The Financial Conduct Authority (FCA) has spoken on a number of occasions of how the Senior Managers & Certification Regime (SM&CR) will herald a new era of individual accountability. However, although for most sectors the Regime is not scheduled to be introduced until close to the end of 2019, in some ways the era of individual accountability has already arrived.
Law firm Clyde and Co has analysed data from the enforcement notices published by the FCA in 2018, and has discovered that, where the regulator takes action against an individual as opposed to their firm, the average fine imposed has risen to £185,700. This is almost three times the 2017 equivalent figure of £63,200. The actual number of fines imposed by the FCA against an individual fell from eight in 2017 to seven this year.
The law firm also notes that the total of all fines imposed by the FCA fell sharply over the year, from £229.5 million in 2017 to £27.6 million in 2018. However, there were some very large fines imposed against firms for exceptional incidents in 2017 – £163 million of last year’s total comprised a single penalty against Deutsche Bank for serious money laundering failings – so the fall should not in any way be interpreted as the FCA “going soft”.
Clyde & Co partner Charles Kuhn said:
“The FCA has made a conscious effort to put the onus of responsibility on individuals. The introduction of the Senior Managers and Certification Regime is testament to this and the statistics demonstrate that this approach might be starting to bear fruit.
“The FCA has its foot firmly on the gas. However, it has come under some criticism over taking too long to prosecute and with a record number of cases in the pipeline some are questioning the regulator’s capacity to handle so many investigations.
“Eventually, these cases will be concluded and we could see a continual uptick in the level of fines levied against individuals. Especially as a number of the cases in the pipeline involve examination of the conduct of senior managers, which will of course test whether the SMCR might result in heavier punishments for individuals.”
When the SM&CR is introduced across the industry on December 9 2019, responsibilities of Senior Managers will be clearly defined, and if something within their remit goes wrong, then they can be held personally accountable by the FCA. Each Senior Manager will have a document that will be known as a ‘Statement of Responsibilities’, and it must be given to the FCA whenever a senior manager applies to be approved, or whenever a major change to their responsibilities occurs.
Once approved by the FCA, senior managers will then need to be re-approved by their firm on an annual basis, so firms will need to put in place a framework for conducting these annual assessments.
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