Financial Conduct Authority Senior Managers and Certification Regime

The Financial Conduct Authority (FCA) has published proposals to extend the senior managers and certification regime (SM&CR) across most regulated firms replacing the existing approved persons regime. This follows a government announcement in October 2015 that it wished to extend the SM&CR to all sectors of the financial services industry.

The FCA said that the aim of the new regime was to reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct and competence. As part of this, the SM&CR aimed to encourage a culture of staff at all levels taking personal responsibility for their actions and make sure firms and staff clearly understand and can demonstrate where responsibility lies.

Under the SM&CR the responsibilities of senior managers will be clearly set out and, should something in their area of responsibility go wrong, they can be personally held to account. The certification regime means that will certify individuals for their fitness, skill and propriety at least once a year if they are not covered by the senior managers regime but their jobs significantly impact customers or firms.

The FCA also said that there will be five conduct rules that will apply to all financial services staff at FCA authorised firms. These rules mean that individuals must act with integrity, act with due care, skill and diligence, be open and cooperative with regulators, pay due regard to customer interests and treat them fairly, and observe proper standards of market conduct.

Financial Conduct Authority senior managers certification regime
Jonathan Davidson: Culture and governance of financial firms a priority for FCA

Jonathan Davidson, executive director of supervision- retail and authorisations at the FCA, said: “Culture and governance in financial services and its impact on consumer outcomes is a priority for the FCA. The extension of the senior managers and certification regime is key to driving forward culture change in firms.

“This is about individuals, not just institutions. The new conduct rules will ensure that individuals in financial services are held to high standards, and that consumers know what is required of the individuals they deal with.  The regime will also ensure that senior managers are accountable both for their own actions, and for the actions of staff in the business areas that they lead.

Additionally, the  Prudential Regulatory Authority (PRA), which is part of the Bank of England has published proposals to extend the SMCR to insurance firms. The PRA said that a  key objective for the proposals was to strengthen the PRA’s regulatory regime for insurers to ensure there is an effective governance system with a clear allocation of responsibilities within firms; as well as to ensure the individual accountability of senior managers and directors.

The consultation for both sets of proposals ends on 3rd November 2017.

Last Updated: 28 July 2017
Post comment

Leave a Reply

%d bloggers like this: