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FCA expects 20-fold increase in Senior Managers’ Regime

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The FCA expects the number of managers that can be held personally responsible for misconduct will reach 72,000 after the extension of the Senior Managers’ and Certification Regime (SMCR), according to data provided to financial services law firm Cleveland & Co.

Cleveland & Co says that this represents a dramatic increase in the 3,159 managers that the SMCR was applicable to in 2016.
The FCA recently confirmed proposals to extend the SMCR to all sectors of the financial services industry, namely to all firms who are regulated by the FCA, and it expects to do this by 2018.
SMCR rules are used to increase accountability across staff in the financial services industry. If managers don’t take reasonable steps to avoid misconduct they could face fines, suspensions, and bans.
The SMCR had previously applied only to banks, building societies, credit unions and PRA designated investment firms. The SMCR extension will bring all senior staff at FCA-authorised firms, including financial advisers, private equity firms and fund managers under its jurisdiction.
Cleveland & Co says that the fact that the number of managers is set to increase by over 20-fold demonstrates the increased regulatory burden that the financial services industry will face before it is introduced in 2018.
Firms that are set to be included in the Regime will have to overhaul compliance teams and commit further resources to training their staff on SMCR requirements.
Cleveland & Co adds that private equity and hedge fund firms need to be particularly careful following the extension of the SMCR. They must ensure target companies that are under the SMCR’s jurisdiction are fully compliant, and also understand responsibilities should they take up board positions at those target firms.
Emma Cleveland (pictured), Managing Director of Cleveland & Co, says: “The scale of the increase highlights the size of the task that many companies face.”
“While the biggest companies with larger budgets should be able to handle the regulatory changes, it is smaller companies with the biggest mountain to climb.”
“Understanding the rules and rolling out extra training – not just for senior staff – will take large chunks out of comparatively smaller budgets.”
“It’s imperative that firms don’t leave introducing changes until the last minute and seek advice sooner rather than later.”

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