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 FCA proposals has three elements. The first is a set of five conduct rules that will apply to all financial services staff at FCA authorised firms. These require individuals to 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.

Secondly, 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.

Finally, 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: ‘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.’

The FCA proposes 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 regulator is advocating some extra requirements, under the ‘enhanced regime’. They include responsibilities maps, handover procedures, and the need to make sure that there is a senior manager responsible for every area of their firm.

Insurers currently apply a revised version of the FCA’s approved persons regime and the Prudential Regulation Authority’s  (PRA’s) senior insurance managers regime, but the FCA says it plans to introduce all elements of the SM&CR regime to insurers.

The FCA proposes 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.

The Treasury will set the implementation date for the extended regime, with the expectation this will be from 2018.

FCA proposals for extending the senior managers and certification regime are here:CP17/25: Individual accountability - extending the Senior Managers and Certification Regime

FCA proposals on extending the SM&CR regime to insurers are here: CP17/26: Individual accountability - extending the Senior Managers and Certification Regime to insurers