FCA implements SMR principles to govern all firms FCA implements SMR principles to govern all firms

09 Feb 2017 Ken Davy

The traditional saying: 'What’s sauce for the goose is sauce for the gander' has held true since the 17th Century, so it is very encouraging to see that when it comes to the application of the Senior Managers Regime (SMR), the Financial Conduct Authority is voluntarily adopting its principles for itself.

The FCA is already applying the SMR to major financial institutions, and anticipates extending them to smaller firms, including IFAs, in 2018. The logic of the rules is irrefutable. Indeed, given the scale of the consumer detriment the big battalions, such as banks, have created over the years, it is quite amazing that such a regime has not been brought in much earlier.

The SMR places the responsibility for mismanagement, and poor or sharp business practices, squarely on the heads of the senior managers of the business. This means the FCA can hold an individual director, or a group of directors or senior managers, personally responsible for the actions of the business.

Penalties for individuals who fail to take reasonable steps to properly discharge their responsibilities are likely be very severe.
Having dealt with IFA firms for more than 40 years, I know the vast majority of advisers work hard and responsibly to do the best for their clients. As a result, I believe that you will have little to fear from the SMR, providing you make sure you follow the basic principle of combining good compliance and common sense with sound business practice.

In last week’s column, I drew attention to a firm whose business practices the FCA was reportedly seriously concerned about. Despite this concern, the firm continued doing business, which it is now feared has caused clients further significant detriment. Given that one would have thought the relevant permissions could have been withdrawn immediately, this appears to be gross mismanagement by the FCA.

Will the FCA now apply the SMR to itself? If this problem could have been nipped in the bud by the FCA and was not – with the result being that clients have suffered financial detriment which IFAs will end up paying for through higher FSCS levies – will the FCA's senior management now be called to account? After all, what is sauce for the goose is sauce for the gander.

Ken Davy is chairman of SimplyBiz


Testimonials

"I wanted to put on the record how grateful we are for the support, advice and help we have received from our application manager, Tim Prest, and all the team at SimplyBiz.  If we've ever made one absolutely, 100% correct business decision, never to be questioned or re-considered (even with the benefit of hindsight) - employing the services of your firm would be it!"

Chris Lee
Lee Financial Planning

Read More

Latest News

"Please, Mr Provider, could we have some more?"

May 23, 2018

When Dickens’ Oliver Twist famously said “Please, sir, I want some more”, every reader or audience member knew that there was plenty available and his need for ‘more’ should have been satisfied. I feel somewhat the same in respect of the outcome of the Financial Services Compensation Scheme review.

Read more >

Liz Coyle: Your Senior Managers & Certification Regime refresher

May 17, 2018

Liz Coyle, Compliance Policy Manager for The SimplyBiz Group, recaps the key aspects of next year's big rules change.

Read more >

SimplyBiz Group's Centra investment system has attracted 1500 users

May 14, 2018

Dan Russell, MD of SimplyBiz Investment Services, expresses his delight with the speed and enthusiasm with which Centra, the end-to-end investment service, has been embraced by advisers.

Read more >

"Ending 'phoenixing' is a matter of political will"

May 10, 2018

The government minister, Robert Jenrick, recently highlighted that the practice of ‘phoenixing’ can be deeply corrosive to public trust in the system which is progressively passed on to the whole of our economy. While this is undoubtedly true, what I find so depressing is that after all these years the debate had to take place at all.

Read more >