On May 4, 2016, the Bank of England and Financial Services Act 2016 was passed by the UK Parliament. The Act includes amendments to the Senior Manager and Certification Regime and extends the SM&CR to all UK authorized firms. The amendments include removing the presumption of responsibility for a senior manager when a breach of regulatory provisions occurs in the area that he is responsible for, replacing it with a duty of responsibility. For a senior manager to be found guilty of misconduct by one of the UK regulators, the PRA and/or Financial Conduct Authority will need to prove that a senior manager did not take reasonable steps to prevent the contravention by his firm from occurring or continuing. In addition, the UK regulators are granted specific powers to take enforcement action against all non-executive directors of firms for their misconduct. The extension of the SM&CR follows from the recommendations of the Fair and Effective Markets Review, published in June 2015, that the regime should be extended to wholesale participants in the fixed income, currency and commodity markets.
Certain provisions of the Act came into effect immediately. It is not yet known when the extension to all UK authorized firms will occur but the UK regulators have mentioned 2018 in the past. On May 10, 2016, two pieces of secondary legislation in the form of an Order and Regulations brought the revised provisions published in the Bank of England and Financial Services Act 2016 on senior manager misconduct into force.
The Act is available at: http://www.legislation.gov.uk/ukpga/2016/14/pdfs/ukpga_20160014_en.pdf.
HM Treasury’s press release is available at: https://www.gov.uk/government/news/bank-of-england-and-financialservices-bill-given-royal-assent and the Bank of England’s press release is available at: http://www.bankofengland.co.uk/publications/Pages/news/2016/050.aspx.
The Order is available at: http://www.legislation.gov.uk/uksi/2016/568/pdfs/uksi_20160568_en.pdf and the Regulations are available at: http://www.legislation.gov.uk/uksi/2016/569/pdfs/uksi_20160569_en.pdf.
You may like to view our client note on Implementation Issues Arising from the revised UK SM&CR, available at: http://www.shearman.com/~/media/Files/NewsInsights/Publications/2015/11/Implementation-Issues-Arising-from-theRevised-UK-Senior-Manager-and-Certification-Regime-FIA-100215.pdf.