Rules originally designed to force bank bosses to take responsibility for misconduct through handing them fines and punishments look set to be extended across the whole finance sector – including advice firms – it has been announced this morning.

The Government has published details of proposals to extend the Senior Managers and Certification Regime.

Some 17,200 investment firms, a category which includes financial advisers, would be subject to the new rules.

A Treasury report, released this morning, stated: “The government is proposing to extend the Senior Managers and Certification (SM&CR) regime to all sectors of the financial services industry, replacing the discredited Approved Persons Regime.

“The government considers that it is now appropriate to extend the SM&CR more widely, creating a more rigorous, comprehensive and consistent approach across the financial services industry.

“Many firms beyond the banking sector – such as large investment firms, insurers and those involved in shadow banking – can pose a threat to financial stability.

“Misconduct by firms of any size can have serious impact on the welfare of consumers or on market integrity, which will in turn harm consumers, investors and the businesses that depend on fair and effective markets. Such misconduct can be caused by similar failings to those identified by the PCBS in banks.”

Officials said: “This expansion of the SM&CR to all financial services firms will enhance personal responsibility for senior managers as well as providing a more effective and proportionate means to raise standards of conduct of key staff more broadly, supported by robust enforcement powers for the regulators.

“The government has decided, therefore, to extend the SM&CR to all sectors of the financial services industry, including insurers, investment firms, asset managers, insurance and mortgage brokers and consumer credit firms.”

The announcement from the Government today comes after a regulatory report in June, which suggested extending elements of the Senior Managers and Certification Regimes to a wider range of regulated firms. This referenced asset management firms as one such type.

The report accepted that there would be difficulties in introducing the new rules.

It stated: “Clearly implementation for about 60,000 firms in a wide range of sectors from “traditional” financial services (financial advisers, asset managers, stock brokers etc) and consumer credit firms will be very challenging.

“That said, it will be important, in view of the improvements to conduct regulation that the SM&CR will deliver, to extend the regime to all authorised financial services firms as soon as practicable. The government and the financial services regulators are determined therefore to set a stretching but realistic plan for ensuring effective implementation.”

According to the report, the key features of the extended SM&CR are:

 an approval regime focused on senior management, with requirements on firms to submit robust documentation on the scope of these individuals’ responsibilities

 a statutory requirement for senior managers to take reasonable steps to prevent regulatory breaches in their areas of responsibility

 a requirement on firms to certify as fit and proper any individual who performs a function that could cause significant harm to the firm or its customers, both on recruitment and annually thereafter

 a power for the regulators to apply enforceable Rules of Conduct to any individual who can impact their respective statutory objectives