Although we have also reflected on the core legal duties under the Companies Act 2006 and the common governance risks facing directors (provide link), this piece focuses on the expectations of the Financial Conduct Authority (the FCA) and the Prudential Regulation Authority (the PRA) for those who also hold senior management functions. For many firms, and for individuals who are both directors and senior managers, these regimes overlap significantly, creating a combined set of obligations that shape how decisions are made, documented, and overseen.

Operating in a regulated environment

In the UK, the financial regulators (particularly the FCA and the PRA) are some of the most active in terms of the rules they impose and the standards they expect from the firms and individuals they regulate.

Although HM Treasury and the FCA and the PRA have recently announced proposed changes to the SMCR regime, the fundamentals of this accountability regime remain in place. This means that those individuals who are performing the most senior roles within firms will still be required to obtain regulatory approval to be senior managers and to adhere to standards imposed by the SMCR, which aim to reduce harm to consumers and strengthen market integrity by making individuals accountable for their conduct and competence. Like the statutory directors’ duties, these regulatory standards also carry serious consequences if breached.

What does being a senior manager mean?

  1. Fitness and Propriety

In order to become a senior manager, an individual must be regulated by the  FCA and / or the PRA. As part of this, the regulator will want to ensure that the individual is fit and proper. Firms are also required to ensure that senior managers (as well as others performing certain senior roles within the firm) are fit and proper on an ongoing basis.

The main criteria to be considered when assessing fitness and propriety are:

  • Honesty, integrity and reputation;
  • Competence and capability; and
  • Financial soundness

Factors relevant to a fitness and propriety assessment include criminal convictions; investigations or disciplinary proceedings; involvement in insolvency proceedings; disqualification; bankruptcy; training and truthfulness.

From 1 September 2026, as part of a suite of measures aimed at tackling “non-financial misconduct”, behaviours such as bullying, harassment and discrimination will also be relevant to an assessment of fitness and properness, including those behaviours which have occurred outside the workplace.

  1. Conduct Rules

All employees of firms regulated by the FCA or PRA are subject to what are referred as conduct rules. These include that employees must act with integrity; due skill, care and diligence; and be open and cooperative with the FCA, the PRA and other regulators.

In addition, senior managers are also subject to additional rules:

  • To take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively;
  • To take reasonable steps to ensure that the business of the firm for which you are responsible complies with the relevant requirements and standards of the regulatory system;
  • To take reasonable steps to ensure that any delegation of your responsibilities is to an appropriate person and that you oversee the discharge of the delegated responsibility effectively; and
  • You must disclose appropriately any information of which the FCA or the PRA would reasonably expect notice.

These requirements are incredibly broad but are taken very seriously by the regulators. As with being a director, the senior management of firms have significant responsibilities and the regulators want to ensure that when misconduct occurs, somebody is held responsible.

  1. Duty of responsibility

This is set out in legislation and empowers the FCA to take action against a senior manager when misconduct occurs within the part of the business for which that individual had responsibility. This duty is designed to effect the shift to individual accountability and requires the FCA to prove that the individual did not take reasonable steps in relation to their obligations and to avoid contravention of specific rules. It is an objective test – it asks what a reasonable senior manager with their role, responsibilities and knowledge would have done. If the FCA can demonstrate this, the relevant individual may be sanctioned (including a significant fine or prohibition) for their role in the misconduct.

  1. Reasonable steps

As described above, senior managers will be required to demonstrate, with evidence, that they took all reasonable steps to prevent or stop breaches in their area of responsibility. The FCA is interested in how things were run, not just whether something went wrong, assessed in context and proportionately. The regulator will consider many things including record keeping; governance; oversight; scrutiny and challenge; and managing resources, and they are interested in the extent of inaction leading to culpability, as much as action. The term “reasonable steps” is deliberately flexible and will vary depending on the context and the facts of each case.

How to protect yourself

The personal liability for individuals, arising from their obligations as a senior manager, are huge and can impact their future livelihood if something goes wrong under their watch. It’s important to remember though that the senior managers’ regime doesn’t just anticipate misconduct of individuals because something went wrong, it also allows the regulators to consider what steps were taken after the event and how those can be evidenced or articulated. If there is a breach, the question will be what did you do to avoid it and what did you do after the breach in order to best manage it. Therefore, a senior manager needs to be very clear what is inside and outside their remit, must actually interact with their area of responsibility and keep evidence of everything and decisions made.

How can Doyle Clayton help

Navigating the SMCR can be challenging, particularly for those who hold both regulatory, senior manager, responsibilities and board level duties as directors. Ensuring that reasonable steps are taken, and properly evidence, is now a critical part of regulatory risk management for senior individuals. Our firm advises senior managers and boards across the financial services sector on how to meet these expectations in practice, from clarifying role boundaries and delegation lines to developing robust governance frameworks, documenting decision making, and preparing for regulatory engagement or scrutiny. Whether you, or individuals within your firm, are stepping into a senior management function for the first time; looking to strengthen the existing approach; or trying to navigate the regulatory horizon and upcoming rule changes, we can help you understand relevant obligations, mitigate personal and firm wide risk, and demonstrate compliance with confidence.

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