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FCA to consult on whether in-house lawyers will fall within new accountability net

By Kathryn Higgins

03 February 2016 at 09:20 BST

The Financial Conduct Authority will deliberate as to whether in-house lawyers will be subject to the watchdog's new pre-approval process for senior managers.

Mathias Rosenthal

The FCA Senior Manager Regime is designed to boost individual managers' accountability for misconduct in the banking and finance sectors. Under the new FCA rules, which are slated to take effect on 7 March, all individuals with 'overall responsibility' for certain functions within banks, credit unions and building societies, among others, will need to obtain pre-approval from the FCA to carry out senior management functions. While the lawyer role was not included on the FCA's 'indicative list' of functions when it announced the new regime last year, responsibility for the management of legal functions was not excluded, giving rise to 'significant uncertainty' as to how the new rules will affect general counsel and other in-house lawyers.

Lack of clarity

With the implementation date fast approaching, the FCA has acknowledge the lack of clarity surrounding to what extent in-house legal managers and their staff will need to comply with the new regime. 'We recognise that at least some firms may not be in a position to make a decision, with full certainty, about whether or not they need approval for the individual in charge of their legal function,' the FCA said. The watchdog has now launched a consultation to clarify the obligations of in-house lawyers. A time limit for the consultation has not been set, with the FCA indicating only that its conclusions will be delivered 'in due course.'

Privilege concerns

For some, the prospect of including in-house lawyers in the FCA's new screening regime has raised a red flag about potential threats to legal privilege. While other senior managers may be required to demonstrate that they took reasonable steps in situations when a company has or may have breached its obligations – for example, by providing evidence in the form of emails or board meeting minutes – complying with the FCA statutory duty of responsibility will be significantly more complicated for lawyers. 'The ability for senior lawyers to [provide evidence of their actions] will be much more limited, especially when their reasonable steps may well consist of the provision of legal advice, which would not be disclosable,' commented Kemp Little partner Marian Bloodworth. Sources: Legal Futures; Legal Futures (2); Legal Business


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