A regulatory regime intended to crack down on the behaviour of bank bosses is to be extended to 47,000 firms including dentists, gyms and tool hire companies that offer credit to customers.
The Financial Conduct Authority estimated that the new regime would cost firms £550m, with up to £190m of ongoing costs for the firms involved.
It had been expected that the additional firms would be covered by the senior managers and certification regime (SMCR) from 2018, although the FCA’s consultation document does not indicate if this is still the timetable.
The SMCR came into force for almost 900 banks and building societies in March 2016 and was intended to tackle the fact that no bank bosses were held to account when their firms collapsed in 2008.
It requires the responsibilities of top managers to be spelt out and for them to certify their key staff are suitable for their roles. This certification must now happen annually, whereas under the previous system the FCA approved individuals only once, unless they moved roles.
The FCA’s consultation paper sets out five “conduct” rules for firms: act with integrity; act with due care, skill and diligence; be open and cooperative with regulators; pay due regard to customer interests and treat them fairly; and observe proper standards of market conduct.
The Treasury had called for the broadening of the new regime two years ago when it also dropped a plan to “reverse the burden of proof” for managers, which would have forced them to demonstrate they had done the right thing if wrongdoing emerged on their watch.
Marian Bloodworth, an employment partner at law firm Kemp Little, said: “The change will also mean the end of the FCA register for the majority of financial services employees … This has been a cause for concern for those in the existing regime already, as it means there is no publicly available list of advisers for customers to review.”
The FCA warned that some cost increases on firms will pass through to consumers in the form of higher prices, while senior managers “may demand bigger pay deals”.