The FCA is set to bring in a new set of rules for all regulated firms to ensure individual accountability and conduct standards are met.
The regulator today published proposals to extend the Senior Managers and Certification Regime that currently applies to banks to the wider financial services industry.
The three key parts of the rules that apply to firms include, firstly, a requirement to clearly set out what areas of responsibilities senior managers at the firm have. A specific individual must be in charge of areas including financial crime prevention and compliance with client asset rules. These managers will receive FCA approval and be listed on the FCA register.
Secondly, the FCA has also proposed five conduct rules that all staff at firms will fall under, which are equivalent to those it imposed on banks.
- You must act with integrity
- You must act with due care, skill and diligence
- You must be open and cooperative 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
There are an additional four conduct rules for the senior managers within a firm:
- You must take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively
- You must take reasonable steps to ensure that the business of the firm for which you are responsible complies with the relevant requirements and standards of the regulatory system
- You must take reasonable steps to ensure that any delegation of your responsibilities is to an appropriate person and that you oversee the discharge of the delegated responsibility effectively
- You must disclose appropriately any information of which the FCA or PRA would reasonably expect notice
The final key piece of the proposed rules asks firms to “certify” each year that staff below senior manager level are fit and proper to carry out those jobs that are not covered by the SMR but “significantly impact customers or firms.”
The FCA gives the example that “if a firm employs a customer‑facing financial adviser, every manager above them in the same chain of responsibility will have to be certified (until the Senior Manager approved under the SMR is reached).”
Law firm Ashurst regulation partner Jake Green says: “No longer is it just the bank bosses who are in the regulator’s firing line. The FCA’s extension might make the administrative burden slightly less for smaller firms than for banks, but the proposed rules bring those running all types of financial services firms into the spotlight, even your IFA on the high street.
“On the one hand the regime clearly aims to be proportionate. However, many large fund/portfolio managers may be surprised to see the FCA suggest a figure of senior managers running into the ‘teens’. While that may not be the case, draft lines appear to be drawn.”
The consultation closes in November.