Financial Services Trends to Watch – Q4 – The FCA power shift

Financial Services Trends to Watch – Q4 – The FCA power shift

 

As part of our sector-focused series, we have spoken with our in-house PSLs to outline the key legal trends to watch in Financial Services as 2019 draws to a close.

This article focuses on recent changes in the Financial Conduct Authority’s (FCA) regulations around the Senior Managers and Certification Regime (SM&CR).  Additionally, the ramifications on FCA power of the August 2019 House of Commons Treasury Committee report: “The work of the Financial Conduct Authority: the perimeter of regulation”.

 

Extension of the SM&CR to solo-regulated firms

 

On 9 December 2019, the Financial Conduct Authority (FCA) is extending the Senior Managers and Certification Regime (SM&CR) to solo-regulated firms.

From this date, the SM&CR will apply to almost all firm authorised under the Financial Services and Markets Act 2000 and to branches of non-UK firms with permission to carry out regulated activities in the UK.

The FCA created the SM&CR to expand the scope of individual liability, focusing on senior management responsibility and creating a firm-wide ‘culture of accountability’ in order to reduce consumer harm and strengthen market integrity. 

The SM&CR marks a fundamental shift in the FCA’s regulatory approach to individuals and compliance with the SM&CR is a top supervisory and enforcement priority for the FCA.

Most solo-regulated firms’ SM&CR preparations should be well underway. By day one of the extension, all firms are required to have identified those employees who meet the definition of one or more Certification Functions and trained their Senior managers and Certification staff in the Conduct Rules.

Among other requirements, firms will have 12 months in which to train their remaining staff in the Conduct Rules and certify their Certification staff as ‘fit and proper’. 

For all SM&CR firms it is critical to embed a culture of individual engagement and accountability at all levels. Increasingly, the FCA, and indeed other international bodies like the Financial Stability Board, consider that the process of cultural change, of assessing and managing culture, and corresponding governance should be a top priority for financial services firms.

 

Further reading:

 

Comprehensive coverage on the extension of the SM&CR and the regulator’s expectations on developing a cu

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About the author:
Amy is a content writer and marketing manager at LexisNexis. She previously worked as an independent writer and researcher, for clients such as, Unilever, Kantar TNS, The Soil Association, MasterCard and Lufthansa Airlines. She has written for national publications, including City A.M. and Financial IT. Amy now writes and plans editorial content for the LexisNexis blogs, campaigns and industry magazine features. She has a Bachelor's Degree in Italian and French from the University of Warwick.