This paper has been developed by member firms of the FMSB to:
• Set out Good Practice Statements for front office supervision; and
• Make this information available to the industry.
Firms have responsibility for supporting fair and effective functioning of financial markets. Implementation of effective front office supervisory frameworks promotes the integrity and effectiveness of financial markets leading to better outcomes for all market participants.
Front office supervision is a fundamental first line of defence for firms when mitigating risks directly related to employee conduct and their business activities in the “FICC” markets. There are increasingly high expectations on firms to identify and correct poor conduct before it leads to potentially significant losses or negative impact on the effectiveness and efficiency of markets, including potentially negative outcomes for clients, other market participants or compromising effective competition.
Front office supervision is key to strengthening a firm’s overall control framework in mitigating both financial and non-financial risks and promoting good employee conduct and culture. Regulatory interventions and remediation projects consequent to conduct failures are damaging in terms of loss of reputation and are costly and time-consuming. Those costs, as well as direct financial losses, may be avoided, or reduced, where misconduct can be identified and corrected earlier.