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Senior Managers Regime – What You Need To Know

Posted 10/02/16

The new Senior Managers Regime and Certification Regime from the FCA will finally come into full force from the 7th of March – just a month away from the writing of this article.

What does this mean?

Well, for starters, lets recap on the FCA’s purpose in all this. They aim to make sure that senior managers can be held accountable for misconduct which occurs within their area of responsibility, and make sure individuals working at all levels can be held responsible for their conduct when it comes to regulatory compliance. In short: it aims to bring greater alignment between risk and reward.

The Senior Managers Regime applies to any individuals who perform SMFs (senior management functions). That is to say, any function which needs the person performing it to have management-level responsibility in the firm’s affairs.

Key features of the Senior Managers Regime include:

-Requirement of pre-approval of new senior manager appointments by regulators

-Any application for approval needs to be accompanied by a ‘Statement of Responsibilities’ which sets out what affairs the person will be responsible for managing.

-Regulators to have the power to impose time limits or conditions before approving an application

Potential accountability of senior managers should their organisation breach a regulatory requirement in the area designated in their ‘Statement of Responsibilities’. They can be held accountable if they can’t satisfactorily show that they’ve done everything in their power to prevent a breach of regulations, although since October 2015 the wording has been changed to place the burden of proof on the regulators, rather than the senior manager.

Potential criminal liability should a breach that falls under the ‘Statement of Responsibilities’ cause a financial institution to collapse.

While the first two points are largely bureaucratic in nature, and the deadline for submission of the relevant paperwork was yesterday (Monday 8th February 2016). The second two are the ones which senior managers will want to sit up and take notice of.

These two points could have real, significant consequences for senior managers should someone in their team breach regulations. That means they will have to take an active role in ensuring that they are doing everything in their power to ensure compliance.

Technology will be an increasingly important part of this as communication complexity increases. A large part of avoiding being held accountable is making sure every communication across every medium is recorded for evidence provision. Failure to provide evidence in a timely manner could be a breach of a senior manager’s ‘Statement of Responsibilities’, even if there was no breach within those communications.

Which is why we see automated compliance assurance as so vitally important to the financial services sector. It’s now paramount that senior managers can show that they’ve done everything they can to make sure their recording infrastructure is working as intended, all the time, and be able to immediately notify the authorities if there’s a blip.

To see our suite of automation products, click here.

For more information about the Senior Manager Regime, the Bank of England has provided full details in advance of the March deadline here. The FCA has also provided a helpful explanatory powerpoint here.

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