The FCA has said that placing responsibility on to individuals through its Senior Managers Regime will not mean that firms have a “free pass” against fines.
Speaking at New York University, the FCA’s director of enforcement and market oversight Mark Steward said that while fines were not the only way to keep firms in check, the regulator was still willing to fine firms for their failings, which could be separate from individual employees’ breaches of the Senior Managers Regime.
Steward said: “Some have viewed the Senior Managers Regime as a means of shifting corporate liability onto individuals. This is not the case, so far as the duty of responsibility imposed on senior management is concerned, because the firm’s liability is a jurisdictional fact in any action against an individual.
“There is no free pass for firms and so the Senior Managers Regime does not mean there will be an end to action against firms, including heavy financial penalties.”
Steward used the example of the FCA’s recent action against Tesco for giving misleading impressions of its share values as an example of wider corporate responsibility that it was important to monitor.
“While it is good to pay attention to the liability of individuals for corporate misconduct, we should not forget the need for all wrongdoers to account to those individuals who otherwise end up paying – unfairly – for the consequences of wrongdoing.
The Senior Managers Regime was introduced in March 2016, and is due to be rolled out to all firms, including advisers, from 2018.
As clearer responsibilities are drawn up for individual managers, discussions are ongoing as to whether the FCA’s current adviser register could be scrapped and replaced with a new directory system.
Putting an end to ‘phoenix’ firms
In a hearing with a committee of MPs, former FCA acting chief executive Tracey McDermott said last year that the Senior Managers Regime would help the regulator tackle so-called phoenix firms, where advisers or other financial services directors deliberately wind down a firm with impending liabilities and start up a new one to avoid personal liabilities.
In his speech, Steward said: “The Senior Manager’s Regime, I think, marks a distinct and positive turning point here because it provides a clear framework in which the responsibilities of senior managers are identified and allocated. This serves to answer one aspect of the problem that existed before insofar as there was a perception the legal framework around these questions was inadequate.”
“The overriding purpose of the regime is to improve genuine accountability in firms by removing ambiguous or bureaucratic structures that have impeded or obfuscated clear lines of responsibility.”