Unit 4 / Section 1 - UK SM&CR Flashcards
What were the key findings of the UK Parliamentary Commission on Banking Standards (PCBS) report in June 2013?
Many individuals operate with very little personal accountability and with little prospect of enforcement action against them.
These findings represent significant failings in the previous Approved Persons – Controlled Functions regime, and change was therefore regarded as being essential.
Who is the Senior Managers Regime (SMR) for?
Individuals who are subject to regulatory approval, which focuses on senior individuals who hold key roles or have overall responsibility for key areas.
Who is excempt from the SMR?
‘Standard’ non-executive directors (NEDs) who do not chair specified subcommittees of the board of directors.
Who does the Certification Regime apply to?
Staff who could pose a risk of significant harm to the company or any of its customers, the ‘material risk-takers’ in the firm.
E.g. give investment advice, execute client orders or administer benchmarks.
What are firms responsible for w.r.t. employees who come under the Certification Regime?
For certifying the fitness and propriety of staff carrying out these functions.
Why is the SMR narrower than the Approved Persons Regime it replaces?
To allow regulators to focus resources on authorising and supervising the most senior staff in companies, and make them accountable for certifying the staff captured by the certification regime.
What are the 5 standard conduct components for all staff?
1) Doing the right thing:
○ acting with integrity
○ acting with due skill, care, and diligence
2) Being open and honest:
○ being open and cooperative with the FCA, the PRA, and other regulators
3) Conduct of an individual towards customers and the market:
○ paying due regard to the interests of customers, and treating them fairly
○ observing proper standards of market conduct
What are the four additional conduct requirements senior management have to follow?
1) Effective control
2) Complying with the rules
3) Effective oversight (incl of persons to which responsibilities have been delegated)
4) Open and honest - disclosing info that the FCA or PRA would reasonably expect notice
What should be included in a Management Responsibilities Map (MRM)?
- Approved persons who are subject to the SMR
- Members of the governing board who are not approved persons (such as standard NEDs who do not chair subcommittees)
- Senior management who are subject to the SMR but were not previously approved persons
- Senior personnel who are captured by the Certification Regime
What are 7 considerations when a Management Responsibilities Map (MRM) is being designed?
1) Shared allocation - the FCA expects single person accountability
2) A ‘living’ map - updated when changes to R&R
3) Disentanglement - clarify responsibilities
4) Technology - to maintain records of changes and preserve audit trails
5) Auditability - so can ID details for a specific point in time
6) Regulatory challenges - expect challenge, particularly on oversight and ability to discharge responsibilities
7) Outsourcing of responsibilities - can’t outsource accountability, just an activity
What 4 benefits should be realised through adherence with SM&CR requirements?
1) Greater transparency and accountability as a result of improved governance
2) Indv more focused on delivery of good conduct outcomes, reinforcing positive cultures
3) Reputation of company enhanced (with consumers and regulators)
4) Better management of financial and op risks, potentially reducing amount of reg capital to be held
