The Senior Managers Regime has received a multitude of press coverage this week over the supposed U-turn by the Treasury and regulators (FCA and PRA) regarding the reverse burden of proof. In the policy paper detailing the measures in the Bank of England and Financial Services Bill, section 3.2 states:

'The same tough underlying obligation will remain on the individual to ensure that they take reasonable steps to prevent regulatory breaches in the areas of the firm for which they are responsible, but the burden will be on the regulators to prove that a senior manager has failed to do this.

This announcement effectively removes the 'Presumption of Responsibility' section from the proposed amendments to the Financial Services and Markets Act 2000. It has caused a stir in the media but has been downplayed in a statement by Tracey McDermott of the FCA.

See some of the news coverage below.

Bloomberg Business 15/10/2015

U.K. Dumps `Guilty Until Proven Innocent' Rule for Bankers

The U.K. government backtracked on a plan to assume senior managers of banks are guilty until proven innocent, substituting it with a “duty of responsibility” that will extend across the entire financial services industry.

"A key part of the government’s long-term plan is to restore trust in Britain’s financial-services sector so that it works better for customers and businesses,” a Treasury spokesman said in an e-mailed statement. “Ensuring that these firms are properly run is vital for the health of our economy.”

The Telegraph 15/10/2015

Victory for City as Treasury scraps controversial 'guilty until proven innocent' rules

Regulators will have to prove wrongdoing as Treasury extends plans to make top executives accountable for failures on their watch across the financial services industry.

The Government has scrapped controversial plans to make senior executives in the financial services industry prove they were unaware of any wrongdoing on their watch.

The about-turn, which was unveiled by the Treasury last night, forms part of the Government's Senior Managers and Certification regime, where top managers across the financial services industry will be held accountable for regulatory failures under new rules designed to stamp-out wrongdoing and recklessness.

Allen & Overy 15/10/2015

Proposed ‘u-turn’ on the Presumption of Responsibility?

Although controversial, the Presumption of Responsibility has been one of the key components of the regulators’ proposals for the Senior Managers Regime. This made it all the more surprising when the government published a draft bill yesterday that proposed to abolish the Presumption of Responsibility (even before it has come into force).

The Financial Times 15/10/2015

Treasury abandons senior bankers’ accountability rule

One of the most contentious parts of a tough new accountability regime for top executives in the financial sector is to be excised in a move that will be welcomed by Britain’s banks.

Just as the Senior Managers Regime is to be extended to the entire financial sector, the Treasury has abandoned the “reversal of burden of proof” rule that would have held senior managers to account for failings on their watch, with the threat of a fine or a ban.

PWC 15/10/2015

The removal of the reverse burden of proof - a cause for celebration?

Banks have been working hard over the summer to get ready for the introduction of the senior manager regime in March next year. Whilst some of the rules were not yet final, no-one expected a significant change at this stage. That expectation was proved wrong yesterday when one of the most contentious aspects of the regime - the reverse burden of proof - was removed. The reverse burden of proof has been talked about as being similar in concept to being 'guilty until proven innocent' and has made many senior managers uncomfortable about the regime - not because they believe they are acting in a unreasonable way but because they were concerned about how they would be able to demonstrate this to a Regulator.

FT Advisor 15/10/2015

Treasury u-turns on senior manager accountability

The Treasury has reportedly u-turned on plans which would have imposed a guilty until proven innocent burden as part of a proposed new senior managers and certification regime.

Michael Ruck, a senior financial services enforcement lawyer at Pinsent Masons and formerly with the Financial Conduct Authority, commented that while many in the banking industry are likely to consider the removal of the reverse burden of proof a weight removed from their shoulders, “it is too early at this stage to breathe a sigh of relief”.

City AM 16/10/2015

Treasury's U-turn plugs brain drain fears: City bosses welcome "reverse burden of proof" retreat

City bosses have welcomed the Treasury’s U-turn on controversial plans for a so-called “reverse burden of proof”for senior bankers, saying that the reversal will help the Square Mile retain and attract top talent.

A leading City head-hunter told City A.M. that the Treasury’s initial proposals, which would have required bankers to prove they were unaware of any wrongdoing at their institutions, would “undoubtedly” have “had the effect of putting people off joining the boards or taking roles in the financial services sector”.