The last major aspect of the Senior Managers & Certification Regime falls into place in two months. But as the rules come into full force, it seems that many of the firms theoretically subject to SMCR at this stage are still falling short. There are some straightforward steps managers can take to ensure they have nothing to fear when the regulator comes knocking.
As the industry’s attention remains on the Halloween Brexit deadline, there’s another frightening date which has been flying under the radar. On the 9th December, the last major aspect of the SMCR falls into place (save for a 12-month transitional period).
Given the amount of time banks have had to prepare, one would assume that the SMCR rules are embedded in company culture, but figures suggest otherwise, and banks that fail to prepare risk more than a slap on the wrist. In 2018, there was a 70% rise in FCA lifetime bans compared to 2017. At the same time, the number of FCA investigations into individuals is increasing, as is the number of complaints to the Financial Ombudsman Service – suggesting that consumer concerns are far from eradicated.
It seems that many of the firms theoretically subject to SMCR at this stage are still falling short. And December’s deadline is unlikely to mark a change in focus. As the rules come into full force, we can expect the regulator to double down on any firms dragging their feet with SMCR compliance. It’s no longer only UK senior managers who have to worry about personal accountability. Since the SMCR was announced, the world has started paying attention. Several jurisdictions outside of the UK have used this as an opportunity to examine their own actions and are starting to realise the importance of holding senior managers accountable for regulatory breaches by anyone under their command.
As a result, we’re seeing ‘copycat’ SMCR regulations spring up globally, from the proposed regulation BI in the US, focusing on protecting client best interest, to Manager in Charge in Hong Kong and Australia’s Banking Executive Accountability Regime. With such extreme consequences at stake, boardroom executives are at significant risk if they fail to take action.
Regardless of geographic location, there are some relatively straightforward steps managers can take to ensure they have nothing to fear when the regulator comes knocking. The key is having the correct systems in place to allow senior managers to trace, monitor and audit their employee’s activities and actions, giving them a means to prove active control and supervision of employees. As the regulators gear up to decide who to trick and who to treat, senior managers who can get this right not only avoid compliance headaches, they also can contribute to making the markets a safer and fairer place to operate.