FCA's SMCR investigations halve, despite extension to almost 50,000 firms

Research from financial regulation consultancy Bovill has revealed that the FCA launched fewer than half as many investigations into senior manager misconduct in 2021 than in 2020.

Related topics:  Regulation
Rozi Jones
28th March 2022
"This year’s statistics show that SMCR currently lacks bite, and is not biting often enough to be considered as an effective enforcement tool."

A Freedom of Information request reveals that by 15th November, only six enforcement investigations had been opened under the Senior Managers and Certification Regime (SMCR) in 2021, less than half the number in each of the three previous years.

This is despite the fact SMCR was extended to 48,000 solo-regulated firms at the start of the year.

While the number of enforcement investigations opened between 2018 and 2020 was consistent – never dropping below 13 – 2021 sees a fall to the same level as 2017. The FOI request from Bovill also reveals that nearly two-thirds (65%) of the 54 SMCR investigations opened by the FCA since 2016 have not yet been resolved.

Moreover, the FOI revealed that, since 2016, only two investigations have resulted in a penalty being imposed. Of the 19 investigations concluded by the FCA, 10 resulted in no further action being taken, or the investigation being discontinued.

Ben Blackett-Ord, chief executive officer at Bovill, said: “In recent years we have questioned SMCR’s ability to hold individual senior managers to account, pointing to consistently low numbers of investigations and enforcement actions. This year’s statistics show that SMCR currently lacks bite, and is not biting often enough to be considered as an effective enforcement tool.

“Most would assume that the extension of SMCR in 2021 would result in an increase in investigations and enforcement actions, especially as it should be easier to identify decisions made in smaller firms. The low number of investigations last year suggests that this hasn’t been the case, and that instead economic and pandemic pressures have hindered the regime’s SMCR efforts.

“With such low enforcement statistics, it brings into question SMCR’s role as an effective deterrent from poor behaviour by senior management.

“The pandemic has likely played a role in disrupting and delaying investigations, as have staff-shortages which have impacted employers across the country. However, enforcing only two penalties means that the FCA is five times more likely to take no action at the end of an investigation. This not a good return after five years, and the FCA will need to adapt to these challenges if we are going to see more enforcements and, ultimately, a more effective regime.”

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