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Senior managers regime: widening the scope
Practical Law UK Articles 0-589-4754 (Approx. 3 pages)
Senior managers regime: widening the scope
by Calum Burnett, Philip Annett and Sarah Hitchins, Allen & Overy LLP
| Published on 27 Nov 2014 • United Kingdom |
The Treasury has issued the latest consultation in relation to the proposed new senior managers and certification regime, which, when finalised, will replace the approved persons regime. The principal issue addressed in the consultation is widening the scope of the new regime to capture UK branches of overseas firms.
The Treasury has issued the latest consultation (the consultation) in relation to the proposed new senior managers and certification regime (the new regime), which, when finalised, will replace the approved persons regime for banks, building societies and Prudential Regulation Authority (PRA) designated investment firms operating in the UK. The principal issue addressed in the consultation is widening the scope of the new regime to capture UK branches of overseas firms.
The consultation is another step along the road to reforming the existing approved persons regime in order to make it easier for the Financial Conduct Authority (FCA) and the PRA to hold to account individuals working in banks, building societies and investment firms (see News briefs "Tackling serious failings: the FCA and the PRA outline their approaches" and "Personal accountability: FCA and PRA consult on new regime").
A wider reach
The consultation briefly sets out the Treasury's proposed approach to extending the new regime to UK branches of overseas firms. The Treasury has also published a draft order that will be used to give effect to this extension, and on which the Treasury is also seeking responses (www.gov.uk/government/uploads/system/uploads/attachment_data/file/372460/Financial_Services_and_Markets_Act__2000___relevant_authorised_persons__Order_2015.pdf).
In particular, the Treasury has stated that:
- The PRA does not intend to designate any senior management functions for UK branches of EEA firms as primary responsibility for prudential supervision of a UK branch of an EEA firm rests with the home state regulator of its parent entity.
- The PRA expects to specify significantly fewer senior management functions for UK branches of non-EEA firms than in equivalent UK firms, and that UK branches of non-EEA firms may only require one individual approved by the PRA as a senior manager.
- The PRA is unlikely to designate a large number of roles within UK branches of overseas firms as "significant harm functions" that will fall within the scope of the certification regime.
- The FCA expects that the implementation of the new regime in UK branches of overseas firms will be broadly aligned with the implementation of the new regime in equivalent UK firms.
It is important to note that senior managers in UK branches of overseas firms will not be caught by the new criminal offence relating to a decision causing a financial institution to fail (section 36, Financial Services (Banking Reform) Act 2013).
Possible delay?
The Treasury has requested responses to the consultation by 30 January 2015. This deadline suggests that there is likely to be a delay to the proposals for the new regime being finalised, as it was originally proposed by the FCA and the PRA that the finalised rules for the new regime would be published by the end of 2014.
We anticipate that the consultation will be followed by a further joint FCA and PRA consultation paper, which will set out in more detail their proposed approaches to implementing the new senior managers regime in practice in UK branches of overseas firms.
Calum Burnett is a partner, Philip Annett is Counsel and Sarah Hitchins is an associate in the Banking, Finance and Regulatory Litigation Group at Allen & Overy LLP.