Jonathon Davidson, executive director of supervision, retail and authorizations for the Financial Conduct Authority (FCA) is urging financial firms to consider the Senior Managers and Certification Regime (SMCR) as "a positive thing … as opposed to just a compliance thing which in a sense is constricting." Davidson's viewpoint was expressed as part of an FCA podcast focused on the extension of the SMCR to FCA solo-regulated firms beginning in December 2019.
Davidson says senior managers need to “step up and be a leader,” in establishing a culture within their firms that doesn’t just view SMCR as a set of new compliance requirements. Instead, they need to lead by example in embracing SMCR as pledge to hold themselves personally accountable for doing the right thing on behalf of the firm and its clients.
Davidson points to poor culture as one of the "fundamental root causes" of firm misconduct and the resulting legal, financial and reputational damages that accompany it – alongside firms' business models and strategies. Addressing firm culture is a "huge priority" for the regulator, he said.
Financial regulation expert David Heffron of Pinsent Masons, the law firm behind the online publication Out-Law, noted: "Davidson's notion of the conduct rules as being 'almost a pledge' is illuminating. The idea is that the conduct rules will enable staff to push back against anything that goes against the grain of those essentially quite simple, but fundamental behaviours: of acting with integrity, due skill, care and diligence; treating customers fairly; being open with regulators; and keeping to proper standards of market conduct.”
Find more information and resources on SMCR here.