The Financial Conduct Authority is expected to receive overwhelming calls not to include the legal function of banks and other financial institutions in its accountability regime for top executives. A consultation on the City watchdog’s discussion paper on its senior managers regime closes on Monday.

The SMR, which came into force six months ago, 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.

Last month the Law Society warned that in-house lawyers could face a conflict of interest with their employers if they are included in the regime.

Its concerns about legal professional privilege are shared with the Building Societies Association (BSA), which submitted its response this week.

Acknowledging that there are legitimate arguments for both sides of the argument, the association said the status quo should be retained.

‘The clinching point for us is that it would be inappropriate to risk the foreseen (and potentially unforeseen) consequences of a regulatory change that could jeopardise a centuries-old fundamental principle of law,’ the BSA said.

‘While the fact that a fundamental principle is of long-standing does not make it sacrosanct, it does mean that we should tread very carefully before we amend it or take steps that might have the unintended consequence of prejudicing it.

‘We agree that, especially in the context of allegations of breach of duty of responsibility or being knowingly concerned in a regulatory breach, an individual’s opportunity to establish that they took “reasonable steps” could significantly be impeded if that individual was general counsel SMF and had to rely on the advice that they provided to the firm.’

In the discussion paper, the FCA admitted that its previous communications were unclear about to what extent the legal function is included in the SMR.

Currently, the FCA’s framework contains no requirement that the general counsel be designated a ‘senior manager’. However, its rules require that a senior manager must have overall responsibility for every activity, business area or management function – including the legal function.