Will you be a Senior Manager?
Having a senior role or the title Manager won’t necessarily mean you are a Senior Manager. Senior Managers are the most senior people with the greatest potential to cause harm or impact on market integrity. There won’t be many of them in your firm – even the largest retail banks have less than 40.
The FCA has identified certain Senior Management Functions. Not all firms will require all of these – that depends on its size, complexity and the regulated activities it carries out. Anyone who holds such a Senior Management Function will require pre-approval from the regulator before performing this role.
The regime introduces new ‘Prescribed Responsibilities’ that must be given to Senior Managers. These have been identified by the FCA to ensure that there is a Senior Manager who is accountable for all key risks.
What your firm will be doing to get the Senior Manager team in place
Identifying individuals who will hold Senior Manager Functions (SMFs)
Allocating prescribed responsibilities that are relevant to the firm’s activities to those SMF’s
Identifying overall responsibilities of senior individuals for any other activities, functions or business areas
Identifying problem areas, for example:
Concerns about obtaining FCA approval for any individuals
Do they need to restructure/reallocate responsibilities
Are there any reluctant candidates or do they need to manage those disappointed not to be allocated an SMF
New Paperwork to sign
Senior Managers will have a ‘Statement of Responsibilities’ which sets out what they are responsible and accountable for. This is submitted to the FCA and must be kept up to date.
You are likely to be asked to sign an updated employment contract. The SMCR does not override the general principle that if your contract doesn’t expressly permit a change in your role, responsibilities etc your agreement is required. Be warned that refusing to agree to your Statement of Responsibilities will mean you can’t perform the Senior Manager role and could be a fair reason to dismiss you.
Financial incentives were not the norm to secure agreement in the banking sector unless as a result of the SMCR the individual had a significantly enhanced role and responsibilities.
Duty of Responsibility
Senior Managers must comply with additional Conduct Rules as well as those applicable to most staff. They also have a duty of responsibility - this means that if a firm breaches one of the regulator’s requirements, the Senior Manager responsible for that area could be held accountable if they did not take ‘reasonable steps’ to prevent or stop the breach. Sanctions include fines or being barred.
Training
The FCA has imposed specific training obligations. One to One session with advisers and possibly paid for independent legal advice to ensure you understand your responsibilities may be offered for Senior Managers.
Reputation
If you breach a Conduct Rule this will need to be reported to the FCA. Any concerns about your fitness and propriety will need to be recorded on the new style regulatory reference – the days of the agreed reference hiding a multitude of sins are over!
It is important that if you are a Senior Manager you:
Understand the scope of your responsibilities
Know the conduct rules
Are questioning and challenging
Oversee line reports proactively
Always follow up on queries and issues
Understand the business you are responsible for and the regulatory requirements applicable to it
Keep appropriate records to demonstrate reasonable steps have been taken
Check that the firm has insurance policies which are adequate to cover you and are fit for purpose.
Joanna Chatterton is partner of Fox Williams LLP specialising in employment law for financial services businesses and partnerships. She can be contacted at jkchatterton@foxwilliams.com or on +44 (0) 20 76142617 or +44 (0) 7740945716
This overview is general guidance. It should not be relied upon without first taking separate legal advice. Neither the author nor Fox Williams LLP accept any responsibility for any consequences resulting from reliance on the contents of this document.
