The Senior Management Responsibility regime – disappointing and unprincipled

In the run-up to the creation of the FSA, much was made of the innovation introduced by the Financial Services and Markets Act of a power to discipline personally approved persons. By including senior managers as well as firms, the legislation hoped to strike fear into the hearts of top people in the industry when they were tempted to cut corners. Six years later, we asked regular contributor, Adam Samuel , to have a look at whether the regime has succeeded or ever could do so.

During the self-regulation era of 1988 to 2001, compliance commentators often bemoaned the fact that firms could be fined for appalling behaviour leaving senior managers unscathed by any public share of responsibility. In practice, regulators did act against individuals before 2001. Firms gently retired off compliance officers and other senior managers when self-regulating organisations (SROs) told them that otherwise they would face more serious enforcement action. What section 66 of the Financial Services and Markets Act offered with its power to discipline approved persons was hope that the publicity engendered and the fear of holes in individuals’ pockets might bring compliance into the board room.