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Proposed changes to the FCA Senior Manager Conduct Rules (SMCR)?

22 October 2021

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Proposed changes to the FCA Senior Manager Conduct Rules (SMCR)?

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What are the proposed changes to the FCA Senior Manager Conduct Rules (SMCR)?

The Financial Conduct Authority announced yesterday that it wants to broaden its existing regime for regulating the conduct of senior managers in financial services. The regulator is proposing to extend the reach of its rules by bringing payments services, electronic money firms and credit rating agencies under the regime.

The FCA on payment services and electronic money

According to the FCA’s 2020-2021 Perimeter Report, the Senior Managers and Certification Regime (SM&CR) ‘aims to reduce harm to consumers and strengthen market integrity by improving conduct at all levels within firms and enhancing senior management accountability.’

The regime was initially developed by the FCA in response to the 2008 financial crisis. Its mission is to impose accountability on senior individuals who work in the financial services industry. According to The Times, the regime currently regulates the conduct of executives in about 47,000 financial services firms, including banks, insurers and asset managers. All firms subject to SMCR have been warned by the FCA to comply or face fines or sanctions.

'The annual perimeter report is an important part of our accountability to Parliament, particularly the Treasury Committee. The FCA is committed to being more innovative, assertive and adaptive. That means being more proactive at the limits of our regulation, working with partners and other agencies where we don’t have powers and setting out where we believe more powers are necessary.’

— Nikhil Rathi , Chief Executive of the FCA

The city regulator is now proposing that payment services, “e-money” firms and credit rating agencies should abide by the SMCR rules. E-money firms are companies that provide financial services such as digital current accounts. If the rules are extended to include these types of business, a further 600 firms will be subject to the regime, including Revolut and Moody’s.

Under the current legislation, SMCR only covers solo-regulated firms authorised under FSMA, including investment firms operating a trading venue (ie multilateral trading facilities and organised trading facilities). However, the regime does not apply to Recognised Investment Exchanges (RIEs), Credit Ratings Agencies (CRAs) or payments and e-money firms. According to the report, this is because they are not authorised under FSMA and are subject to different process of recognition (RIEs), registration (CRAs), or authorisation and regulation (payment and e-money firms).

Why are changes to the FCA Senior Manager Conduct Rules needed?

If SMCR was extended to the e-money and payments sector, as well as RIEs and CRAs, this would bring a range of benefits to consumers. The move would:

  • Enhance individual accountability within firms
  • Encourage more effective governance and oversight of functions within firms
  • Give the FCA a strengthened ability to supervise firms
  • Drive higher standards in the sector
  • Mitigate risks to consumers
  • Promote market integrity
  • Ensure consistency in relation to the FCA’s supervisory expectations of individuals discharging key responsibilities

Looking ahead

The proposed changes to the FCA Senior Manager Conduct Rules (SMCR) were outlined in the regulator's 2020-2021 perimeter report, which it publishes annually as part of its accountability to Parliament. The government will now decide whether or not to approve the proposed changes. In the same report, Nikhil Rathi, the FCA’s chief executive, called for significant changes to the Online Safety Bill and claims that it received 30,000 reports of potential online scams in April 2020-March 2021.

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Written by

Nicola Pearson

With a background in research, Nicola Pearson is a blogger on all things business, financial and technology. She is passionate about the topics of wellbeing, leadership and collaboration in the workplace. She enjoys hiking, travelling and yoga in her spare time. 

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