The review of the rules covering senior managers working for regulated firms was heralded in Chancellor Jeremy Hunt’s Edinburgh Reforms speech in December.

The study will look at ways to improve the regime which has been criticised in the past for delays and inflexibility.

The review has begun with the publication of a discussion paper today: DP1/23 – Review of the Senior Managers and Certification Regime (SM&CR).

The PRA and FCA have launched a joint review to assess the, “effectiveness, scope, and proportionality of the regulatory regime” while the Treasury has launched its own call for evidence.

The regulators say the review will aim to understand stakeholders’ views on the functioning of the SM&CR and to identify, “ways to improve the regime to help it work better for firms and regulators, while preserving its underlying aims.”

The SM&CR regime, established in 2016, seeks to promote "safety and soundness, reduce harm to consumers and strengthen market functioning" by requiring that financial services professionals are individually accountable to their employers and to the regulators.

A core requirement is that the most senior decision-makers in firms should be fit and proper for their roles and take reasonable steps in the execution of their duties. The regime also aims to ensure that all financial services staff meet expected conduct standards.

The SM&CR was introduced following the recommendations of the Parliamentary Committee on Banking Standards. It was introduced because of problems that became evident during the 2007-2008 financial crisis and subsequent conduct scandals.

Since 2019 the regime has applied to almost all regulated financial services firms, including FCA solo-regulated firms. It requires minimum standards and checks on senior managers working for regulated firms.

The SM&CR comprises several elements, centred on the Senior Managers Regime, the Certification Regime, and the Conduct Rules.

The FCA and PRA say they are aware that some stakeholders have previously raised concerns about delays in obtaining regulatory approval for Senior Manager appointments but says that “significant improvements” have been made. Despite this some approvals for senior managers can take three months or more.

The regulators says that overall evidence suggests the regime has been helpful in holding senior individuals in financial services to account. A survey by the Financial Services Culture Board, which captured employees’ perceptions of their firms’ organisational cultures, found that the proportion of respondents (employees) who agreed that senior leaders in their organisation took responsibility, especially when things went wrong, rose from 58% in 2016 to 68% in 2022.

• Respondents are asked to respond to the DP by completing an online response survey. The survey will ask a number of questions on enforcement, whether individuals are fully held to account and how the regime can be improved. Further details of the DP are here: DP1/23