SMF REGIME – WHAT IS THE POINT OF IT ALL?

In December 2019 the FCA introduced the Senior Managers Regime on IFA, thus unleashing on the industry a major change in the way that each individual in senior positions is approved for roles.  18 months later IFAC assesses the impact on the ordinary life of an IFA.

In fact the regime was introduced in 2016 for banks and PRA designated investment firms, and has received over eight thousand applications up to the end of 2020.   Out of this cohort, some 632 individuals have also been called in for interview by the FCA as part of its process for determining whether it should approve them.  This amounts to a running average of about three per week.  But most of those interviews were for banking positions.

In 2020 323 applications to perform one or more SMF were withdrawn by the firm and/or candidate, three were refused and one went to the Regulatory Decisions Committee (RDC).   

But remember that all of these individuals would have needed permission from the FCA before this new regime was introduced, so what was the point in the SMF regime?  

The aim of the legislation was to improve accountability and awareness of conduct after the banking crisis, as a reaction to the tiny number of bankers who were called to account for the credit crunch.

Since March 2016, the FCA has opened 46 enforcement investigations into individuals who hold or have held one or more SMF; of that number, 15 investigations were discontinued with no further enforcement action taken.  So all of this legislation and change to help with a mere 31 enforcement investigations in five years?

FCA also opened 12 enforcement investigations into individuals who are/were classified by their firm as Certified Persons; of that number, three investigations were discontinued with no further enforcement action taken.  So the certified regime was introduced to help with just 9 prosecution cases in five years?

With just eight enforcement prosecutions per annum on average, and the FCA introducing yet more rules around a consumer duty - practitioners are entitled to ask to those who rule over us  “What, exactly, was the point of the SMCR regime?”