The regulator published proposals for widening the Senior Managers and Certification Regime, following the Treasury stating its intention to do so in October 2015.

The new regime will “essentially replace” the Approved Persons Regime.

The FCA stressed the regime would be “proportionate according to the size of the firm”. It proposed applying a baseline of specific requirements to all regulated firms, called the “core regime”.

For the largest and most complex firms (fewer than 1% of regulated firms) the FCA intends to place some extra requirements, under the “enhanced regime”.

The FCA proposed maintaining the exemption for firms who already have exemptions under the Approved Persons Regime. These firms will be in a category called ‘Limited Scope Firms’, and will typically have fewer Senior Management Functions than firms in the core regime. This mirrors how the Approved Persons Regime applies to these firms at the moment, officials explained.

The aim of the new regime is to “reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct and competence”.

The SM&CR aims to:

• encourage a culture of staff at all levels taking personal responsibility for their actions.
• make sure firms and staff clearly understand and can demonstrate where responsibility lies.

The latest Financial Planning Today magazine is out and available to read below...https://t.co/BBvoXy7IWj pic.twitter.com/wOeisaeG7P

— FP Today Magazine (@FPTodayMagazine) July 17, 2017

The FCA proposed three parts to the SM&CR:

Five Conduct Rules that will apply to all financial services staff at FCA authorised firms. This simple set of rules means that individuals must act with integrity, act with due care, skill and diligence, be open and cooperative with regulators, pay due regard to customer interests and treat them fairly, and observe proper standards of market conduct.

The responsibilities of Senior Managers will be clearly set out and, should something in their area of responsibility go wrong, they can be personally held to account. The Senior Managers will be approved by the FCA and appear on the FCA Register.

Under the Certification Regime, firms will certify individuals for their fitness, skill and propriety at least once a year, if they are not covered by the Senior Managers Regime but their jobs significantly impact customers or firms.

Jonathan Davidson, executive director of supervision- retail and authorisations at the FCA, said: “Culture and governance in financial services and its impact on consumer outcomes is a priority for the FCA. The extension of the Senior Managers and Certification Regime is key to driving forward culture change in firms.

“This is about individuals, not just institutions. The new Conduct Rules will ensure that individuals in financial services are held to high standards, and that consumers know what is required of the individuals they deal with. The regime will also ensure that Senior Managers are accountable both for their own actions, and for the actions of staff in the business areas that they lead.”