A series of papers were published on 28 September 2016, taking stock of the SMCR and SIMR six months after their entry into force. While the story has been largely positive, the regulators consider that more can be done, with the proposed changes aimed at a better functioning accountability regime.
More particularly, the FCA has announced that it will consult on: guidance on the ‘Duty of Responsibility’; a requirement for UK branches of overseas banks to tell their employers about the whistleblowing services offered by the FCA/PRA; and extending the conduct rules to all non-executive directors of banks/insurers.
The FCA also published a discussion paper on how the legal function in firms should be treated under the SMCR. In response, the Law Society warned of a risk of conflict between the lawyer and employer if in-house legal functions in financial services are included. Concerns were also raised around erosion of privilege should the lawyer feel obliged to disclose privileged information by virtue of being within the SMCR. An increased burden on in-house lawyers to comply with FCA and SRA rules was also a concern.
The PRA consultation will address similar areas to the FCA’s, as well as looking at the creation of new roles and responsibilities around ensuring the operational continuity and resilience of the internal operations, largely in recognition of the increasing threats to firms from cyber attacks. The consultation also seeks to provide some clarification around the PRA’s expectations of Statements of Responsibilities and Management Responsibilities Maps.
While the FCA dropped its review into banking culture in late 2015, current Chief Executive, Andrew Bailey, is at pains to stress that “culture matters a great deal”. Indeed, the message from the FCA and PRA is clear: the senior management of firms need to set the right ‘tone from the top’. The consultations will be open until early January 2017.