Senior Managers’ and Certification Regime

This blog is dedicated to providing insights and advice on training requirements following on from the UK financial services Senior Managers’ and Certification Regime. This regime is the regulatory response to the inability to hold managers to account for all the financial services scandals in the UK in the past decade. It is backed by the Financial Services (Banking Reform) Act 2013 which has given teeth to the regulators - FCA & PRA, and we are about to see how far they are willing to sink them in. The omens were not good when the regulators asserted under that the presumption of responsibility that in future cases of misconduct the senior managers would bear the burden of proving that they took the necessary steps to manage the affairs of their firm that they were responsible. In mid October the regulators backed of slightly and reframed that as the duty of responsibility, which shifts the burden of proof back to the regulators/prosecutors as it should be. However, the regulators have warned that statutory duty of responsibility is backed by "the same tough underlying obligation" and that it would be advisable for Senior Managers to "take reasonable steps to prevent regulatory breaches in the areas of the firm for which they are responsible". Senior Managers’ and Certification Regime is the new framework to strengthen accountability in financial services. It has three components: 1) Senior Managers’ Regime - This covers the fraction of the Approved Persons performing Senior Management Functions. They are expected to have clearly defined responsibilities and be held personally responsible for breaches of their domain. The regulator provide a list of opportunities that must be allocated between Senior Managers without leaving any gaps. Senior Managers will need to be assessed as Fit and Proper and approved by the regulators. 2) Certification Regime - This covers the remaining population of the erstwhile Approved Persons and more (together the numbers of the SMs and the CPs will exceed the previous numbers of Approved Persons). Firms will be able to self certify these persons - no need for approval from the FCA. 3) Conduct Rules - these are analogous to the statements of principle for Approved Persons. But they apply to practically everyone in financial services firms other than those in ancillary roles such as HR, IT and Facilities. And they are likely to be policed more rigorously. More on these three components and other aspects including prescribed roles, Management Responsibilities Maps, Fit and Proper assessments etc in future posts.