The Financial Conduct Authority (FCA) has published a package of proposals on how firms and individuals will move to the Senior Managers and Certification Regime. The aim of the new regime is to make individuals more accountable for their conduct and competence.
Earlier this year, the FCA consulted on extending the new regime to almost all regulated firms. However, given the differences in the size and nature of firms covered by the extension, the FCA is proposing proportionate approaches for different types of firms. For the majority of FCA regulated firms, the FCA is proposing to automatically convert individuals from the Approved Persons Regime to the new regime. This means the majority of firms will not need to submit applications to convert Approved Persons to Senior Managers. Firms can instead focus on embedding the cultural changes that the new regime introduces and making sure their staff know what they need to do.
The FCA is also consulting on extending the ‘Duty of Responsibility’ to insurers and firms solely regulated by the FCA. The Duty of Responsibility currently only applies to Senior Managers of banks.
Under the Duty of Responsibility, Senior Managers are responsible and accountable for the business areas they lead. The FCA can take action against the Senior Manager responsible where their firm has contravened an FCA requirement in their part of the business. The FCA must show that the Senior Manager did not take reasonable steps to avoid the breach occurring or continuing.
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. Extending the Senior Managers and Certification Regime will drive forward culture change in financial services firms. This next set of our proposals outline our plans for a smooth transition to the new regime, which is simple, clear and proportionate. Indeed, the vast majority of firms will not need to submit applications to convert existing Approved persons to Senior Managers.”
In response to feedback, the FCA is considering what the move to the new regime means for the Financial Service Register.
The FCA welcomes feedback on the proposals and aims to finalise its approach in summer 2018. The date for the implementation of the new rules will be announced and set by HM Treasury in due course.