Non-executive directors (NEDs) and effective corporate governance—expectations of the Financial Conduct Authority (FCA)
Non-executive directors (NEDs) and effective corporate governance—expectations of the Financial Conduct Authority (FCA)

The following Financial Services guidance note provides comprehensive and up to date legal information covering:

  • Non-executive directors (NEDs) and effective corporate governance—expectations of the Financial Conduct Authority (FCA)
  • General role and responsibility of a non-executive director (NED)
  • NEDs who perform SMFs under the SM&CR
  • NEDs in financial services firms which are not subject to the SM&CR
  • FCA application of COCON to standard NEDs
  • FCA expectations of NEDs in financial services firms
  • Roles and responsibilities of NEDs in financial services firms—understanding the business
  • Roles and responsibilities of NEDs in financial services firms—identifying risks
  • Roles and responsibilities of NEDs in financial services firms—challenge of the executive
  • FCA's assessment of culture, governance and controls
  • more

General role and responsibility of a non-executive director (NED)

For information about the roles and responsibilities of NEDs, see Practice Note: Non-executive directors and the listed company board—corporate governance roles and responsibilities.

Guidance on the rules and roles of NEDs can also be found in the UK Corporate Governance Code (UKCG Code) and the FRC Guidance on Board Effectiveness, both published by the Financial Reporting Council (FRC).

For further details, see Practice Note: The UK Corporate Governance Code.

NEDs who perform SMFs under the SM&CR

On 7 March 2016, the Senior Managers and Certification Regime (SM&CR) took effect in relation to UK banks, building societies, credit unions and Prudential Regulation Authority (PRA)-designated investment firms. It came into effect for all dual-regulated insurers from 10 December 2018 and will be extended to FCA solo-regulated firms from 9 December 2019. Firms which are subject to the SM&CR are relevant authorised firms or RAPS.

Under the SM&CR, a NED of a RAP who performs a senior management function (SMF) designated by the FCA (an FCA SMF) or the PRA (a PRA SMF) will require pre-approval by the relevant regulator.

The FCA SMF which may be applicable to a NED is chair of the nominations committee of the RAP.

The PRA SMFs, which may be applicable to a NED of a RAP are:

  1. chairman

  2. chair