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Compound Growth

4th December 2015

Personal Accountability under the Senior Managers Regime

With just over three months to go until the Senior Managers Regime (SMR) starts to the implemented, Tracey McDermott, acting Head of the FCA delivered a speech at the City & Financial conference urging firms to embrace the opportunity that the SMR provides  - particularly in reviewing and revising internal processes and procedures.

Ms McDermott’s speech addressed the practicalities of implementing the new Certification Regime (CR) the Senior Managers Regime (SMR) and high-level conduct rules that together make up the Individual Accountability Regime (IAR) that will start to be implemented for some firms from 7th March 2016, and that is being proposed by government, to be extended to all regulated firms come 2018.

SMR: Flexible Implementation

With the window until implementation shortening, Ms McDermott stated that “It is critical that, at this point in the cycle, we do not lose momentum but instead see a renewed push, across the industry, to drive up standards and to tackle problems”

Ms McDermott informed that the design of the new regime is deliberately set to be flexible to allow firms to implement it in the best way suited to their own business model.

“rather than taking an overly prescriptive approach, firms are being given considerable latitude to design and implement the regime as they see fit.”

Tracey McDermott, Personal Accountability, FCA Speech 2nd December 2015

SMR: Firms to embrace the opportunity and ‘spirit of the rules’

The speech further informed that the regulator sees the new regime as having two major priorities, these being:

 That there is a clear focus from firms on meeting the ‘spirit of the new rules’, rather than approaching the regime with a narrow concentration on what the letter of the law requires.

 That firms must ‘take ownership of the regime’ and embrace the opportunities it presents for their business.

As Ms McDermott said, “Implementation of the SMR will be a massive test here – if embraced and embedded as an exemplar of good business – not as a compliance task – it has the capacity to lead to a sea change in how UK financial services is seen by all parties.”

“In my conversations with firms, I know many are really embracing this. Using the new regime as a chance to streamline their structures, to reinforce values they have always espoused and to empower and inspire their staff. That is the approach we want to see”

Additionally, Ms McDermott took the opportunity to again highlight a few of the most important steps that the regulator see firms must take in the lead up to the new regime, these being:

 Firms need to allocate senior management responsibilities clearly.

 For groups, work out which of your entities come under the regime and how they are linked together.

 What activities are actually carried out and how significant are they? What does each entity actually do?

 Firms need to identify which individuals hold Senior Management Functions and are considered ‘Senior Managers’ – such as the chief executive, executive directors etc

 Firms need to allocate responsibilities to these Senior Managers, many of which will already be well understood, such as being responsible for training staff and countering financial crime.

 Firms need to determine if there are functions or anyone that is missing or gaps that need to be filled.

 Senior Managers that have overall responsibility for an entire area or activity of a firm must be added to the list, regardless of the job title they hold

 Firms must record those responsibilities that have been allocated to individuals and record in the form of a statement for each individual and in an overall map of responsibilities for the firm or group as a whole.

SMR Regulatory Support: Who can help?

If you would like to discuss how the new Individual Accountability Regime including the Senior Managers Regime and Certification Regime might affect your firm or if you would like assistance in planning or preparing for any of your firm’s current or future regulatory requirements, please get in touch with our helpful and friendly compliance support team.

FCA Personal Accountability under the Senior Managers Regime

Read our latest articles, news and views affecting compliance and regulation in the UK Financial Services Industry.

Comment from the FCA:

“The regime is not designed to re-invent the way that firms organise themselves – but to reflect – and ensure clarity about how they operate in practice.”

Tracey McDermott, FCA, December 2015