HM Treasury has announced that it will extend the Senior Managers and Certification Regime to toughen up the approved persons regime.
The new SMCR is due to come into effect in March 2016, and will make senior managers in all financial services firms – from advisers to bankers – more accountable.
However, while the Treasury has removed the reverse burden of proof proposal, which critics claimed would have imposed a “guilty until proven innocent” burden on top executives, Michael Ruck, senior financial services enforcement lawyer at Pinsent Masons, said the industry should not breathe too much of a sigh of relief at this U-turn from its initial proposals.
Mr Ruck said: “While the reverse burden of proof may no longer be part of the SMCR regime, the approach likely to be taken by the regulators in assessing whether they have taken all of the appropriate steps to prevent a regulatory breach from occurring, will no doubt be a high bar to clear.
“The extension will be a major change for firms from the existing approved persons regime, bringing tough standards of personal responsibility and accountability on senior managers.”
FCA response
Tracey McDermott, acting chief executive of the FCA, said: “Extending the Senior Managers and Certification Regime is an important step in embedding a culture of personal responsibility throughout the financial services industry.
“While the presumption of responsibility could have been helpful, it was never a panacea. There has been significant industry focus on this one small element of the reforms, which risked distracting senior management within firms from implementing the letter and spirit of the regime.”
