So now we have a date: the UK’s new Senior Managers’ Regime will come into force by 7 March 2016. It is part of an attempt to strengthen accountability in banking (no need to explain why this might be necessary) and, as explained by the Financial Conduct Authority in their press release, “is designed to encourage individual accountability for decision-making in banks, building societies, credit unions and PRA-designated investment firms”. The FCA’s plan is to publish final rules over the summer, but so that firms can get cracking on the changes needed, they have already published a paper containing what they call “a set of near-final rules on our new Senior Managers’ Regime”. The near-final rules appear as an appendix to this consultation paper.
So let’s have a look. To start with, “A firm must, at all times, have a comprehensive and up-to-date document (the management responsibilities map) that describes its management and governance arrangements, including: (1) details of the reporting lines and the lines of responsibility; and (2) reasonable details about: (a) the persons who are part of those arrangements; and (b) their responsibilities.” Each approved person covered by the new rules must have a statement of responsibilities outlining their, well, responsibilities – and these must all tally with the management responsibilities map. So management needs to decide who (specifically) is responsible for doing what, and anyone identified must know what is being assigned to them.
Crucially, the legislation which paves the way for the new rules – the Financial Services (Banking Reform) Act 2013 – also introduced the presumption of responsibility, explained thus in the FCA’s consultation paper: “When a Relevant Authorised Person contravenes a relevant requirement, the Senior Manager with responsibility for the management of any of the firm’s activities in relation to which the contravention occurred, is guilty of misconduct unless they satisfy the relevant regulator that they took such steps as a person in their position could reasonably be expected to take to avoid the contravention occurring (or continuing).” So if you are handed a responsibility under this new regime, you need to make sure that you can actually do what is required of you, and that your compliance is documented. Otherwise, you may be heading directly to jail without even passing Go.
I hate money laundering 
I am reminded of the recent FCA sanctions against Bank of Beirut and in particular against the Heads or Audit and Compliance. The Bank was found guilty of misleading the regulator but of more relevance the two named individuals failed to stand-up to senior management when dealing with the FCA. In the press release the FCA pointed out that they should “show backbone even when challenged by senior colleagues.” Here is an example of the FCA identifying the “nominated persons” and pursuing them, not for failure but for acquiescing with poor behaviour.
An excellent example, Gary – thank you. For other readers, here is the link to the FCA press release, which in turn gives links to the three Final Notices (on the bank as an institution, and on the two individuals concerned – Anthony Wills and Michael Allin): https://www.fca.org.uk/news/the-financial-conduct-authority-imposes-2-1m-fine-and-places-restriction-on-bank-of-beirut
Best wishes from Susan
Good. Let’s hope this has teeth and that those taking on managerial posts, usually for more money, realise that they come with an obligation to do them properly.
I’m with you on this one, Roy. I think that working in the regulated sector is a privilege and not a right – and with privileges come responsibilities. There are plenty of other jobs out there with no personal comeback, but if you want the prestige, interest and salary that comes with a responsible job, you can’t complain when you are held, well, responsible. Here endeth the lecture.
Best wishes from Susan