Recommendation 5

HM Government · verbatim extract Acknowledged

The Senior Managers Regime, which focuses on the most senior individuals who perform key roles, aims to reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct. By driving greater clarity about who is accountable for what, the regime minimises the potential for overlaps and underlaps in accountability. Furthermore, the regime has been designed so that individual accountability does not cut across or undermine the collective decision-making of an organisation’s governing body. Although the FCA is not within the scope of the Senior Managers Regime, we have adopted and applied the principles of the Regime to our senior managers, as we expect those individuals to meet standards of professional conduct as exacting as those required in regulated firms, and for those individuals to be held accountable for functions they personally direct. Since 2016 we have set out what our Senior Managers are responsible and accountable for in published Statements of Responsibility,1 and our Management Responsibilities Map sets out our management and governance arrangements, providing a collective view of the allocation of responsibilities across the FCA. As our public Management Responsibilities Map makes clear, the CEO is accountable for the organisation overall, and the Executive Directors are accountable for the performance of their divisions. Under the Senior Managers Regime, establishing who is accountable is a first step in considering their conduct. that individual. Personal culpability arises if the individual’s behaviour was deliberate or below the standard which would be reasonable in all the circumstances at the time of the conduct concerned. It is important to note that there is no assumption of guilt or reverse burden of proof in this process. So in the context of Dame Elizabeth’s Report, the next step for the Board was to assess the reasonableness of the actions that named individuals took in light of all the circumstances, taking into account the steps they took to make improvements, as well as the overall scope of their responsibilities, the challenges they faced in those other responsibilities and the priorities set by the Board. In its consideration of these factors, the Board concluded that the named individuals did identify problems in the approach of supervising small firms; that they put in place an extensive programme to address these problems; that their responsibilities were very wide in scope; and that their priorities within those wider responsibilities were endorsed by the Board. There were no findings of personal culpability or misconduct in this case. In taking account of all the circumstances of this case, which include the responsibilities of other senior managers for areas which contributed to the overall outcomes, which the Board was able to consider more broadly than the Independent Review, the Board took the view that it was appropriate to remove bonuses from the individuals named and also from others and that this was consistent with our guidance on the Senior Managers Regime. control failings in major financial services firms. These have resulted, in accordance 1 Senior Managers Regime, Financial Conduct Authority, published July 2021 Second Special Report of Session 2021–22 11 with the Senior Managers Regime, in adjustments to variable remuneration of the senior managers with the relevant responsibilities. However, on the basis that there was no personal culpability or misconduct, these have often not resulted in either the cancellation of all variable remuneration for the periods in question or the termination of employment of the individuals concerned. Culture at the FCA