UK: Financial Regulators Consult On Extension Of Senior Managers And Certification Regime

Last Updated: 28 July 2017
Article by Michael Ruck and Steven Cochrane

The UK's financial regulators have promised a "consistent and proportionate" regulatory framework as they consult on proposals for the extension of individual accountability rules.

The Financial Conduct Authority (FCA) has proposed a tiered approach to applying the Senior Managers and Certification Regime (SM&CR) across the wider financial sector, as set out in its consultation on the proposals. Both the FCA and the Prudential Regulation Authority (PRA) are also consulting on extending the rules to insurers and reinsurers, which are currently covered by the PRA's Senior Insurance Managers Regime (SIMR) and a revised version of the FCA's Approved Persons Regime (APR).

It is proposed that the SM&CR, which currently applies to deposit-taking banks, be extended to almost all other firms regulated by the FCA at a date to be set by the UK Treasury, expected for some time in 2018. It will replace the current APR for those firms and change how individuals working in financial services are regulated, according to the FCA.

The UK government announced its intention to extend the SM&CR to all regulated firms in October 2015.

"Whilst at the time this seemed to many presumptive in relation to the potential success of the SM&CR, as introduced initially to banks and a small number of other firms, the FCA and PRA have considered the regime to have been a success," said financial regulation expert Michael Ruck of Pinsent Masons, the law firm behind "John Griffith-Jones, the outgoing FCA chairman, recently referred to the SM&CR as the most significant single matter dealt with by the FCA in the last four years, during his introduction to the FCA annual public meeting. The extension of the SM&CR is therefore not surprising for many reasons."

"The key for those firms to which the regime is being extended is to learn from the lessons of those firms to which the regime already applies and to get to grips with the guidance already issued by the FCA and PRA in relation to the SM&CR. Firms will need to carefully consider their corporate and management structures, the roles of those within the current senior management and how the SM&CR can be applied to the firm in a proportionate and appropriate manner," he said.

The SM&CR formed part of the UK government's programme of banking reform following the financial crisis of 2008. The Senior Managers Regime (SMR) is designed to make it easier for the regulators to hold senior individuals within banks personally accountable for failings on their watch, and requires firms to assign responsibility for certain areas of the business to named senior individuals. The Certification Regime (CR) requires firms to assess the fitness and propriety of staff in certain roles.

The extended regime proposed by the FCA separately from its proposals for insurers comes in three parts. First, it will apply five simple 'conduct rules' to almost all financial services staff at FCA authorised firms, requiring them to act with integrity; and with due care, skill and diligence; to be open and cooperate with regulators; to pay due regard to customer interests and treat them fairly; and to observe proper standards of market conduct.

The second aspect of the new regime will be the new rules for senior managers, who will have to be approved by the FCA and appear on the FCA register, which currently lists 'approved persons'. Thirdly, firms will be required to certify individuals who are not senior managers, but whose jobs significantly impact customers or firms, for their fitness, skill and propriety at least once a year. These individuals will no longer appear on the FCA register.

The FCA is proposing applying a 'baseline' of requirements, which it will call the 'core regime', to all FCA solo-regulated firms. The largest and most complex firms will be subject to some additional requirements, under an 'enhanced regime'. These will include requirements to make sure that there is a senior manager with 'overall responsibility' for every area of their firm, and to develop responsibilities maps and handover procedures. There will be a reduced set of FCA requirements for 'limited scope firms', which will typically have fewer senior management functions than firms in the core regime.

The PRA has proposed a two-tier approach to extending the SM&CR to insurers. Tougher rules will apply to 'Solvency II' insurers, including the Society of Lloyd's and Lloyd's management agents and third country insurers and reinsurers, as well as to insurance special purpose vehicles and large-non directive firms (NDFs). Proportionate rules will be applied to smaller NDFs.

Extending the SM&CR to insurers will "align more closely the individual ... accountability regimes for banking and insurance, while continuing to respect the different business models in the two sectors". It will also mean that a wider range of insurance staff are covered by the rules. Senior insurance managers will continue to be governed by a version of the SMR which will now include the same 'statutory duty of responsibility' as senior managers at banks. This will enable the PRA to hold the senior manager to account if a breach of a regulatory requirement takes place in their area of responsibility and the senior manager failed to take reasonable steps to prevent or stop the breach.

Financial services expert Alexis Roberts of Pinsent Masons said: "All FCA-regulated insurers that are subject to its Approved Persons Regime (APR) need to read these consultations carefully. The proposed changes are not a case of 'one size fits all', a streamlined approach is proposed for smaller entities, therefore firms can focus on the parts specific to them. To be welcomed is the FCA's commitment to principles of simplicity and proportionality where it will likely not be necessary for individuals to apply for new approvals as senior managers where these approvals have already been obtained under the APR."

"Insurer employees not in senior roles will also be interested in reading the consultations as one of the most significant changes proposed is the introduction of a certification regime for those whose role, although not senior, means they could pose a risk of 'significant harm' to the firm or its customers. This could include client dealing, material risk taking, or roles subject to qualification requirements," said Roberts. "Although these roles will not require approval under the new regime, firms will need to check and confirm that employees are fit and proper to perform these roles. The consultation will close in early November and the new rules will not come into force until a date set by the FCA next year however insurers would be well advised to consider the proposed changes now given the new SM&CR will completely replace the APR."

Once the extended regime is in force, insurers will be required to annually assess and certify the 'fitness and propriety' of their employees in roles capable of causing 'significant harm' to the firm or its customers. All 'key function holders' and 'material risk-takers' at large insurers will then be subject to the conduct rules.

"Insurers are in a unique and arguably unenviable position, in the sense that they have already implemented SIMR," said financial services expert Steven Cochrane of Pinsent Masons. "However, while key function holders and senior insurance managers are already subject to a similar regime, the changes will mean that the accountability regime penetrates further down into the organisation. Large insurers will need to grapple with how the two regimes dovetail in practice."

The consultations close on 3 November 2017.

Useful Links

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions