SMCR will not cover Heads of Legal

Senior Managers & Certification Regime (SMCR) was implemented in March 2016 by the UK Regulators, namely the FCA and the PRA. The legislation aimed at extending regulatory accountability to senior managers within top banks. This was an attempt to reduce corruption and increase compliance within the UK’s financial services market.

In July 2018, the FCA and PRA published a series of papers detailing their plans to extend the reach of SMCR to apply to all FCA approved firms. The SMCR came into force for insurers on 10 December 2018 and, subject to Treasury approval, will come into play for solo-regulated firms on 9 December 2019.

The rules cover a series of “senior management” functions which staff must be approved by the FCA for. Firms themselves are also required to evaluate the fitness and propriety of staff in these “certified” roles.

However, it has now been clarified that Heads of Legal will not be included in this bracket. The Law Society has welcomed the decision.

There were concerns that if Heads of Legal/General Counsels were included, it would affect their ability to give legal advice. Lawyers must ensure that any advice given to clients is privileged and confidential. The Law Society stressed that these stringent regulations may put the lawyer in a conflict of interest with their employer as well as affect their ability to provide complete and honest advice.

Simon Davis, Vice President of The Law Society and a Partner at Clifford Chance has said:

‘This [decision] will ensure lawyers remain free to provide full and frank advice to their employer without the risk of a conflict of interest emerging,”

‘We opposed these proposals because … they would also have meant counsel were answering to two regulators, increasing the cost of doing business.’

‘If investigated, in-house lawyers could have been uniquely unable to provide evidence to the FCA that they had acted properly, because the advice they give their employer is privileged. A logical outcome of this could have been organisations no longer seeking the advice they need from their own legal teams.’


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