The Financial Conduct Authority expects the new Senior Managers and Certification Regime will push the way the regulator engages with advisers and small firms to a more "adult-like" relationship.
The Senior Managers and Certification Regime (SMCR), the Financial Conduct Authority's (FCA) flagship regulation, will make it possible to identify who precisely can be held responsible for future missteps of any kind.
On Monday, December 9, the regime will be broadened beyond the very large banks it now governs to almost 50,000 more companies in the UK.
So moving from a parent-child relationship of asking us what you should do, to an adult-adult relationship which reflects that you’ve got a business to run and we’ve got requirements as a regulator"
Money managers with billions of pounds in assets, inter-dealer brokers in derivatives, and consumer-credit firms will all be covered by the new rules, and lawyers and consultants are scrambling to get their clients ready.
Speaking at the Personal Finance Society's annual conference last week, Debbie Gupta director of life insurance and financial advice at the FCA, said the new rules would be a "revolutionary" change in how the regulator engaged with advisers and small firms.
"So moving from a parent-child relationship of asking us what you should do, to an adult-adult relationship which reflects that you've got a business to run and we've got requirements as a regulator - let's work out how we do that most effectively," Gupta said.
Senior executives must have clear job descriptions and statements that spell out their roles, what they're accountable for in their business and to submit these documents to the FCA. Every senior manager will also have a so-called duty of responsibility, meaning that they could be held accountable if a firm violates the law and if they didn't take reasonable steps to prevent or stop the breach.
The toughest rules will apply to mortgage lenders with 10,000 or more regulated mortgages outstanding and money managers with £50bn of assets under management in a three-year period.