UK: Senior Managers And Certification Regime | Changes To Functions, Responsibilities And Scope Of Conduct Rules

On 28 September, the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) issued a suite of publications setting out a number of proposed amendments and optimisations to the Senior Managers and Certification Regime (SMCR) for banking firms. In addition to providing feedback on firms' grandfathering submissions they introduce a number of changes which will impact existing Senior Manager Function holders (SMFs).

Below we set out the proposed changes and identify the questions that firms should now be seeking to answer to ensure their SMCR frameworks factor these change in.

Duty of responsibility

The FCA is consulting on adding guidance to the DEPP sourcebook on the statutory duty of responsibility for SMFs including guidance on:

  • the circumstances in which the duty will apply;
  • the factors that it will bear in mind when determining whether or not a SMF was responsible for the management of the firm's activities in relation to which a breach took place; and
  • the factors that it will bear in mind when determining whether or not a SMF took reasonable steps to avoid a breach occurring (or continuing).

Through this proposed guidance, the FCA has clarified a number of points raised in firms' responses to prior consultations on guidance on the presumption of responsibility. Most notably the FCA has stated that the duty of responsibility can apply to activities outside those set out in the SMF's Statement of Responsibilities, recognising that It is possible for SMFs to be responsible for the management of activities at their firm that fall outside their prescribed responsibilities.

Regulatory references

The FCA released its final rules on regulatory references for firms under SMCR. The FCA confirmed firms will have to obtain and provide references covering a period of 6 years for individuals seeking SMF and Certified Persons roles. To support firms in this task the FCA has provided a regulatory reference template requiring firms to provide information indicating if individuals have had disciplinary action taken against them or has ever been determined not to meet the relevant requirements of fitness and propriety.

The controversial requirement for firms to update regulatory references where misconduct comes to light after an employee has left remains in place. The FCA has clarified that firms only need to update the current employer (where that firm is a FSMA firm) and that it need only cover a period of six years from the date the individual left the firm.

This reference regime will come into effect on 7 March 2017.

Chief Operations SMF

We have recently seen a number of initiatives and publications from the FCA, the PRA and the FPC focussing on the importance of operations, systems and technology within financial services firms. In recognition of this the PRA has identified a corresponding need to ensure appropriate senior level accountability for these areas within firms. To achieve this the PRA proposes:

  • to create an additional, optional, Chief Operations SMF (SMF23), for UK banks and branches of Non-EEA firms; and
  • to create a corresponding Prescribed Responsibility for "managing, and ensuring the operational continuity and resilience of, the internal operations, systems and technology of a firm".

Head of Key Business Area (SMF6) new criteria

The PRA has recognised that the current criteria for designating an SMF6 potentially exclude some business lines which would still be considered capable of having an impact on the safety and soundness of a firm on account of their commercial or strategic importance.

Consequently, the PRA is proposing to amend the requirement so that individuals will also be in scope of the SMF6 if the business area they are responsible for either:

  • meets both of the existing criteria:
    • over £10 billion in gross total assets; and
    • accounts for 20% or more of the firm's, or its group's, gross revenues; or
  • meets one of the above criteria and satisfies either of the following criteria:
    • it performs a 'critical function' as defined in sections 3(1) and(2) of the Banking Act 2009 (as amended); or
    • it is a 'material business unit' as defined in Article 3(6) of the Regulatory Technical Standards for the definition of material risk takers for remuneration purposes.

Extending Conduct Rules to notified Non-Executive Directors (NEDs)

Under current provisions the regulators were unable to extend the new Conduct Rules to notified NEDs, as they are neither 'employees' nor senior managers requiring regulatory pre-approval.  The FCA and PRA are now proposing to extend the following Conduct Rules to all NEDs regardless of regulatory status:

  • You must act with integrity;
  • You must act with due skill, care and diligence;
  • You must be open and co-operative with the FCA, the PRA and other regulators;
  • You must pay due regard to the interests of customers and treat them fairly;
  • You must observe proper standards of market conduct; and
  • You must disclose appropriately any information of which the FCA or PRA would reasonably expect notice.

The Legal Function

The FCA has stated that its intention was always that the legal function should be considered a key function of any firm and that responsibility for it should therefore have been assigned to a SMF. However, the FCA has acknowledged that the feedback received from firms highlighted that that this is not explicit and could be unclear. 

As a result, Discussion paper DP16/4 'Overall responsibility and the legal function' outlines the key arguments for and against capturing the legal function – including the potential to impinge on the principle of legal privilege – and asks for feedback from industry on whether the legal function should fall under the scope of the SMCR.

Questions to consider

Firms should now be considering the following key questions, taking into account their own structure and business model:

  • Have your SMFs received training on the duty of responsibility, reasonable steps and the regulators' guidance in relation to them?
  • Does your firm have the capability to provide and obtain regulatory references for SMF and Certified roles? Are your record keeping facilities set-up to retain relevant documentation for up to six years after an individual leaves the firm?
  • Is your firm's COO currently an SMF? If responsibility for business continuity, operations, and technology is split between multiple individuals, which individual should take on the new prescribed responsibility?
  • Do any of your business units now meet the criteria for allocating an SMF6? Does this bring new senior managers into scope?
  • Are your firm's notified NEDs informed of the upcoming application of the Conduct Rules? Are there any corresponding new training needs?
  • Is the individual responsible for your firm's Legal Function currently an SMF? If not, who in the organisation holds, or could hold, this responsibility?

Firms should read the latest publications and take this opportunity to comment, with feedback submitted to the regulators by 9 January 2017.

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.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.