Changing the ways individuals are regulated BusinessRiskTV Individual Accountability Regime Conduct Rules

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By the end of 2019 all firms in UK regulated by the Financial Conduct Authority FCA must apply new rules on individual accountability. Nearly every person who works in financial services will be subject to the new regime.

  • What are you doing to implement the regime?
  • How are you engaging key staff?
  • What are you doing to review and update your risk governance and accountability frameworks?

The Senior Managers and Certification Regime SMCR is part of the FCAs obligation to improve risk management culture governance and accountability within financial service firms. SMCR aims to deter misconduct by improving individual accountability and awareness of conduct issues across firms.

Banks and Prudential Regulation Authority PRA designated investment firms have been subject to the SMCR for over two years. Insurers moved to SMCR on 10 December 2018. The SMCR will be extended to apply to all other regulated firms from 9 December 2019.


The extended application of SMCR to all FCA regulated of firms is tailored to take account of the different types and sizes of firm which will now be subject to the regime including Enhanced Firms Core Firms and Limited Scope Firms.

  • What are the principal features of the extended SMCR?
  • What risk issues will your financial services firm need to consider?
  • What does new SMCR regime mean for existing SMCR firms?

Get our risk management insights on the new regime.

By extending the SMCR to all regulated firms the FCA is changing the way individuals are regulated at firms including

  • Asset managers
  • Mortgage providers
  • Investment firms
  • Crowdfunding platforms
  • Consumer credit firms
  • Sole traders.

Senior Management Function SMF roles have been specified to cover the individuals deemed by the FCA to pose the greatest potential risk to consumers or market integrity.

The certification regime is being extended to apply to all FCA regulated firms. It applies to people who perform certain functions known as certification functions but are not Senior Managers.

Certified Persons – the FCA has identified a list of certification functions. Firms need to ensure that anyone performing these roles has been certified. The firm must check and confirm that the person is fit and proper to do the job and issue them with a certificate confirming the assessment of fitness and propriety. Certificates must be issued at least once a year


Regulated firms are required to make sure that anyone performing a Senior Management Function SMF a certification function or a Non Executive Director NED role which is not in scope of the regime is fit and proper to perform their role.

As part of the SMCR extension the FCA will set minimum standards of behaviour for nearly everyone in the financial services industry. Breach of the Conduct Rules will be a ground for disciplinary action being taken against the individual by the FCA.

Firms must notify staff they are subject to the Conduct Rules and provide suitably tailored training.

There are two tiers of Conduct Rules. The first is a general set of rules that applies to most employees in a firm. The second tier consists of rules that only apply to Senior Managers SM.

FCA guidance provides that training should always ensure that those who are subject to the Conduct Rules have an awareness and broad understanding of all the Conduct Rules and that they also have a deeper understanding of the practical application of the specific rules which are relevant to their role.

In preparing for implementation of rules firms will need to understand legal interpretation and analysis of the regulatory requirements as well as more practical issues associated with applying and embedding the principles of the new regime to their particular organisational structures.

The way business decisions are made may require review. There is potential for conflict between individual accountability and collective decision making.

Greater individual accountability means a higher risk for individuals. Individuals must be trained and supported. Reasonable steps frameworks can help Senior Managers document core elements of the steps taken to fulfil their responsibilities.

Firms should consider how they will structure and implement their SMCR projects.

BusinessRiskTV Partners have in depth knowledge and risk management expertise in advising on the SMCR and related governance and risk management issues.

Connecting you with risk experts who can support your financial services business decision making

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