The FCA has admitted that the remit of in-house lawyers needs to be reassessed.
In-house lawyers will perhaps take heart from the fact that the Financial Conduct Authority strikes a conciliatory note in its consultation paper on the role of lawyers in its Senior Managers Regime.
It acknowledges the ‘confusion’ that has arisen in the profession and that early communications on the subject were simply unclear. Ultimately, the City watchdog will come to a conclusion on whether the legal function ought to be included in the SMR at all.
At general counsel level, observers warn of a longer-term ‘brain drain’ from financial institutions among high-calibre lawyers who decide the personal risks attached to regulated sector roles are not worth taking. Perhaps so – although one might also expect a concomitant hike in salaries for the top positions. Jobs will generally get done if they pay enough.
It is certainly hard to get past the principal substantive objection. If the head of legal is a senior manager for the purposes of the regime, it is argued that there would be an expectation in certain circumstances that they would have to disclose privileged information in order to explain the legal department’s conduct.
Moreover, as the Building Societies Association points out, there is an inherent danger in conflating management with advice, because the former involves taking responsibility for managing the business, while the latter requires the adviser to stand to one side in an impartial manner.
It is surely welcome that the FCA has beaten a retreat and gone away to reconsider.