The Financial Conduct Authority is considering whether to make in-house lawyers part of a new regime that could see them accountable for any misconduct that falls within their areas of responsibility.

The regulator will consult on whether individuals in charge of a firm’s legal function in banks, building societies and credit unions need approval under its senior managers regime. 

Under the regime, which comes into force on 7 March, senior managers will be held accountable for any misconduct that falls within their area of responsibility. They will also be held to appropriate standards of conduct.

Last year the FCA made final rules for the accountability framework. But the FCA said it had since come to its attention that ‘significant uncertainty exists in the market’ for those with overall responsibility for a firm’s legal function.

The FCA had not included the legal role in its indicative list of business activities and functions, but said ‘responsibility for the management of the legal function was not excluded’.

‘We now recognise that some confusion exists in this area and our communications have not necessarily been sufficient to ensure that firms have full clarity,’ the FCA said.

It was aware of a ‘range of concerns’ if those responsible for a firm’s legal function were brought into the regime.

‘For example, if individuals are approved for the role, we know that some industry participants are concerned about a possible perception that a general counsel might be required or pressured by regulators to disclose privileged information,’ the FCA said.

‘We recognise both that uncertainty exists and that there is a need to consider the range of views as to what the scope of the regime should be in this particular area.’

The FCA will issue a consultation paper seeking views on the ‘pros and cons’ of ‘capturing’ individuals with overall responsibility for the legal function within the regime.

The FCA clarified its expectations ‘in the interim’ due to insufficient time to consult properly on the matter before the regime comes into force on 7 March.

Firms that have sought to decide ‘in good faith’ whether they need approval for the individual in charge of the legal function ‘on the basis of the published rules and our other communications, should not need to change their approach in the interim’, the FCA said.