Senior Managers - Coming to a bank, insurer, and fund manager new you!

The Senior Managers Regime, part of a series of regulation (in addition to the new Renumeration Code and Certification & Conduct Rules) in the UK, is aimed at signficantly increasing personal

accountability and responsibilites for UK banks, foreign banks building societies, and credit unions.  One can probably add foreign bank subsidiaries and branches to the list too. However a recent article by Dechert LLP posits that this may soon be expanded to other regulated entities, including insurers, fund managers, investment funds, asset managers and others following recent comments from the UK Treasury Committee saying "... regulators should at the earliest opportunity make proposals to extend the coverage of the Senior Managers....to.... other parts of the financial services industry". The article entitled OnPoint dated February 2015 indicates that such changes are designed to ensure there is a Senior Manager who is personally accountable for every aspect of the firm's regulated activities and such individuals must be approved by the regulator.

The folks are Dechert also point out that one key difference between the existing so-called Signficant Influence Functions and the new rules is that in the past the regulator had to satisfy a relatively high burden of proof that a manager acted in contrary to approved persons principles.  Now, such Senior Managers need to demonstrate that steps and systems were put in place to mitigate infractions,  otherwise face sanction.

Without arguing the pros/cons of this change today, I want to now focus on just one aspect, and that being implementation of such a rule for global trading businesses, for example.  I have held such a role in the past and can tell you the idea of managing risk managers, traders, sales people and the like across geographies such as NY, London and say Hong Kong can be tricky without the use of matrix reporting lines to local managers and global product managers at the same time.  But who in this simplifed example will stand up and assume the UK Senior Managers role and accountability?  The global trading head in NYC?  Or maybe the Risk Management leader in head office overseas? Or perhaps the product manager in London?  It will be interesting to observe the practical consequences of this rule in bank trading platforms operating accros boarders.  It will also be interesting to see how it will be implemented into market-based finance platforms and the like as well.