Following the parliamentary review of the financial services sector resulting from the 2008 financial crisis, the government looked to replace the existing UK Approved Persons Regime with one more focused on senior managers and individual responsibility.
The result was the creation of the Senior Managers and Certification Regime which, for banks, building societies, credit unions and Prudential Regulation Authority-designated investment firms, has been in force since March 2016.
But, from 9 December, this regime will extend to cover all FCA solo-regulated financial services firms. It will also affect international firms where they have UK operations.
HM Treasury estimates that 17,200 firms will be affected. This will impact 106,000 approved persons, 43,900 future senior managers and 62,000 certified persons. That ranks alongside Mifid II and Priips as one of the more comprehensive regulations to land in recent times.
The main aim is to reduce harm to investors and strengthen market integrity by raising the standards of conduct for everyone who works in financial services. It shifts the responsibility of activities in a firm on to senior managers and brings into scope non-executive directors.
This surely presents an opportunity. While SM&CR is not primarily designed to impact on the diversity issue, it does provide a mechanism through which to review job profiles, the road mapping of responsibilities and current assessment processes.
Megan Butler, the FCA’s director of supervision and a member of its executive committee, spoke in November on sexual harassment in the context of SM&CR, noting the regulator would continue to pay attention to how firms handle personal misconduct, with the roll-out of the regime being one way to achieve this.
During the same period, FCA executive director of strategy and competition Christopher Woolard spoke at the LGBT in Financial Services Industry Summit of the great need for increased inclusivity, suggesting the regulator’s social contract “rests on our ability to reflect the consumers we are charged with protecting”.
Research now shows the clear value of diversity to the overall success of a firm. For example, Consultancy UK last year produced figures showing that diversity in the upper echelons of businesses is correlated with an improved likelihood of financial performance above industry medians. For gender diversity, the premium was found to be 21 per cent between first and forth quartile companies, while for ethnic/cultural diversity the premium was 33 per cent.
Enhancing the necessary re-evaluation of a company’s positioning by including diversity as part of the mix can only help in their drive towards success.
To learn more, FCA CEO Andrew Bailey and economic secretary to the Treasury and City minister John Glen will be speaking at Pimfa’s Wealth of Diversity Conference on 5 February at London’s Canary Wharf.
Liz Field is chief executive at Pimfa