Senior managers regime - an update

Simon Lovegrove: Hello everyone and welcome to this latest financial services video. In this video we are going to do a short update on the Senior Managers Regime. We haven’t got time to focus on all of the papers the regulators have published but we are just going to focus on one important proposal and that’s the proposed new senior management function – the chief operations function. Peter the function has got a lot to do with internal systems and controls. What are your thoughts?

Peter Snowdon: Yes, I mean it’s designed to capture the individual who is responsible for the continuity and resilience of systems, operations and technology, so it’s something that the regulator has looked at before but now they’ve created a specific post. What they are looking to capture – I mean it will vary in different firms and some firms may not have someone performing that role and they won’t actually have to apportion this  responsibility in that sort of situation, but those firms who have someone like a Chief Operating Officer, someone performing that sort of function will need to create this new senior management function.

Simon Lovegrove: And also the head of operations and technology might find themselves within scope.

Peter Snowdon: Yes that’s correct.

Simon Lovegrove: OK. And does this apply to third country firms?

Peter Snowdon: It does, it applies to third country firms and it’s a particularly interesting and challenging issue for third country firms, particularly third country branches because this type of individual, particularly if you think about technology, would often be sitting outside the UK. Now we’ve seen this already in relation to the Senior Management Regime – the extra territorial reach of the regime, but now this brings it into much sharper relief because if your head of technology sits in the US or Australia or somewhere else, he or she may well be captured.

Simon Lovegrove: And for UK branches, those who might be caught, could already be part of the Senior Managers Regime falling within the overall of the responsibility function.

Peter Snowdon: That’s correct, I mean we have these sort of general catch all SMF’s both for European, EEA branches and also for third country branches, but this is a specific function which is designed to capture the individual with that specific responsibility.

Simon Lovegrove: And Peter, as you know, as part of Senior Managers Regime prescribed responsibilities come with it. We’ve got a proposed new prescribed responsibilities for operational resilience and operational continuity.

Peter Snowdon: Yes, I mean this new prescribed responsibility is designed to sit with the new proposed SMF. All firms have to allocate prescribed responsibilities, they’re mandatory, there is no question of choice and this will be a new one to add to that list.

Simon Lovegrove: But in other cases, if you don’t have this SMF, the prescribed responsibility would have to be allocated to another SMF.

Peter Snowdon: That’s correct, although some firms may not have this SMF, it doesn’t mean that prescribed responsibility falls away. In that case you are going to have to allocate it to someone else and firms in that situation will need to think quite carefully who actually performs this role and allocate this new prescribed responsibility accordingly.

Simon Lovegrove: And importantly for UK branches the prescribed responsibilities only relate to UK operations.

Peter Snowdon: That’s correct, it only relates to what you are doing within the UK – but that could still capture people outside the UK depending on the situation. It’s important to remember these are only proposals at the moment, it’s only a consultation paper, but I think firms will probably want to start thinking about the consequences, you know, quite early on.

Simon Lovegrove: Thanks Peter. That concludes this video.