With the Senior Managers and Certification Regime (“SMCR”) due to be extended to all regulated financial services firms in six months’ time (9 December 2019), Kingsley Napley reflect on three key learning points from the regime which has already been in place for banks, building societies, credit unions and PRA- designated investment firms since March 2016.
Perhaps the biggest change the SMCR heralds for regulated firms has been the shift in focus of the fitness and propriety test. The onus is now on firms to assess and certify whether an individual is fit and proper, rather than the regulators being sole arbiter.
With the advent of the new Regulatory References regime, we have seen firms adopting a significantly more cautious approach. Firms are now reluctant to engage with departing employees in respect of agreed references, in some cases only giving an indication of what a reference would say if given. Most firms will be clear that they are subject to regulatory obligations to provide accurate references which include disclosing relevant facts, and that this significantly limits their ability to negotiate the terms of a reference.
Finally, in our experience there has been a drain of talent. We know some individuals who, whilst certain that there had been no wrongdoing on their part or as a function of anything which they themselves had done, nonetheless have decided to leave their lucrative, successful careers within financial services, rather than risk more of their life-times’ earnings being subject to potential malus and clawback as they continued in post.