Accountability and Conduct: The End of the Beginning

Bernardo Castel-Branco

The Senior Managers and Certification Regime (SM&CR) is now live for all FCA-regulated firms in the UK. Is this the end of the journey? We don’t think so.

Asset and Wealth Managers have gone to great lengths to prepare for SM&CR. The work carried out has included:

  • Redesign of governance arrangements, board composition and senior management committees
  • Identification of senior managers and certified personnel
  • Documentation and mapping of responsibilities
  • Review and update of employment contracts and regulatory references
  • Delivery of tailored conduct training to all impacted staff
  • Establishment of ongoing certification processes

Despite the many actions which firms need to have completed by now, the FCA’s overarching objectives – fostering cultural transformation and greater personal responsibility to improve conduct – mean more is needed.

With this in mind, senior managers and their respective teams will now need to ask themselves:

  1. Am I genuinely confident that I am on top of my regulatory responsibilities and risks?
  2. Can I demonstrate this easily enough and evidence my oversight?
  3. Do I run a sufficiently well-controlled business?

A number of risks and responsibilities are now clearly mapped to accountable individuals. These individuals (Senior Managers) have the duty of responsibility for all aspects of the firm for which they are accountable and are conscious of the need to evidence reasonable steps to prevent any breach occurring or continuing.

Key Considerations To Evidence Reasonable Steps

Senior Managers will need to be confident that any discharge of responsibility is to competent individuals and functions, and that adequate oversight is carried out. These responsibilities will range from Regulatory and Client Reporting, Product Governance (including Value Assessment), Conduct, Market Abuse, Fund Liquidity Management and Operational Resilience, to name but a few.

Enhancing all 'three lines of defence'

Alpha has been working with Asset and Wealth Managers to enhance their ‘three lines of defence’, supported by improved management information (MI). This important work enables senior managers to be confident in their delegation and oversight. The top priorities we are helping our clients with include:

  • Embedding a risk and control management culture across the business
  • Implementing smarter data and user-friendly dashboards to support oversight and decision-making
  • Establishing conduct risk management frameworks which aim for continued improvement of conduct and culture
  • Implementing technologies, such as workflow solutions and analytics tools, that support real-time monitoring, identification, remediation and reporting of risks and issues

What next?

With clear accountability and transparency, the FCA expects Senior Managers not only to be competent but to evidence their competency. As the steady increase in fines against individuals since the launch of the regime for banks demonstrates, failure to do so may have severe financial, regulatory and reputational consequences, to both firms and individuals.

To find out more about how we are supporting our clients in establishing a controlled business environment, rooted in evidence-based oversight and management information, please contact Bernardo Castel-Branco.

About the Author

Bernardo Castel-Branco
Senior Manager

Bernardo is a Senior Manager at Alpha with more than 10 years of Risk and Compliance consulting experience for the Asset Management Industry. He provides advice across a number of regulatory topics, such as the FCA regime and expectations, Governance and Oversight, Best Execution, MiFID II, Risk Management and Regulatory Reporting.