Simple steps for senior managers to prepare for increased responsibilities

48,721 companies will come under the scope of the Senior Managers and Certification Regime (SMCR) following its full extension on 9th December, says Fox & Partners, the employment and partnership law specialists.

SMCR rules were introduced by the FCA to increase accountability for senior individuals in the financial services industry to help root out misconduct. The rules were introduced for banks in 2016, insurers in 2018, and fully extended by the end of 2019.

Fox & Partners says that the SMCR has placed a considerably heavier burden of responsibility on senior managers in the industry. It means that senior managers can be held personally liable not only for their own actions, but also for the actions of the staff they manage.

Senior managers can face financial penalties, public censures, suspensions and conditions and limitations upon that person’s approval. The disciplinary powers available are designed to promote high standards of regulatory and market conduct by acting as a deterrent. The FCA issued its first fine under the SMCR in May 2018, for £642,000.

Fox & Partners says there are some simple steps senior managers should take to ensure the SMCR does not put them under unfair pressure:

  • Obtain a statement of responsibilities which will show the areas they will be responsible for when performing a senior management function and a management responsibilities map (a document which describes the management and governance arrangements).
  • Request confirmation of D&O insurance.
  • Ask for training if they don’t feel that they are fully ready to take on the new position of responsibility.
  • Obtain assurances that they will be provided with sufficient staff to support them with their new responsibilities.
  • Request details on any compliance problems that have previously occurred within their area.
  • Consider negotiating an improvement of their terms of employment, such as an increase in salary to compensate for the additional responsibilities

Ivor Adair, Partner at Fox & Partners, says: “Those being brought into scope of the SMCR face a far greater risk of falling foul of the FCA. That new responsibility shouldn’t be taken on too lightly.”

“Managers can now be held responsible for the actions of others and could find themselves being investigated by the FCA for areas that they are responsible for.”

“The FCA will police the SMCR with fines so be prepared. Seek proper assurances from your employer and review what your new obligations are very carefully.”

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