In a recent speech, Director of Enforcement and Market Oversight at the FCA, Mark Steward, discussed a number of topics, including an update on recent enforcement cases and how the FCA will conduct AML investigations. We discuss the AML aspects separately here.
For these purposes, we wanted to focus on potential takeaways for Senior Managers as part of their increased accountability arising from the Senior Managers and Certification Regime (SM&CR). Specifically, the speech identifies two key themes for Senior Managers to address as part of their SM&CR implementation project. These are:
Whilst neither will surprise anyone, the speech is a helpful reminder to Senior Managers to consider how best to address these and to recognise the FCA's determination to implement and (likely) enforce the new regime.
Mark Steward referenced a number of recently concluded investigations, including:
This speech gave more than a brief nod to the SM&CR. Specifically, Mark Steward stated:
Evidently, the FCA is starting to set out how it will approach investigating Senior Managers in a SM&CR world. With this in mind, we advise each Senior Manager to ask:
For larger firms, there will be a hierarchy of managers. As a Senior Manager, you would want to satisfy yourself that lower and middle management are sufficiently trained to recognise and escalate systemic issues. Senior Managers will want to review the processes for passing information 'up the line'.
The warning is clear (and unsurprising) – a lack of MI and/or failure to prevent foreseeable harm may leave the Senior Manager(s), and as an extension, regulated firms, in significant trouble. What is of most interest is the FCA already foreshadowing how they may frame these investigations in a SM&CR world.
Accordingly, Senior Managers should take action now to ensure these points are covered as part of their SM&CR implementation project. They should also (out of self-interest) check their employment contracts and D&O policies to make ready to defend themselves in the event of FCA enforcement action.
If you would like to discuss the contents of this article or any aspect of your implementation of SM&CR, please contact Aaron Osborn.