On September 28, 2016, the PRA and the FCA launched a
consultation proposing amendments to the Senior Manager &
Certification Regime. Most of the changes result from the
legislative changes made in the Bank of England and Financial
Services Act 2016. However, the regulators are also proposing some
other changes which they consider appropriate having had the
opportunity to assess the SM&CR in practice.
Both regulators are consulting on proposed guidance on the
so-called "duty of responsibility." The duty of
responsibility replaced the presumption of responsibility and
allows the regulators to take action against a Senior Manager for
misconduct if his/her firm contravenes a regulatory requirement at
the time that the Senior Manager was responsible for the management
of those aspects of the firm's activities. The regulators will
need to show that the Senior Manager did not take reasonable steps
to prevent or stop the contravention. The PRA's proposed
guidance on what may constitute "reasonable steps" and
how they can be documented has not materially changed following the
shift from the presumption of responsibility to the duty of
responsibility. The FCA is proposing a non-exhaustive list of
considerations that may be relevant when determining whether a
Senior Manager was responsible for the relevant area at the
relevant time as well as a non-exhaustive list of considerations it
will take into account when considering whether reasonable steps
were taken by a Senior Manager.
Both regulators are also proposing to extend the application of
some of the Conduct Rules to notified non-executive directors in
banks, building societies, credit unions and dual-regulated
investment firms (relevant authorized persons or RAPs) and
insurance firms. Notified NEDs are NEDs that are not in scope of
In addition, the PRA is proposing to introduce a new Senior
Management Function, known as the Chief Operations function in
RAPs, together with a new PRA Prescribed Responsibility. This is
intended to bring within the scope of the SM&CR those
individuals with overall responsibility for managing and ensuring
the operation continuity and resilience of the internal operations,
systems and technology of a firm. The PRA is also proposing
additional criteria for the Head of Key Business Area function and
clarifications of its expectations of Statements of
Responsibilities and Management Responsibilities Maps.
Responses to each consultation paper are due by January 9, 2017.
The PRA anticipates that its final rules will come into effect
within two months of the regulators publishing their final rules,
with the exception of the introduction of the new Chief Operations
SMF, the new Prescribed Responsibility and the additional criteria
for the Head of Key Business Area function, which will each take
longer to implement. The FCA has stated that it intends to publish
final guidance on the duty of responsibility in early 2017 and will
publish its rules on extending the Conduct Rules to Notified NEDs
later in 2017.
On March 7, 2017, it will be one year since the U.K. Financial Conduct Authority's senior managers and certification regime came into force, heralding a new era of personal accountability in the financial sector.
On January 31, 2017, the FCA published a final notice issued to Deutsche Bank AG and fined the bank Ł163 million for failing to maintain an adequate AML control framework between January 1, 2012 and...
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