The corporate shield that has long protected errant executives from prosecution for fraud is going to be stripped away.
That was the message that echoed through speeches at last week’s Mansion House dinner.
It comes as part of the ongoing response to public outrage that crimes committed by people in the banking sector seem to go unpunished.
And why should bankers be able to steal money with impunity when those outside of the corporate envelope seem to receive the harshest custodial sentences for financial crimes?
The bombshell at Mansion House was Bank of England governor Mark Carney’s announcement that a new regime to ensure corporate individuals are prosecuted for market abuse will be extended to asset management. “The Age of Irresponsibility is over,” declared Mr Carney.
The broadening of this new scheme – the Senior Managers Regime (SMR) – to asset managers is significant. Are we going to see fund managers hauled into the docks and charged with financial crimes? Probably not many.
For one thing funds tends to suffer relatively fewer criminal scandals. It’s hard to pinch money from a fund because of the number of independent auditors and depositaries involved.
There’s insider trading, of course, but that’s already a criminal offence that prosecutes individuals.
But the application of “key elements” of the SMR to fund management is significant for other reasons.
The way fund managers get paid creates incentives that have a direct impact on the way they run savers’ money.As Mr Carney put it: “All senior managers would have clearly defined responsibilities and would be answerable for training, certifying and monitoring the material risk-takers they supervise.
“These individuals would be on the hook for promoting compliance within their organisations. Incentives will be aligned.”
It remains unclear which parts of the SMR will be applied to asset managers, but it obviously looks as though individual responsibilities will be clarified.
But, most significantly, could the broadening of the SMR prove the vehicle through which the government finally clamps down on fund managers’ pay?
I have argued before in these columns that the way fund managers get paid is important.
For the record, it doesn’t bother me how much they get paid – in a free market economy, total pay should be a matter for employer and employee.
But the way fund managers get paid creates incentives that have a direct impact on the way they run savers’ money.
I have argued before that a good way to start would be full disclosure of the bonus terms offered to the managers of each fund.
This would be a useful due-diligence tool for advisers assessing funds, for one thing. I would rather my fund manager be incentivised on fund performance than on net sales, for example.
Given the tone of Mr Carney’s speech, fund managers must now accept the need to get this disclosure work done as soon as possible.
John Kenchington is editor of Investment Adviser
