LONDON (Reuters) - Britain’s markets watchdog has proposed rolling out banker accountability rules to thousands of staff in other parts of the financial sector a decade after taxpayer bailouts and market rigging scandals saw only a few individuals punished.
The rollout will see asset managers becoming directly accountable for giving investors value for money, turning the regulatory screw further on the sector.
The Senior Managers Regime or SMR was introduced for top bankers in March 2016 to try to improve behavior after banks were hit with hefty fines for trying to rig the Libor interest rate benchmark and currencies.
No other country has introduced such detailed and wide-ranging accountability rules.
The government wants the rules applied across the financial sector from 2018 to cover asset managers, foreign exchange and commodities dealers, and on Wednesday the FCA and Bank of England said how they proposed to do this.
Under SMR, key staff are vetted by the FCA and must spell out their job description. They are then directly accountable for misconduct on their patch, making it easier for regulators to pin blame on an individual.
The FCA said almost all of the firms it regulates will have to comply in some form, but there will be a lighter version for small firms.
As with banks, more junior staff will have to be “certified” by the firms for fitness, skill and propriety at least annually.
“In practice, it should not amount to a complete overhaul of governance and senior manager arrangements, but it will be the ‘stick’ the FCA uses to ensure clarity over such,” said Jake Green, a lawyer at Ashurst.
The watchdog proposed that five basic conduct rules will apply to all staff at authorized firms: act with integrity and due care, be open with regulators, treat customers fairly and observe proper standards of market conduct.
Senior managers in non-banking sectors will also be vetted by the FCA, and must set out their responsibilities and be directly responsible for misconduct, the FCA said.
The BoE also proposed that senior staff at insurers, which had been subject to a more limited version of SMR, be subject to the same rules as top bankers.
Lawyers and funds industry officials said the roll out will pile more rules on the asset management sector, which is already facing scrutiny from the FCA over how much “value for money” it gives to customers.
“Interestingly the regime takes forward the changes suggested in the FCA’s Asset Management Market Study, requiring individuals to have responsibility for the value for money received by investors,” said Emma Rachmaninov, senior associate at Freshfields Bruckhaus Deringer law firm,
The Investment Association, a funds trade body, said it wants the rules to take into account different business models.
“The SMCR arrives at a complex time for many firms who are already implementing a huge volume of domestic and European regulation as well as preparing for Brexit,” said Chris Cummings, chief executive of the IA.
Reporting by Huw Jones; Editing by Keith Weir
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