The senior managers' regime does not shift corporate liability onto individuals and will not spell an end to action against firms, the Financial Conduct Authority (FCA) has said.
Speaking at the New York University director of enforcement and market oversight Mark Steward said the new rules were no free pass for firms and heavy fines on corporates would still be issued for misconduct.
Implemented last year, the senior managers' regime was the result of recommendations by the UK Parliamentary Commission on Banking Standards, which asked for a regime that would put a greater onus on individual responsibility of senior managers.
The regime is set to be widened out to the rest of the industry, including financial advisers, in the coming years.
The overriding purpose of the regime is to improve genuine accountability in firms by removing structures that have impeded clear lines of responsibility. The regime designates specified functions for senior management and created a duty of responsibility.
Steward said: "Some have viewed the senior managers' regime as a means of shifting corporate liability onto individuals. This is not the case, so far as the duty of responsibility imposed on senior management is concerned, because the firm's liability is a jurisdictional fact in any action against an individual.
"There is no free pass for firms and so the senior managers regime does not mean there will be an end to action against firms, including heavy financial penalties."
Last week the FCA took action against Tesco Plc and subsidiary Tesco after they were found to have committed market abuse by inflating the company's share price. However, it decided not to impose a sanction.
This was because the company had been fully cooperative and agreed to accept the FCA's findings, Steward said. Besides, Tesco Stores agreed a deferred prosecution agreement (DPA) with the Serious Fraud Office and agreed to pay a fine of £129m.
Steward said: "The company's decision to co-operate with us and to accept not only our findings but also not to contest the first compensation order sets a strong example of corporate responsibility. A firm's response to discovering wrongdoing in its affairs is perhaps the best test of its integrity. This is a test that Tesco has passed."
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