The FCA set out its proposals to extend the SMCR to “almost all” financial services businesses on Wednesday, with the Treasury due to set a date for full implementation some time in 2018.
The regime was created after the financial crisis to make senior management at banks and insurers personally responsible for misconduct by their staff.
The regulator said SMCR will “essentially” replace the Approved Persons Regime with other staff not deemed to be senior managers having to be certified by the firm annually.
It does yet not apply to appointed representative (AR) firms, though the regulator says a paper looking at AR businesses will be published later this year.
Held to account
The FCA said the responsibilities of senior managers will be clearly set out and, should something in their area of responsibility go wrong, they can be held to account personally. Senior managers will be approved by the FCA and appear on the FCA Register.
The regulator has set out the five conduct rules applying to all financial services staff at FCA authorised firms under the new regime.
These are 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.
Culture shift
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.
The FCA said it is committed to ensuring that the regime is proportionate according to the size of the firm, and therefore proposes applying a baseline of specific requirements to all regulated firms, called the “core regime”.
Around 1% of complex firms will face some extra requirements, under an “enhanced regime”.
Moving furniture
Compliance consultant Adam Samuel is cynical about just how significant a change this represents, suggesting it may be a case of the regulator rearranging deckchairs.
He said: “You will have exactly the same people subject to almost exactly the same rulebook. It will just be called something different. It picks up the people who might be in a position to do significant harm. But who are the significant harm people in an advice firm? Well they are the people who give advice. So you end up back where you started.”
