From 9 December 2019, Senior Managers at FCA solo regulated firms will need to comply with the new Senior Manager Conduct Rules and the new statutory duty of responsibility. So what are the obligations and what should Senior Managers be doing now?
Everyone working within financial services, with few exceptions, is expected to comply with the 5 individual conduct rules. These are:
In addition a Senior Manager must comply with four specific Senior Manager Conduct rules. These are:
The regulator can take action against an individual Senior Manager for failing to meet the above behavioural standards and the cost of getting it wrong can have significant personal repercussions. The regulator may take a range of action against an individual ranging from issuing a private warning, publically censuring an individual through to imposing a financial penalty. In the most serious cases, getting it wrong can lead to an individual being prohibited from working in financial services.
Furthermore, following the introduction of the statutory duty of responsibility to take reasonable steps in May 2016, action can be taken against a Senior Manager where they are responsible for the management of activities in their firm, their firm contravenes a regulatory requirement in relation to those management activities and they as a Senior Manager, do not take such steps as a person in their position could reasonably have been expected to take to avoid the contravention occurring or continuing.
The onus for proving a Senior Manager has breached either the conduct rules or the statutory duty of responsibility lies with the regulator who will consider whether the Senior Manager has taken relevant reasonable steps and have regard to the Senior Manager’s Statement of Responsibility.
When considering if the Senior Manager has breached the applicable conduct rules, the regulator will consider the following factors:
In seeking to determine whether a Senior Manager is responsible for managing the activities concerned in the breach, the regulators will look to the Senior Manager’s Statement of Responsibilities, and in the case of enhanced firms, the Management Responsibility Map. The regulator will also consider how the firm and the responsibilities were allocated in practice, the Senior Manager’s actual role and the relationship between the Senior Manager’s responsibilities and the responsibilities of other Senior Managers.
As part of the preparation for the SMCR regime commencing on 9 December 2019, it is recommended that Senior Managers consider the following actions:
If you would like to discuss any of the above areas, please do not hesitate to get in touch.
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