The Duty of Responsibility

Under the Senior Managers and Certification Regime, a Senior Manager can face regulatory action if a firm breaches a requirement in an area they’re responsible for and they didn’t take the steps a Senior Manager in their position could reasonably be expected to take to prevent it. The burden is on the regulator to show that reasonable steps weren’t taken. But in practice, the Senior Manager’s own records are often the best evidence of what they did.

The FCA’s guidance on the Duty of Responsibility, set out in the Decision Procedure and Penalties manual, lists the kinds of factors it will consider. These include the size and complexity of the firm, what the Senior Manager knew or should have known, what steps they could have taken, and whether they delegated properly and supervised the delegation. All of those questions are easier to answer, years later, with a clear record made at the time.

The Senior Manager Conduct Rules add to this. They require Senior Managers to take reasonable steps to ensure the business they’re responsible for is controlled effectively, complies with regulatory requirements, and that any delegation is to an appropriate person and is overseen effectively. Records are how a Senior Manager shows they met each of those requirements.

Why Records Decide Outcomes

Regulatory investigations usually happen long after the events in question. People move on, memories fade, and the context that made a decision sensible at the time is easily lost. An investigator looking back sees the outcome first and works backwards. Without contemporaneous records, the Senior Manager’s account becomes one version among several.

A well-kept record does three things. It shows what the Senior Manager knew at the time, which prevents hindsight from being applied unfairly. It shows what they did about it: the questions asked, the challenges made and the actions taken. And it shows why they made the decisions they did, which is often the most important part.

What Senior Managers Should Document

Their Responsibilities

The starting point is a clear, current Statement of Responsibilities. If it’s vague, every other record is harder to interpret, because it’s unclear what the Senior Manager was accountable for in the first place. Senior Managers should make sure their Statement is accurate and updated when their role changes.

What They Inherited

A new Senior Manager should record the state of their area when they take it over: open issues, known weaknesses, ongoing remediation and anything the handover didn’t cover. This protects them from being held responsible for problems that began before their time, and gives a baseline against which their own actions can be judged.

Key Decisions and the Reasons for Them

For significant decisions, such as approving a new product, accepting a risk, deferring a remediation project or responding to a breach, the record should capture the options considered, the information relied on, the advice received and the reasons for the choice. A decision that turns out badly is far easier to defend if the reasoning was sound at the time.

Challenge and Escalation

When a Senior Manager challenges a colleague, raises a concern with the board or escalates an issue, the record should show it. This is especially important for control function holders such as compliance oversight and MLROs and chief risk officers, whose role depends on independent challenge.

Delegation and Oversight

Senior Managers can delegate tasks but not responsibility. The record should show who they delegated to, why that person was suitable, what information they asked to receive and how they checked the work was being done. Periodic reviews of delegated areas, and the questions asked in them, are valuable evidence.

Management Information

Records of the management information a Senior Manager received, and what they did in response, show that they were monitoring their area. If the information was inadequate, the record should show that they asked for better.

Where the Records Live

Documentation doesn’t need to be elaborate. Much of it already exists in normal governance processes, provided those processes are run properly.

• Board and committee minutes. These should record not just decisions but the discussion behind them, including challenge and dissent. Minutes that only say “the board approved” are of little help later.
• Papers and reports. The papers a Senior Manager submits or receives show what information was available at the time.
• Emails and memos. A short email confirming a decision and the reasons for it can be valuable, provided it’s retained.
• Risk and issue logs. These show how problems were identified, tracked and resolved.
• A personal file. Many experienced Senior Managers keep a simple record of significant decisions, escalations and concerns. Firms should make sure this is compatible with their own record-keeping policies and data protection obligations.

Firms are already subject to general record-keeping requirements in SYSC 9. Good Senior Manager documentation builds on those, rather than creating a separate system.

Common Mistakes

Recording Decisions but Not Reasons

The most common gap. A record that a risk was accepted is far less useful than one explaining why accepting it was reasonable at the time.

Sanitised Minutes

Some firms edit minutes to remove disagreement. This can backfire badly. A Senior Manager who challenged a decision loses the evidence that they did, and the board as a whole appears less rigorous than it was.

Documentation Written Afterwards

Records created after something has gone wrong carry far less weight than those made at the time, and can damage credibility if they appear self-serving.

Too Much, Not Too Little

Excessive documentation can obscure what matters and consume time better spent managing the business. The aim is a proportionate record of significant matters, not a transcript of every conversation.

Ignoring Delegation

Senior Managers often record their own decisions but not how they oversaw the people they delegated to. Oversight of delegation is exactly what the regulator will ask about.

Lessons From Enforcement

The FCA’s enforcement cases against Senior Managers show a consistent theme: the regulator looks for evidence that the individual understood the risks in their area and responded to them. Cases often turn on warnings that were received but not acted on, management information that was inadequate but not challenged, or delegation that wasn’t supervised. Our analysis of FCA enforcement trends for SMF holders looks at what recent cases tell us about “reasonable steps” in practice.

A Practical Checklist

• Keep your Statement of Responsibilities accurate and current.
• Record the state of your area when you take it over.
• For significant decisions, record the options, the information relied on and the reasons.
• Make sure minutes capture discussion and challenge, not just outcomes.
• Record escalations and concerns, and what happened next.
• Document delegation and how you oversee it.
• Keep a record of the management information you receive and any requests for better information.
• Keep records proportionate, contemporaneous and consistent with the firm’s policies.

For Firms and Boards

Firms can make good documentation much easier. Clear Statements of Responsibilities, well-run board and committee processes, minutes that capture debate, and management information designed around each Senior Manager’s responsibilities all help. So does a culture in which challenge is recorded rather than smoothed over. A governance and SMF structure review can identify where responsibilities or reporting lines make it hard for Senior Managers to show what they did.

For board and executive appointments at larger regulated firms, Exec Capital’s FCA-regulated executive search practice looks for candidates who understand how accountability is evidenced, not just how it’s allocated.

The Bottom Line

Under the Senior Managers regime, reasonable steps have to be shown, not just taken. A proportionate, contemporaneous record of what a Senior Manager knew, what they did and why is one of the best protections available, for the individual and for the firm. For more on the regime, the Senior Manager Functions guide and the fit and proper test in full on the SMF Capital website are good places to start.