The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have launched a joint discussion paper seeking input on potential ways to improve the Senior Managers and Certification Regime (SM&CR).
The UK regulators want views on the effectiveness, scope and proportionality of the SM&CR.
The Treasury has, in parallel, launched a Call for Evidence and is also seeking feedback on the SM&CR.
The FCA said that the discussion paper should be read alongside the Treasury’s publication to understand the full scope of the legislation and regulatory requirements they institutions are inviting views on.
This discussion paper is relevant to financial services firms covered by the SM&CR; trade bodies; consumer organisations; other regulated firms not currently subject to the SM&CR; and any other interested stakeholders.
Some of the questions asked by the regulators include:
- To what extent do you agree or disagree that the SM&CR has made it easier to hold individuals to account?
- To what extent do you agree or disagree that the SM&CR regime has improved safety and soundness and conduct within firms?
- To what extent do you agree or disagree that the fitness and propriety requirements support firms in appointing appropriately qualified individuals to Senior Manager roles?
- To what extent do you agree or disagree that the SM&CR has made it easier for firms to hold staff to account and take disciplinary action when appropriate against them?
- To what extent do the specific accountabilities of individual directors established by the Senior Managers Regime work in ways that complement the collective responsibility of the board of directors or decision making committees? Are there ways this could be improved?
- To what extent do you agree or disagree that the prospect of enforcement promotes individual accountability?
- How could our approach to enforcement be enhanced to better support the aims of the SM&CR?
- To what extent do you agree or disagree that the scope of the SM&CR is appropriate?
- Are there actions the regulators could take in respect of the SM&CR that would help enhance competition or international competitiveness?
- To what extent do you agree or disagree that the SM&CR is applied proportionately to firms and individuals?
- To what extent to do you agree that the process for obtaining criminal records and notifying these to the regulators is effective in supporting the aims of the SM&CR?
The FCA and PRA, which is part of the Bank of England, wants responses back by 1 June 2023.
Success?
The regulation has come under fire over the last few years, including comments that in its current form the SM&CR “lacks bite”.
It applied to banking firms from 2016 until December 2019, when it was extended to cover all “solo regulated firms”.
Individuals deemed ‘senior managers’ need FCA approval before starting their roles and a statement of responsibilities that clearly says what they are responsible and accountable for. The regulator does take disciplinary action against senior managers where there is evidence of personal culpability on the part of that individual.
In March 2022, a Freedom of Information (FOI) request by financial regulation consultancy firm Bovill revealed that by 15 November 2021, only six enforcement investigations had been opened under the SMCR in 2021.
The FOI also found since 2016 until 2022, only two investigations had resulted in a penalty being imposed.
