Last Thursday, Grant Thornton, Cameron McKenna and CISI jointly hosted a conference on the forthcoming extension of the SM&CR regime at Willis Towers Watson. The FCA hasn’t yet published its consultation, but we can draw some conclusions from what it has said so far, and also make some provisional assumptions based on how the new regime is being applied in banking and insurance.
The regime will have a profound effect on firms’ culture and will shift the balance of their relationship with the FCA. Speakers, panels and questioners all focused more on the longer term implications of SM&CR than on what are likely to be its detailed provisions. The debate highlighted five key areas:
How SM&CR might affect firms that are part of international groups
The impact of Brexit restructuring
The immense challenge for the FCA of extending the regime in a proportionate way
The wider impact of the certification regime and how this might affect employee relations
Above all, perhaps, the impact on firms’ culture and the risk accountability maps might create a parallel universe, separate from reality
It is clear that the FCA has a huge task to get the SM&CR regime right for its 55,000 regulated firms, and then to supervise it effectively. Its first few SM&CR decisions will set critical precedents and dictate, in large part, how firms respond to it. Our next conference is scheduled for 17 October, by which time the view ahead should be clearer.
Firms should therefore consider carefully what sort of overall regulatory relationships they want to have in the longer term. For many firms, this is likely to involve a greater degree of internal coordination and forward thinking. In our report ‘Senior Managers & Certification Regime, Industry Perspectives’ (PDF) we consider experiences and learnings from the first wave of banks that have fallen under the SM&CR over the past year. We also seek views from law firms, trade bodies and academics on the intent of the regime and the implications for the financial services industry and beyond.