Financial Institutions and the Extended Senior Managers Regime



The government have proposed to extend the Senior Managers Regime (SMR) which if agreed by parliament is likely to come into action in 2018 and it will replace the current Approved Persons Regime. The original act launched in March 2016 but the forthcoming developments to the scheme will see significant changes for the roles of senior figures within the financial services industries.

The aim of the extended SMR is to increase accountability and personal responsibility of senior managers within financial institutions, meaning there will be a more consistent and comprehensive approach to individual accountability.

Some of the key features of the extended SMR are:

Further Regulatory pre-approval for specific Senior Managers

For those who fall under the regime they will continue to be pre approved by regulators. Firms will also have to ensure that those in senior positions are aware that they are legally liable to ensure that the correct procedures are in place to asses their suitability before applying for pre-approval from the Financial Conduct Authority (FCA) or the Prudential Regulatory Authority (PRA). There will be some specific accountability which will be allocated to the Senior Managers; these responsibilities will need to be outlined in a statement of responsibility (SOR). In short, there is likely to be more regulatory pressures to face and Senior Managers who will be liable to manage the firm’s activity if there is a regulatory breach. In short, there will be a statutory requirement for senior managers to take responsible steps to prevent regulatory breaches within their firm. Extended Employee Cover

The SMR covers managers who are in “decision making” roles within a company. For those that are currently regarded as Approved Persons below Senior Mangers, they are likely to become Certified Persons; new conduct rules will face both Senior Managers and Certified Persons. There will also be the opportunity to extend these to individuals who are not currently listed as approved persons, for example anyone that performs a job function which could provide significant harm to the firm will need to considered. These developments to the SMR will certainly mean that those in significant decision making roles will need to ensure that they are covered sufficiently by their D&O insurance policy. Particularly with the increased threat of regulatory investigations, D&O polices will need to be specifically designed to suit financial institutions and therefore ensuring that you have a specialist insurance broker is central to protect against such investigations and respond adequately to the new risks faced.