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Avoiding the bear pit of enforcement

On 26 April 2021, the FCA published a speech given by Mark Steward (Executive Director of Enforcement and Market Oversight) to the NYU Law School.

One quote from the speech leaps off the page:

“By imposing personal liability, the [Senior Managers] regime uses self-interest – in this case the senior manager’s self-interest in avoiding liability – to avoid the bear pit of enforcement.”

The truth is that the Senior Managers Regime is about more than just the stick of enforcement.  The threat of sanction is just a waymark on the route to a destination in which true cultural change has been embedded within firms.

Nonetheless, this is a timely reminder about THE key principle underpinning the entire Senior Managers Regime – personal accountability.  Senior Managers are liable for the decisions and actions taken within their area of responsibility (as defined by their Statement of Responsibilities). 

Given that the Senior Managers Regime expressly employs the concept of self-interest as a motivational tool, perhaps it is time that Senior Managers become more selfish – or at least more concerned with self-preservation.

If you are a Senior Manager, ask yourself – do you have the tools you need to discharge the legal obligations to which you are subject?  If not, why not?  You’re the one on the hook.  Put more bluntly, can you create the audit trail detailing the decisions you have made, the delegations of responsibility you have authorised, and the risk controls you have implemented?  If not, why not?  Your neck is the one on the line.  You need – indeed you are entitled to – help.

At a higher level, does your firm run SM&CR compliance centrally from HR or Compliance?  If so, you are in danger of missing a trick.  It’s great that firms take SM&CR seriously, but a ‘drive from the centre’ isn’t wholly consistent with the principle of personal accountability.  More to the point, are you content for it to be run in this way?  If so, you are in danger of missing the point and putting yourself at risk in the process.  Remember, simply doing nothing will not wash.  Senior Managers can’t be bystanders.

The FCA regards senior manager self-interest as a “virtuous circle”.  In its view “what protects senior management from liability also reduces (though cannot guarantee) the risk of non-compliance more generally within firms.”

This is undoubtedly true.  However, recognising this quid pro quo, firms should provide Senior Managers with tangible tools designed to help executives shield themselves from liability.  For their part, Senior Managers should demand nothing less.

If you are wondering where to go on this, get in touch.  Corterum is a comprehensive SM&CR solution at a price that makes sense.  Employers – give your Senior Managers the tools they need to implement the “virtuous circle” of compliance which the FCA envisages.  Senior Managers – if the “virtuous circle” is to work, demand that your employer helps you to help them.  More to the point, let us help you both – at a fraction of the cost that you would incur if you tried to do this on your own.  Drop us a line at [email protected], or hit the button below to see how.

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