If you’re a director of an investment management firm, you’re uniquely exposed, and the risks just got bigger.

Regulation changes have increased personal accountability, and it’s being enforced. It’s never been more important to get specialist insurance advice and make sure you’re covered.

What’s changed?

Directors and senior executives in financial services have always been responsible not just for commercial success but also governance, regulatory compliance and protecting client interests, but the new Senior Managers and Certification Regime (SMCR) has upped the stakes.

The SMCR hasn’t just reshaped regulatory expectations; it’s also moved the sector away from collective responsibility towards clear, documented and enforceable personal accountability.

How the SMCR enforces personal responsibility

Under the new rules, the Financial Conduct Authority has wide-ranging powers to investigate individuals as well as firms.

Directors and senior executives can be called to compulsory interviews; required to respond to formal information requests or demonstrate how they exercise oversight and challenge.

What you can be held accountable for

Accountability stretches far and wide and there are different areas of work where you can be held personally responsible, such as:

Governance and oversight failures
Including inadequate governance frameworks, weak controls or compliance failures; poor oversight of managers or third-party providers; and poorly managed conflicts of interest.
Claims from investors or stakeholders
Including claims relating to fund underperformance, operational failures, and alleged breaches of duty.
Employment-related claims
Including claims relating to breach of duties, alleged unfair dismissal, discrimination or harassment, and whistleblowing.

Getting the right insurance cover

Regulatory scrutiny means individual accountability is unavoidable.

No matter how confident you are in your business governance, claims can come from any direction and are often driven by market volatility or hindsight when they come from stakeholders.

Even if there’s no proof you did anything wrong, there’ll be costs, time incurred and it’ll cause a lot of stress.

Getting high quality directors’ and officers’ professional indemnity investment management insurance is essential and it’s best to seek specialist advice to ensure all your risks are covered.