DP23/3: Review of the Senior Managers and Certification Regime (SM&CR)

Concurrently with the HM Treasury’s launch of a call for evidence on the current functioning of the Senior Managers & Certification Regime (SM&CR), the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have jointly published a Discussion Paper (DP1/23 (PRA) & DP23/3 (FCA)) on same issue.
As already noted in the call for evidence (please see EventID 20434 in this context), the regime was launched in 2016 with the aim to improve accountability among senior staff members and among employees that are not senior managers, but may have a significant impact upon a firm’s operation or its customers and to improve the conduct of financial market participants overall. As such, it requires
– most senior staff performing key roles to be approved by the Financial Conduct Authority (FCA) or the Prudential Regulation Authority (PRA);
– firms to annually certify that their non-senior, but important staff meets certain fit and proper requirements; and
– all individuals in the financial sector to act with integrity, skill, care, and diligence.
In their Discussion Paper now, the FCA and the PRA request feedback on a number of questions primarily pertaining to the effectiveness of the current regime when it comes to meeting its objectives and to the „scope and proportionality of the regime“. Some of these questions are briefly noted below; for all of them, please refer to the original Discussion paper:
– To what extent do you agree or disagree that the SM&CR has made it easier to hold individuals to account?
– To what extent do you agree or disagree that the SM&CR regime has improved safety and soundness and conduct within firms?
– To what extent do you agree or disagree that the SM&CR has made it easier for firms to hold staff to account and take disciplinary action when appropriate against them?
– To what extent do you agree or disagree that the prospect of enforcement promotes individual accountability?
– To what extent do you agree or disagree that the fitness and propriety requirements support firms in appointing appropriately qualified individuals to Senior Manager roles?
– To what extent do you agree or disagree that the SM&CR is applied proportionately to firms and individuals?
– To what extent do you agree or disagree that the Certification Regime is effective in ensuring that individuals within the regime are fit and proper for their roles?
– To what extent do you agree or disagree that the Conduct Rules are effective in promoting good conduct across all levels of the firm?
The regulators have also attached a document outlining international developments in that regard, particularly in Australia, Singapore, Malaysia, and Ireland. The below published graphic depicts such developments:
Graphic 1 – Developments Internationally Regarding Individual Accountability

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The Discussion Paper will be open for public comment until June 1, 2023. The regulators would prefer comments to be submitted via the enclosed electronic survey.