The Financial Services (Banking Reform) Act 2013 introduced new offences for misconduct (s 66A and 66B of the Financial Services and Markets Act 2000 (FSMA)) for senior managers of banks and other deposit-takers. The misconduct offence could be triggered, amongst other triggers, by a person being a senior manager (as defined under the SMCR), a contravention occurring in a particular area, and the senior manager being responsible for that area (as stated in their Statement of Responsibilities). This was termed the ‘presumption of responsibility’.
Simultaneously, a statutory provision was included (s 66A(6) and s 66B(6) of FSMA) which stated that in order to rebut this presumption of responsibility, a senior manager would need to prove to the relevant regulator that they had taken all reasonable steps to prevent the contravention from occurring or continuing.
The culmination of the two aspects above meant that it was for senior managers to prove that they were not guilty of the offence, rather than the burden being placed on the relevant regulator to prove this.
In the draft Bill, subsection (6) of each of s 66A and 66B of FSMA are proposed to be deleted. The effect of this (if it passes in this form) would be that it is not for the senior manager to need to prove to the appropriate regulator that they took all reasonable steps to avoid triggering the offence.
In addition, the proposals are to include in the test for triggering the misconduct offence, not only that the person was a senior manager, a contravention occurred in a particular area, the senior manager was responsible for that area (as stated in their Statement of Responsibilities) but also that a new trigger element, namely that the senior manager had not taken reasonable steps to prevent the contravention occurring or continuing. The current draft wording in the Bill is:
“the senior manager did not take such steps as a person in the senior manager’s position could reasonably be expected to take to avoid the contravention occurring (or continuing).”
The culmination of these two proposed changes would mean that: (1) a senior manager is not presumed to be responsible; and (2) the appropriate regulator would need to prove that the senior manager failed to take reasonable steps in order for the offence to be triggered.
This amendment is proposed to come into force on 7 March 2016.