When the Senior Managers & Certification Regime (SM&CR) was introduced, it fundamentally changed the relationship between individuals and regulation.
Responsibility no longer rested solely with the regulated firm; increasingly, it rested with the people leading it.
Recent FCA enforcement actions have involved prohibiting Senior Managers for failing to meet the standards of honesty and integrity and this needs to serve as another strong reminder that regulatory accountability is personal.
While every enforcement case turns on its own facts, the wider message for Directors and Senior Managers is clear – the FCA expects those leading regulated firms to demonstrate not only technical competence, but sound judgement, openness and a culture of good governance throughout the organisation.
That expectation continues long before any supervisory engagement or enforcement action.
Leadership is measured by behaviour
Many Senior Managers understandably focus on regulatory responsibilities, Statements of Responsibility and prescribed responsibilities.
These remain important; however, the FCA is increasingly interested in something much broader – how do Senior Managers behave when making decisions?
Strong governance is demonstrated through everyday leadership.
- Do difficult issues reach the Board?
- Is challenge encouraged?
- Are risks escalated promptly?
- Are regulatory concerns discussed openly?
- Is the rationale behind key decisions clearly documented?
These behaviours often tell the FCA far more about a firm’s culture than any organisational chart ever could.
Governance is built between Board meetings
One of the biggest misconceptions about governance is that it happens during formal Board meetings.
In reality, governance is continuous. It is reflected in the conversations Senior Managers have with colleagues, the questions they ask before approving proposals and the willingness to challenge assumptions when customer outcomes could be affected.
Waiting until a Board meeting to identify a governance issue is often waiting too long.
The strongest organisations build challenge into everyday decision-making.
Documentation protects more than the business
When regulatory decisions are reviewed, outcomes matter.
So does the journey that led to them.
Increasingly, firms should be able to demonstrate:
- what information was considered;
- what challenge took place;
- why a decision was reached;
- who accepted responsibility; and
- how customer outcomes influenced the final approach.
- This is not about creating unnecessary paperwork.
It is about demonstrating thoughtful governance. Well-documented decision-making provides assurance to regulators, confidence to Boards and protection for Senior Managers themselves.
Culture starts at the top
The FCA has repeatedly emphasised that culture influences customer outcomes.
Culture is not created through policies alone; it develops through leadership.
Senior Managers set expectations by the questions they ask, the behaviours they reward and the standards they apply when difficult decisions arise.
Where challenge is encouraged, issues are escalated early and governance is visible, firms are far better placed to identify emerging risks before they develop into regulatory concerns.
Conversely, organisations where difficult conversations are avoided often discover problems only after customers have been affected.
The ALPH Perspective
At ALPH Legal & Compliance, we increasingly support Boards and Senior Managers in strengthening governance before regulatory questions arise.
Whether advising firms on SM&CR, FCA authorisations, Consumer Duty governance, Board effectiveness or operational oversight, our focus is always the same: helping leadership teams build governance that is visible, proportionate and capable of withstanding regulatory scrutiny.
As the FCA continues to focus on individual accountability, the strongest protection for any Senior Manager is unlikely to be another policy or procedure.
It will be a culture of good governance, meaningful challenge and well-evidenced decision-making that demonstrates leadership long before the regulator asks the first question.