Senior managers and key function holders who are subject to the new Senior Insurance Managers Regime (SIMR) (in force from Monday 7 March 2016) will be concerned to ensure that not only the firms for whom they work are in the best possible position to obey the new rules, but also that they are protected from any personal liability. Firms can help their managers from inadvertently breaching the rules by putting in place certain policies and procedures.
This briefing, aimed at HR managers, legal and compliance is the last in a series of six briefings setting out key action points for HR and compliance teams leading up to the implementation dates of the SIMR as it relates to Solvency II firms. In this briefing, we set out below a checklist of how HR can help senior managers protect themselves, and therefore the firm from breaching the rules. This briefing is best read in conjunction with our previous briefings (in particular week 3 which gives some background to the conduct rules, and week 4, the new whistleblowing regime).
Some key ways of helping senior managers help themselves:
- Introduce a policy of completing handover certificates upon change of role or departure – this might show how the senior manager has exercised their responsibilities and identify any issues of which their successor should be aware. An acrimonious departure may result in uncooperative behaviour on the part of the departing employee but it's important to make the senior manager aware of the personal regulatory risks involved if handover is not effected properly. It is also worth considering making any termination payment conditional on a proper handover (see week 5 for more detail on handling departures)
- Consider when to make new recruits privy to their predecessor's handover certificate. This is likely to contain highly confidential information so a firm is unlikely to want to disclose this until the candidate has commenced employment with the firm
- Encourage the senior manager to keep records of duties they have delegated and to whom – this will also be relevant when the manager is absent due to sickness and holiday
- Train senior managers on the new conduct rules, in particular the regulatory guidance on the new rules, explaining carefully the personal implications of any breach of the rules
- Train senior managers on the proper use of performance management procedures and the financial risks of unfair dismissal and whistleblowing claims to the firm – there could be a tension between a senior manager wanting to protect their own position and dismissing underperforming employees, and the firm's need to protect itself from unnecessary unfair dismissal claims which might result from over hasty decisions to dismiss rather than follow appropriate procedures
- Train senior employees on the new whistleblowing rules coming into force on 7 September 2016, helping them to understand the legal and regulatory framework and their rights and duties, including how to identify wrongdoing and what steps are available to them; senior managers also need to ensure that whistleblowers should not be victimised, and what the firms procedures are, and their own role, in preventing any victimisation
- Ensure that processes are in place and senior managers are trained to report any information which is uncovered or which emerges relating to the conduct of or breach of responsibilities of any ex-employees in respect of whom the firm has given a regulatory reference (see week 5 for more information on regulatory references)
- Consider whether to award additional remuneration for increased responsibilities and workload
- Consider whether to permit senior managers to be legally represented at disciplinary hearings
- Consider whether to offer senior managers a contractual indemnity for legal costs they might incur when defending themselves during any investigation by the regulator or any subsequent proceedings against them as a result of any alleged regulatory breach
- Ensure that Directors' and Officers' liability insurance covers all senior managers, key function holders and FCA SIFs