Where the Duty Comes From

The Duty of Responsibility is set out in the Financial Services and Markets Act 2000, in the provisions on misconduct by approved persons (sections 66A and 66B). In broad terms, a Senior Manager can be found guilty of misconduct if:

• the firm contravened a regulatory requirement;
• at the time, the Senior Manager was responsible for managing the activities in which the contravention occurred; and
• the Senior Manager did not take the steps a person in their position could reasonably be expected to take to avoid the contravention occurring or continuing.

The burden of proof sits with the regulator. When the SMCR was first proposed, the government considered a “presumption of responsibility” that would have required Senior Managers to prove they had taken reasonable steps. That was replaced by the Duty of Responsibility, under which the FCA or PRA must show that the individual failed to take reasonable steps. That is an important protection, but it doesn’t make the duty light. In practice, the Senior Manager’s own records are usually the best evidence of what they did, and an individual without them is poorly placed to answer the regulator’s questions.

What “Reasonable Steps” Means

There is no checklist that defines reasonable steps. The FCA’s guidance in its Decision Procedure and Penalties manual (DEPP 6.2) sets out the kinds of factors it may consider when deciding whether to take action against a Senior Manager under the duty. They include, in broad terms:

The assessment is made on the basis of the circumstances at the time, not with hindsight. A reasonable step in a large bank may not be a reasonable step in a ten-person broker, and vice versa. The regulator also recognises that a Senior Manager cannot personally check everything; what it expects is proportionate oversight, sensible delegation and a timely response when warning signs appear.

The Senior Manager Conduct Rules

Alongside the statutory duty, Senior Managers are subject to the Senior Manager Conduct Rules in the FCA’s Code of Conduct sourcebook (COCON). They sit on top of the Individual Conduct Rules that apply to almost everyone in the firm:

SC1 to SC3 closely mirror the Duty of Responsibility and use the same “reasonable steps” language. SC4 is a duty of openness with the regulators. Our guide to the Conduct Rules covers the full set and who they apply to.

Why the SMCR Documents Matter So Much

The Duty of Responsibility only bites where the Senior Manager was responsible for the area in which the breach happened. That makes the firm’s SMCR documents central evidence:

• The Statement of Responsibilities sets out what each Senior Manager is responsible for. Vague or overlapping statements make it harder for everyone, including the individual, to show where responsibility sat. Our guide to writing a Statement of Responsibilities explains what a good one looks like.
• The responsibilities map, which Enhanced firms must maintain, shows how responsibilities are allocated across the firm and how governance fits together. Our guide to the responsibilities map covers it in detail.
• Prescribed Responsibilities allocated to the Senior Manager carry the same weight as the function itself.

A Senior Manager should read their own Statement of Responsibilities carefully, challenge anything unclear before it is submitted, and make sure it is updated whenever their role changes. It is far easier to fix a vague statement at the start than to argue about it after something has gone wrong.

Delegation and Oversight

Senior Managers can delegate tasks, but not their accountability. The regulators expect delegation to be to people with the right skills and resources, with clear reporting back, and with the Senior Manager checking that the delegated work is being done properly. A compliance officer who delegates monitoring to a team, or an MLRO who relies on analysts to clear alerts, remains responsible for the outcome.

Good delegation looks like:

The Evidence a Senior Manager Should Keep

Because the regulator assesses what the Senior Manager did at the time, contemporaneous records are their best protection. Practical evidence includes:

• board and committee papers they wrote or presented, and minutes recording their contributions and challenges;
• management information they received and what they did with it;
• emails or notes escalating concerns, requesting resources or challenging decisions;
• records of decisions, including the reasons and the information available at the time;
• their handover pack on taking up the role, and any gaps they identified;
• actions taken in response to audit, compliance or regulatory findings; and
• evidence of training and keeping up with regulatory change in their area.

None of this needs to be elaborate. A short email recording a concern and the response, filed where it can be found, is often worth more than a long report written after the event.

Taking Up a Role: The Handover

The regulators expect a new Senior Manager to obtain a proper understanding of their area on arrival, and firms are required to take reasonable steps to ensure an outgoing Senior Manager provides a handover. A Senior Manager who inherits problems is not responsible for what happened before they arrived, but they are responsible for finding out about it and acting. Our guide to what a good handover pack contains sets out what to ask for.

Before accepting a role, candidates should also do their own due diligence on the firm, the area and the resources available. Our guide to due diligence before accepting an SMF role covers the questions to ask.

Fractional and Interim Senior Managers

The Duty of Responsibility applies in full to fractional and interim Senior Managers. Working two days a week doesn’t halve the accountability. That makes three points particularly important for part-time holders:

• Agree a realistic time commitment. If the days agreed are not enough to oversee the area properly, the individual is exposed. Our guide to sizing a fractional role explains how to work it out.
• Define what happens on other days. Urgent matters, such as suspicious activity decisions, need a documented route.
• Keep good records. Fractional holders often work across several firms, so organised records for each firm are essential.

Our page on fractional and interim SMF cover explains how we structure these appointments, and our guide to fractional SMF agreements covers the contract.

Enforcement in Practice

Actions against individual Senior Managers under the Duty of Responsibility have been relatively few, and most enforcement involving individuals has relied on breaches of the Conduct Rules or on questions of fitness and propriety. But the duty shapes behaviour across the regime: it is why firms invest in clear Statements of Responsibilities, why boards expect Senior Managers to escalate, and why experienced candidates ask hard questions before accepting a role. Our guide to FCA enforcement trends covers what SMF holders need to know, and the FCA’s SMCR pages set out the regime as a whole.

What It Means for Hiring

For firms, the duty affects recruitment in practical ways. Strong candidates will want to see the Statement of Responsibilities early, understand the resources they will have, and know what they are inheriting. Firms that are open about these things attract better candidates and find the approval process smoother. Firms that are vague, or that try to load an oversized Statement of Responsibilities onto one person, often find that experienced candidates decline. That applies particularly to combined roles: a compliance officer who also holds SMF17 carries the duty for both functions. Our page on combined compliance officer and MLRO recruitment covers how to make that work. Our SMF designations guide explains each Senior Manager Function, and our SMF recruitment services cover every role.

Frequently Asked Questions

Who has to prove reasonable steps were taken?

The regulator. Under the Duty of Responsibility, the FCA or PRA must show that the Senior Manager did not take reasonable steps. In practice, the Senior Manager’s own records are usually central to showing what they did.

Does the duty apply to non-executive directors?

It applies to anyone approved to hold a Senior Manager Function, including the non-executive SMFs such as the chair and committee chairs, in relation to their own responsibilities.

Am I responsible for problems that existed before I joined?

Not for what happened before you took up the role, but you are expected to find out about existing issues and take reasonable steps to deal with them once you are in post.

Does a fractional Senior Manager have less responsibility?

No. The duty applies in full. A realistic time commitment and good records are therefore especially important.

Can I limit my responsibility in the Statement of Responsibilities?

The statement should accurately describe what you are responsible for. Clear, specific wording protects everyone; trying to narrow it artificially is unlikely to work if it doesn’t reflect reality.