The British Bankers’ Association (BBA) and the Association for Financial Markets in Europe (AFME) have published a joint letter that they have sent to the FCA on the application of the senior managers’ regime (SMR) to individuals with overall responsibility for the legal function in banks.
The BBA and AFME are concerned that if the legal function is included within the SMR, it could have considerable adverse implications for culture within banks and for the in-house legal profession.
The BBA and AFME urge the FCA not to include the legal function within the scope of the SMR and explain that they do not believe that the legislative or regulatory framework contains any requirement that the role of general counsel be designated as a Senior Management Function within the SMR. They also argue that role of the general counsel and the Legal function is fundamentally an advisory one and not one which involves “management” of the authorised person’s affairs.
The BBA and AFME state that, if the role of general counsel were to be included in the SMR:
- it would force firms to seek external advice independently from the general counsel and this would adversely impact the general counsel’s mandate to manage legal risk and influence culture and decision making;
- it would create a complex matrix of conflicting duties arising from their SMR responsibilities and their existing regulatory obligations set by the Solicitors’ Regulation Authority. That would result in an erosion of that protected status, create conflicts of interest and discourage employees of the firm from seeking support from internal legal counsel that often helps ensure a firm is well managed, complies with the law and acts responsibly; and
- the core obligation of acting in the best interest of each client would be at risk as the general counsel would face a personal conflict of interest between protecting his/her own personal position under the SMR and the duty to act in the best interests of his or her client as required by the legal codes, including protecting the legal advice privilege.
View Industry Associations’ call on the FCA to exclude general counsel from the Senior Managers’ Regime , 10 May 2016
