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The Duty of Responsibility for Senior Managers

The Duty of Responsibility for Senior Managers

 

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Full transcript available below:

Welcome and thank you for joining today's webinar hosted by me, Bethany Sirven of MyComplianceOffice, and Gregory Brandman and Simon Collins of Eversheds Sutherland.

Finally, if we could go to the next slide please before I hand back to Simon, I wanted to mention this new duty of responsibility for senior managers. In addition to the baseline conduct rules and the senior manager conduct rules which will apply to senior managers, there is an additional statutory duty of responsibility which will be imposed on senior managers and indeed on directors of the firm including NEDs, which essentially will provide a further ground of action by the FCA against these individuals where in the event that the firm has breached a requirement under FSMA which could be a principle for business, it could be a rule in the handbook, it could be a statutory provision in FSMA, where something like that has been breached by the firm and that breach has been established by the regulator, the senior manager responsible for the part of the business where the breach occurred will be considered to be in breach of his duty of responsibility if they didn't take reasonable steps either to prevent that breach occurring or continuing.

The burden of proving the breach lies on the FCA, so the FCA will have to prove a failure to act reasonably, which is essentially a further grounds of action for disciplinary proceedings against senior managers. There is some guidance. This, of course, is a duty that currently applies to senior managers within the banking industry, and there's some guidance that was published both by the FCA and by the PRA last year on enforcing the duty of responsibility and that's in Policy Statement 17/9. It's expected that that guidance will apply equally to other financial services firms, but that's to be confirmed and there'll be a consultation later in the year, all of which gives rise to this perennial quandary about how senior managers could demonstrate that they've acted reasonably.

You'll have noted by reference to the way the conduct rules have described that reasonable steps is very much the test for senior managers. Again, you'll see that reasonable steps is the test under the duty for responsibility, and in terms of personal culpability the test for whether you breached a conduct rule including a baseline conduct rule, the burden of proof is on the regulator to show a failure to act reasonably. Evidencing the reasonableness of your decision making and the fact that you take reasonable steps in each decision or otherwise in the performance of your roles, it will be very, very important to protect yourselves as senior managers going forward that you have taken reasonable steps

How you go about collating that body of evidence is a perennial challenge and source of concern for our clients in this area, and we can certainly talk a little bit more about that later on.

 

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This webinar was co-hosted with Eversheds-Sutherland www.eversheds-sutherland.com

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