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FCA outlines proposals to extend the Senior Managers and Certification Regime to all financial services firms – industry comment

HM Treasury announced in October 2015 its intention to extend the Senior Managers and Certification Regime (SM&CR) to all sectors of the financial services industry.

Today the FCA s published proposals to extend the SM&CR to almost all regulated firms, essentially replacing the Approved Persons Regime.

Here we include a comment from the industry:

Emily Benson, partner and head of financial services regulation at TLT:

“The FCA’s proposals will have a significant impact and affect the entire financial services industry, including the banks. The components of the existing and new regime are broadly the same, but the FCA has tailored the regime currently in place to reflect the differences between different financial sectors.

“Creating parity across a multi-faceted industry with sectors that present varying degrees of risk to the UK economy was never going to be a simple task. The FCA has been toiling with the intricate balancing act between the need, as an effective regulator, to hold individuals to account, with its responsibility as a proportionate regulator to not create an excessive burden on the industry.

“The proposals create a level of responsibility that many firms that are new to the regime will not be used to, placing the burden firmly on the management to be able to demonstrate that they have taken reasonable steps to prevent problems when something has gone wrong. It remains to be seen whether this balancing act will be endorsed by the industry or judged as a step too far.

“Regardless of what happens after the consultation period, which ends on 3 November, it is clear that firms need to prepare for some critical milestones and get ready for a step-change in their internal policies and procedures. The FCA is likely to pay particularly close attention to areas like training in the conduct rules, risk management and individuals whose jobs impact customers directly. Banks will also need to digest some detailed changes in the paper. There are new responsibilities for non-EEA branches with regards to regulatory correspondence, for example.

“For the wider audience, I wouldn’t be surprised to see a wholesale review of internal roles, policies and procedures in line with the FCA’s requirements over the next few months.”