The British Bankers' Association (BBA) and the Association for Financial Markets in Europe (AFME) (together BBA-AFME) published a joint letter on 10 May 2016, which was issued to the FCA, on the application of the senior managers regime (SMR) to individuals with overall responsibility for the legal function in banks.

Previously, the FCA published a statement on uncertainties that had arisen concerning the application of the SMR to these individuals.

The letter urges the FCA not to include the legal function within the scope of the SMR. BBA-AFME argue that the legislative and regulatory framework underlying the SMR does not contain any requirement that the role of a general counsel (GC) should be designated as a senior management function (SMF). Their view is that the role of a GC and the legal function is an advisory one and not one that involves management of a firm's affairs.

In their letter, the BBA-AFME state the consequences of including the role of GCs in the SMR to be as follows:

The independence of the legal function may be compromised, leading to firms engaging with their legal function less and/or using external counsel more frequently.

GCs would be subject to a complex matrix of conflicting duties arising from their SMR responsibilities and their existing regulatory obligations set by the SRA.

GCs would face a conflict of interest between protecting their own personal position under the SMR and the duty to act in the best interests of their client, including protecting legal advice privilege. The BBA-AFME are concerned that a GC might be required to disclose legally privileged material to comply with their duties in the Code of Conduct sourcebook (COCON).

The FCA has confirmed that it intends to consult on this issue in Summer 2016.