In response to the 2008 banking crisis and other conduct failings, the Government set up the Parliamentary Commission for Banking Standards (PCBS) to improve conduct standards in the banking sector. PCBS recommended a new accountability framework focused on senior management. Government brought forward PCBS recommendations and in December 2013 Parliament passed legislation leading to the FCA and Prudential Regulation Authority (PRA) applying the Senior Manager and Certification Regime (SM&CR) to the banking sector on 7 March 2016. Parliament passed further legislation in May 2016 extending SM&CR to all firms, which are authorised to provide financial services under FSMA, this includes consumer credit firms.
the facts
The aim of the SM&CR, which will replace the current Approved Persons Regime, is to reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct and competence. The FCA propose applying a baseline of requirements to every firm, known as the ‘core regime’, this means that the three main elements of the SM&CR will apply to every firm, namely: the Senior Managers Regime, the Certification Regime and Conduct Rules. The FCA also propose some extra requirements (the enhanced regime) that will only apply to the largest and most complex firms (fewer than 1% of firms regulated by the FCA).
The Senior Managers Regime:
This focuses on the most senior people in the firm and FCA rules will define which roles are Senior Management Functions (SMF’s) depending on the type of firm involved. The responsibilities of senior managers will be clearly set out and documented in individual ‘Statements of Responsibilities’ and every senior manager will have a ‘Duty of Responsibility’, Should something in their area of responsibility go wrong, they could be personally held to account. The senior managers will be approved by the FCA and appear on the FCA Register.
The Certification Regime:
Under the Certification Regime, firms will certify certain individuals, within the firm, 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, firms or markets.
Conduct Rules
Five Conduct Rules will apply to all financial services staff at FCA authorised firms. This set of rules means 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. There will be further conduct rules for senior managers. Note: Regulated firms affected by these changes will move to the new regime on 9 December 2019. The current near final rules are subject to commencement regulations to be made by HM Treasury. All affected regulated firms should prepare for this significant change and familiarise themselves on how the FCA’s proposals affect them. Firms should check they have the appropriate people in the correct approved functions before approved functions before approved individuals are converted from the APR to the SM&CR.
course content
background and rationale behind the SM&CR
The Senior Managers Regime
The Certification Regime
Conduct Rules
The Duty of Responsibility
course aims
To provide attendees with an understanding of the FCA’s proposals together with the information necessary to determine how the extension of the SM&CR proposals affect their respective businesses.