U.K. fund executives are buying extra insurance due to
concern that British regulators intend to pursue individuals
when asset managers break the rules.
U.K. fund managers are protecting themselves ahead of new
regulation called the senior managers and certification regime, created to
raise professional standards by holding senior individuals
accountable for their conduct. British bankers have been
subject to these rules since 2016, and theyre expected to
apply to fund managers next year.
There has definitely been an uptick interest from
senior board members, not just in the level of protection but
the nature of protection, Francis Kean, executive
director of FINEX Global at Willis Towers Watson, said in an
interview. In the past 18 months, I have done more board
presentations than in the past five years.
Keans comments echo a GP Strategies report published
last week that said managers are increasingly taking out
personal insurance. The SMCR, along with other regulations
arising after the 2008 financial crisis, such as the Bribery Act of 2010 and the forthcoming
bill called the Criminal Finances Act 2017, are driving an
uptick in interest in insurance policies that offer increased
financial protection for directors and officers, according to
insurance brokers and lawyers.
The U.K. is making it easier to prosecute individuals when
companies break the rules, said Claire Lipworth, a partner at law firm
Hogan Lovells since April. Lipworth, who was previously chief
criminal counsel at the U.K.s Financial Conduct
Authority, said the SMCR helps regulators identify the person
responsible for failings within companies.
To shield against potential investigations, fund management
executives are taking out coverage that will pay for legal fees
from the moment a regulator makes its first enquiry, according
to insurance brokers. They also say fund managers are
increasing their directors and officers coverage, which
protects directors solely from the financial consequences of a
Directors and officers of financial services firms
have never before been under so much pressure to be held
accountable for their actions and this pressure has led to a
real need for an adequate D&O insurance policy, Jamie
Kennell-Webb, commercial and financial client executive at
Miller Insurance Services, said in an email.
Edward Brennan, head of business development at rival broker
Howden agrees, saying the SMCR has pushed individuals to
make sure the coverage they have in place covers them,
increasing their limits if it doesnt.
While company directors are feeling the heat, the FCA warned
in March that it would still continue to pursue companies
guilty of wrongdoing, despite the new rules aimed individuals.
The FCA did not immediately respond to a request for
Lipworth said the change in regulatory approach from British
financial regulators follows a 2015 memo by then U.S. deputy
attorney general Sally Yates. The so-called Yates Memo said that holding individuals
accountable was essential to deter corporate
One of the problems that prosecutors had with criminal
liability is that they found it difficult to find out who was
responsible for the decision-making, said Lipworth,
adding that the SMCR makes the evidence trail much easier