Rules covering senior employees at financial firms regulated by the U.K. Financial Conduct Authority would be expanded to almost all firms and enhance regulations for large firms under new proposals issued Wednesday.
The proposals to extend the existing senior managers and certification regime would change how employees of financial services firms are regulated. The rules, which have applied to banks and insurance companies since 2016, increase individual accountability.
The aim is to "reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct and competence," according to the FCA. As part of this, it aims to encourage a culture of staff at all levels taking personal responsibility for their actions, and to make sure firms and staff "clearly understand and can demonstrate where responsibility lies," the proposals state.
The proposal would replace the current approved-persons regime.
The FCA has proposed three parts: that five conduct rules apply to all financial services staff at FCA-authorized firms; that the responsibilities of senior managers are clearly set out and those managers can be "personally held to account" if something in their area goes wrong; and that under the certification regime, individuals not covered by the senior managers rule but have roles that significantly affect customers or firms be certified at least once a year for their "fitness, skill and propriety."
The FCA also proposed that firms meeting any of six separate criteria, including those with assets under management of more than £50 billion — at any time in the previous three years — be subject to an enhanced regime, with increased accountability and senior management functions. "These firms will generally be larger in size or have more complex structures where weaknesses in accountability or governance could cause greater harm to consumers or impact upon market integrity," said the FCA in its proposals.
"The extension of the senior managers and certification regime is key to driving forward culture change in firms," said Jonathan Davidson, executive director of supervision-retail and authorizations at the FCA, in a statement accompanying the proposals.
"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 implementation date for the extended regime will be set by the Treasury; the FCA expects implementation will start in 2018.
The proposals, available on the FCA website, are open for comment until Nov. 3.
