On October 3, the UK Financial Conduct Authority (FCA) published a discussion paper (Discussion Paper) on the application of the UK Senior Managers Regime (SMR) to persons responsible for the legal function of a UK regulated firm.
The UK Senior Managers and Certification Regime (SM&CR) went into effect on March 7 and is broadly designed to strengthen accountability for senior managers and their areas of responsibility, and to lift the standard of conduct expected of individuals at all levels. The SMR (a subset of the SM&CR) requires (among other things) that a senior manager is appointed with overall responsibility for every part of a firm’s activities and business areas (including the legal function).
The Discussion Paper follows an announcement from the FCA in January, which acknowledged confusion raised by firms, as well as concerns that applying the SMR to the legal function could compromise the function’s independence and prejudice the principle of legal professional privilege. In response to these concerns, the FCA has published the Discussion Paper seeking feedback on arguments for and against bringing those with overall responsibility for the legal function within the ambit of the SMR.
Notably, the FCA acknowledges in the Discussion Paper that confusions expressed by firms on the application of the SMR to persons responsible for the legal function have been “exacerbated by inconsistent FCA communications on the subject.” The FCA notes that it will clarify what is required with respect to the legal function once responses to the Discussion Paper have been received and analyzed.
Comments on the Discussion Paper must be submitted to the FCA by January 9, 2017.
The Discussion Paper can be found here.
The FCA’s January 2016 announcement is available here.