when their ownership changes.
The FCA stressed that the “final decision on an application will be taken by an FCA staff member”. The regulator attributed the need for external resources to an “increase in the number of change in control applications”.
“In order to ensure that we can process these as quickly as possible, while maintaining our high standards, we have employed some short-term resources to support us,” the FCA added. Change of control applications are deemed approved if they are not processed within 60 days, so the regulator cannot afford a pile-up.
Regulated firms and their lawyers have been complaining of delays in other areas of the FCA’s work. A lawyer who spoke to the Financial Times said the time taken for some applications was the longest he could remember in a decade.
“There is a very real sense that the FCA is dangerously understaffed in certain key areas, mainly areas that actually provide a service to authorised persons [regulated firms],” the lawyer said.
Last July, Rathi said he was adding 100 staff to its authorisations division. On Wednesday, he told the Treasury select committee that the FCA was deliberately giving companies a more vigorous assessment.
The third-party law firm for change of control applications, which has not yet been appointed, will be used for a maximum of six months and will involve a maximum of 17 people.
The government tendering website also details almost £1m of spending on headhunters to bolster the FCA’s ranks after a string of resignations. The FCA said last week that Megan Butler, head of the transformation project, was leaving.
The £1m was spread across 12 different tenders for executive searches to fill roles including directors, heads of departments, general counsel and the chair of the FCA’s consumer panel. The largest was a £155,000 contract to find a new finance director and finance head of division.
In 2020, the FCA advertised for headhunters just three times, with a total bill of almost £400,000, according to notices posted on the government’s procurement website.
At the Treasury select committee hearing, Rathi said the FCA’s attrition levels for 2021 were not unusually high and that it was facing the same pressures as commercial companies in an intense jobs market. Several FCA insiders and those who recently left the regulator told the FT that staff had been leaving because of the fallout from the transformation plan.