A new regime to hold top executives to account for corporate misdeeds will not extend to heads of legal, the Financial Conduct Authority confirmed today.
The Senior Managers Regime holds senior managers responsible for failures on their watch, exposing them to a fine or ban if they cannot justify the steps they took to prevent wrongdoing.
Publishing 'final rules' on extending the regime, the FCA said: 'In general, we have implemented the proposed changes to the [regime], which include confirming that the head of legal function is excluded from the requirement to be approved as a senior manager'.
The regime came into force in 2015. The following year the watchdog admitted that previous communications were unclear about the extent to which heads of legal were included and mooted the possibility of including them. The proposal was met with overwhelming opposition. The Law Society warned that it had the potential to put the lawyer in a conflict of interest with their employer, and could affect the lawyer’s ability to provide full and frank advice.
In January the FCA decided to park plans to include GCs, saying: 'As so much of the head of legal’s work relates to legal advice, the laws of legal privilege may restrict us, in practice, from using our powers over senior managers and carrying out our usual supervisory processes relating to senior managers, even in relation to the management parts of their job.'
Firms affected by the extension will move to the regime on 9 December.
Shrenik Parekh, senior manager at accountancy and business advisory firm BDO, said meeting the December deadline will be challenging for many businesses. He predicted that the FCA will begin a thematic review next year to ensure firms are complying with the regime.