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Senior Managers and Certificate Regimes come into force

March 15, 2016 - Regulatory Updates

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On 7 March, 2016, the Senior Managers Regime (SMR), which makes top bankers individually accountable for misconduct within their firms, came into force. The reform was introduced as a result of the recent financial crisis and aims to restore public trust and confidence in the financial services industry.

Senior Managers affected will be required to sign up to a specific 'statutory duty of responsiblity' which means that they will need to demonstrate that they took reasonable steps to prevent or correct any rule breaches. This is intended to focus the mind on who is responsible and accountable for all areas of business. Punishment for breaches include a combination of fines and a ban from working in the financial services industry.

There is also a new criminal offence, 'reckless decisions', that covers any situation which leads a financial institution to fail, potentially resulting in seven years imprisonment. The FT reported on 13 March, 2016, that London's top nine international banks have signed up nearly 250 managers for the new regime.

Alongside the SMR is the Certificate Regime which requires banks to certify, on an annual basis, the 'fitness and propriety' of staff who are not senior managers but are 'material risk takers'. These individuals will not be required to have formal regulatory approval from the Financial Conduct Authority (FCA).

Whilst only affecting banks and insurance firms at present, the FCA has announced the intention of introducing these reforms to other areas of the financial services industry in 2018, which will include asset managers and advisors. 

Lawson Conner has advised a number of clients on how to improve their compliance processes and infrastructure. For further information, please contact Kevin Teixeira.

Andrew Frost
Director, Investment Management Services


Joe Woodbury
Director, Investment Management Services