The reversal of the burden of proof was always a controversial proposal. Its removal is merely a practical realisation of the potential for a legal quagmire that could thwart the Regulators’ stated intention of holding individuals to account where they fail to meet the standard of behaviour expected of board directors and senior executives.
Under the new regime, senior managers will still be held individually accountable for the areas they are responsible for and for acts of willful blindness (i.e., where it was obvious that standards were not being achieved in other parts of their organisation.
The essence of the senior managers’ and senior insurance managers’ regime is about embedding a culture of personal responsibility in the UK financial services sector. Senior staff at banks, building societies, insurance companies and regulated investment companies will continue to face fines, disqualifications and potentially jail time for failing to perform their duties properly. If anything, we will see an increase in fines and sanctions over the coming years.
The new regime necessitates putting in place the infrastructure required to support changes. Firms should review and update contracts and policies for senior managers and focus on complying with both the letter and the spirit of the rules.
Unacceptable behaviour will not be tolerated, rules or no rules. Boards need to ask themselves questions like, “What does good look like?”, “Are we clear about our conduct expectations?” and “Are behaviours (a manifestation of culture) driving good customer outcomes?”
The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions, position or policy of Berkeley Research Group, LLC or its other employees and affiliates.