Certification Regime Research Articles

Individual accountability: holy grail or poisoned chalice?

ABSTRACT New legal regimes in various jurisdictions have increased the accountability of senior individuals in financial services to attempt to prevent wrongdoing. This article critically evaluates these efforts using insights from the behavioural sciences research on accountability, the regulatory theory on enforcement, and the criminological literature on compliance. This inquiry is pursued through an analysis of the Senior Managers and Certification Regime (SMCR) and the Banking Executive Accountability Regime (BEAR) in the UK and Australia respectively. These individual accountability regimes (IARs) are designed to make it easier to identify which senior individual is responsible for failing to address wrongdoing within their area of activity. Though often championed for ratcheting up accountability to tackle perceived impunity for wrongdoing, this article explores the limits of IARs. While acknowledging their strengths and merits, it troubles the expectations that such regimes are necessarily effective ways of priming certain anticipated behaviours and increasing cognitive load to slow decision-making processes. It considers the extent to which these regimes may be ineffective given what is known about the miserly nature of human cognition, the tendency to circumvent efforts to encourage ‘right’ decisions, and the inability of individual accountability regimes to address broader structural issues in financial markets.

Demystifying the Network and Cloud Forensics’ Legal, Ethical, and Practical Considerations

As cybercrimes grow more sophisticated, network and cloud forensics have become vital investigative tools. However, complex legal, ethical, and practical challenges around extraterritorial evidence, privacy rights, volatile data, and specialized skills constrain these processes. This study critically reviews academic literature and industry reports to examine these multifaceted considerations holistically. It aims to aggregate the latest insights around regulations, technical protocols, certification regimes, and international cooperation frameworks shaping network and cloud forensics. The study follows qualitative research methodology, a doctrinal approach used for the analysis of regulation, and grounded theory used for the analysis of related literature. The results reveal gaps around the liability limitations of internet service and cloud providers, ethical bounds for ancillary data collection, and anti-forensic obfuscation techniques. Proposed solutions include accountability in technology design through transparency and oversight. Simplify procedures for cross-border legal assistance requests. Develop lightweight encryption methods that still enable lawful access as well as promote collaboration between industry and academia to advance cybersecurity tools.

Confluent trust, accountability, procedural justice, British credit unions and regulatory reform after the global financial crisis

PurposeThe relationship between trust, accountability and procedural justice is studied via research into British credit unions (CUs) following regulatory reform to remedy problems exposed by the 2007–2008 global financial crisis.Design/methodology/approachInterviews at 13 case studies of different types and sizes of credit unions in Glasgow, Scotland, are examined using template analysis and abductive theorizing to understand the effects of disproportionate reforms on small credit unions.FindingsSmaller credit unions found three regulatory changes – namely dual regulators, increased minimum reserves and introduction of the Senior Managers and Certification Regime – excessive. Excessive change generated distrust in regulators. Regulators' insufficient attention to procedural justice contributed to this distrust.Originality/valueLinkage of multidimensional confluent trust to a multilevel system of accountability provides an original way of understanding how indiscriminate attempts at trust repair damage some elements of trust in formal regulatory systems. Recognition of the need for procedural justice to enable smaller credit unions to articulate their extant checks and potential exemption from formal regulations provides another valuable contribution. The explanation of the abductive logic employed is also original.

Review of the senior managers & certification regime

Following the 2022 Edinburgh Reforms, in which the Chancellor of the Exchequer announced a set of reforms designed to drive growth and competitiveness in the financial services sector, both HM Treasury and the Financial Conduct Authority (FCA) with the Prudential Regulation Authority initiated consultations to review the Senior Manager and Certification Regime (SM&CR). The aim of the review was to understand stakeholders’ views on how well the SM&CR is functioning and to identify ways to improve the regime to help it work better for firms and regulators. The SM&CR is seen as an essential tool to strengthen the financial services market by ensuring that financial services professionals are individually accountable to their employers and to the regulators. This article examines how the SM&CR has been operating to date and critically analyses whether it is achieving its original aims. The impact of the SM&CR on the international competitiveness of the UK financial services sector is considered, with comparisons drawn with the United States. Ultimately, this article recommends a greater use by the FCA of its enforcement powers to sanction senior managers, to ensure the international competitiveness of the UK financial services sector and to deter financial crime.

Analysis of green certification standards related to recycled materials involving textiles based on life cycle thinking

Enterprises have been increasingly required by international brands to obtain green certification. As green certification has become an important tool for evaluating suppliers and securing environmental performance along the supply chain, and textile-related recycled materials are one of the most affected industries, this study aims to examine the differences among various certification schemes in the recycled materials industry involving textiles. We identify a set of clear and consistent evaluation metrics for the criteria in green certification, and investigate the standardized contents of green certifications for recycled materials-related industries based on life cycle thinking. It is found that “requirements on recycled material content” are required by all the green certifications examined. From the perspective of life cycle stages, the “raw material stage”, “manufacturing stage” and “disposal stage” are emphasized by the green certifications related to the recycling industry. Finally, this study combines an environmental perspective incorporating life cycle thinking (LCT) with a social and economic perspective of implementation feasibility to provide ways to strengthen certification regimes related to recycled materials and promote long-term product life cycle management and supply chain management.

Banking on cultural change: individual accountability in the financial services sector in Ireland

ABSTRACT Modelled on the Senior Managers and Certification Regime (SMCR) in the UK, the new individual accountability framework (IAF) in Ireland aims to drive positive cultural change and restore trust in financial institutions. This article analyses the potential strengths and weaknesses of the IAF and explores how it might achieve its aim of improving behaviours and culture. Whilst sanctioning individuals to deter future misconduct is an important part of any successful regulatory strategy, it is argued that the focus should be on ensuring that individuals in the financial services industry internalise the norms of behaviour expected under the new IAF. This article is relevant to audiences in various jurisdictions, including the UK and Australia, which operate comparable individual accountability regimes. In particular, it is relevant to researchers and policy-makers in the UK, in light of the Call for Evidence from HM Treasury ‘to consider future reforms to the regime’.

Application of the Certified Persons Regime: Evolving best practice and potential pitfalls

The primary impetus for the birth of the Senior Managers and Certification Regime (SMCR) was to improve accountability throughout financial services following the 2013 Parliamentary Commission report on Banking Standards report, ‘Changing Banking for Good’. A particular focus of the regime has been to those performing senior manager functions (SMF), which are subject to a statutory ‘duty of responsibility’. Under this statute, SMF role holders can be held personally accountable if it is proved that they did not take ‘reasonable steps' to prevent or stop a breach occurring within their area of responsibility. Throughout the consultation of the regime, the regulators made it clear that firms were not required to necessarily change how they organised themselves, did business or, indeed, hire additional staff as a result; they intended a clarification and reinforcement of governance structures of in-scope firms. Prescribed Responsibility (b) outlined in SYSC 24.2.6(2)R denotes ‘Responsibility for the firm's performance of its obligation under the certification regime’. This prescribed responsibility is demonstrative of the regulator's view of how a firm is structured and organised being the responsibility of a senior manager within the in-scope legal entity. This paper considers the best practice approaches taken to meet the certification requirements of the regime, some of the key challenges and potential pitfalls firms face in this regard and reflects on what could be considered best practice.

What’s in a Label? Articulating Identity through Certification Schemes in Greenlandic Post-Colonial Nation Building

In this article, we explore the connection between industrial certification schemes and the articulation of identity within a broader context of Greenlandic independence. As a heuristic tool to explore ethno-political visions and interferences that emerge from the process of national independence, we draw on three sustainability labels used within the Greenlandic fisheries, hunting and tourism sectors. Drawing on their framings of sustainability, we examine whether and in what ways voluntary marked-based certification schemes under the auspices of the Greenland Self-rule Government add to how research has previously defined Greenlandic identities. We further discuss how these certification schemes contain, speak to, support, or contest ethno-national categories with relevance to Greenlandic nation building. In conclusion, we argue that certification regimes in Greenland draw on old as well as emerging categories of collective identity, contributing to the continuous repositioning of Greenland’s key economic sectors in post-colonial nation building.

A Response To The Financial Conduct Authority/prudential Regulatory Authority Discussion Paper DP1/23 On The Review Of The Senior Managers And Certification Regime (SM&CR)

A Response To The Financial Conduct Authority/prudential Regulatory Authority Discussion Paper DP1/23 On The Review Of The Senior Managers And Certification Regime (SM&CR)

When Federal Standards Crash and Burn: The Need to Distinguish Aviation Product Liability Claims from In-Air Operations Cases

If you are injured in an aviation disaster or lose a loved one in a plane crash, may you seek recovery under state law? Do federal regulations provide adequate opportunities to compensate aviation crash victims? These are questions few people think to ask themselves. A more common query is what entity regulates the more than 16 million flights that occur yearly in the U.S., and how do you know whether the aircraft you fly on are safe? The tragic Boeing 737 MAX crashes initiated a federal oversight investigation into the Federal Aviation Administration (FAA). Industry whistleblowers revealed severe lapses in the FAA’s aircraft certification regime and a culture that promoted unsafe practices in aircraft design and manufacturing. Despite crucial reforms, the ability of uniform federal standards to protect aviation consumers is under fire. In a majority of U.S. jurisdictions, the Federal Aviation Act and associated federal regulations preempt all state law claims in aviation safety cases. The effect of this approach—few plaintiffs recover in aviation product liability suits, and the families of aviation crash victims go uncompensated. However, in Sikkelee v. Precision Airmotive Corp., the Third Circuit offered a new approach that advocates for field preemption for in-air operations claims but allows recovery under state law for aviation product liability cases. This approach adequately compensates aviation crash victims without undermining the FAA’s extensive and effective in-air regulatory scheme. This Comment addresses recent reforms to the FAA’s aircraft certification program and the ongoing circuit split regarding federal preemption of aviation safety claims. Further, this Comment seeks to analyze the fundamental differences between in-air operations regulations and rules governing aircraft design and manufacture to explain why different treatment of these claims is warranted. Ultimately, this Comment advocates for the Sikkelee methodology to provide ample opportunity for plaintiff recovery without unnecessarily undermining FAA regulatory authority.

Is the Senior Managers and Certification Regime Changing Banking for Good?

In 2016 the Senior Managers and Certification Regime (SMCR) came into being. It sought to improve banking culture through the attribution of responsibility to individuals and to provide clarity on required conduct standards. It marked a shift away from collective responsibility and towards more individual accountability that had been so lacking following the financial crisis of 2007/08. Its scope is expansive, including not just board executives but also senior managers. In this paper, I question whether there are indications the SMCR is achieving its objective of ‘changing banking for good’. I do this by analysing the design of the SMCR and its application in practice as well as the meaning and regulatability of culture. I conclude that though the SMCR could make strides towards better banking culture, its potential is being curtailed by inconsistent messaging and irresolute application.

Vulnerability in Financial Regulation: The Case of SMEs

SMEs are the driving force of economies. For many years, this supported, somewhat ironically, the neglect in designing a coherent regulatory framework to ensure their fair treatment. But the reality is that many SMEs face information asymmetries, lack resources and negotiation power and in the absence of regulatory protection are exposed to harm. In recent years, mounting ad-hoc, eclectic responses have mushroomed to address various aspects of appropriate conduct standards, dispute resolution and accountability. While these mechanisms allow for adaptability and dynamism, they may prove to be inadequate to achieve the FCA’s consumer protection objectives. This article proposes to broaden the application of vulnerability, which was initially designed with natural persons in mind, to guide the fair treatment of SMEs. It argues that expanding the application of vulnerability to SMEs would reflect the hybrid nature of this business model which is often akin to that of individual consumers. Conduct of business, Vulnerability, SMEs, FCA perimeter, Regulated activities, Commercial lending, Industry codes of conduct, Senior Managers and Certification Regime, Dispute resolution and redress, The Financial Markets Test Case Scheme, Business Lending Standards

Construction products: changes to certification rules in the UK

Richard Lankshear and Andy Jackson provide an update on the UK’s new certification regime for construction products following Brexit.

Certification Regimes in the Global Agro-Food System and the Transformation of the Nature-Society Relationship

Recent years have witnessed a proliferation of environmental certification regimes in the global agro-food system—a trend characterized as an example of the ecological modernization approach—which emerged largely because of the rise of consumer sovereignty and the neoliberal push for environmental and social “quality” in food production and processing. Based on a robust analysis of global aquaculture, the article argues that the environmental certification regimes privilege some actors, species, and cultures while marginalizing others. While the fundamental tenet of the ecological modernization approach is to shape capitalism by ecological principles, I argue instead that through environmental certification, ecology or nature itself is largely shaped, transformed and restructured to fit into and thereby serve neoliberal global governance and accumulation in a normalized manner. The example of certification regimes is therefore more like a “modernization of ecology” rather than ecological modernization.

The senior managers and certification regime in financial firms: an organisational culture analysis

ABSTRACT This article critically interrogates the experience of the implementation and enforcement of the Senior Managers and Certification Regime (SMCR) in light of interdisciplinary literature on organisational culture. We demonstrate that the SMCR brings the promise of enhancing effective regulatory supervision of firm culture, supporting the incipient professionalisation of senior manager functions in the financial sector and discerning tangible aspects of artefacts and behaviours that constitute the external layer of good culture. However, we argue that, apart from the more obvious risk of too little enforcement or enforcement targeted at misconduct in the private sphere, there is a risk that a perception of rigidity in enforcement may lead to the development of a counterproductive culture, especially if firms unduly rely upon tick-box quantitative measurement approaches to culture management, and that sound culture may be simplistically equated to compliance with the SMCR. This necessitates a careful and nuanced approach to supervision.

The Senior Managers and Certification Regime in Financial Firms: An Organisational Culture Analysis

The Senior Managers and Certification Regime in Financial Firms: An Organisational Culture Analysis

The Impact of Certification Systems for Architectural Solutions in Green Office Buildings in the Perspective of Occupant Well-Being

The green building certification system has long-lasting benefits by improving building efficiency and sustainability. The ultimate goal of such classification is to promote the preservation of the global environment as well as the occupants’ well-being and their health. In this paper, we present examples of buildings that have been designed and built in Poland and have been certified with BREEAM, LEED and WELL. Our study investigates human factors in certification systems and examines the WELL Building Standard as a supplement to other green systems, which will probably be the most popular in the future. The green building movement should prioritize pro-human factors and the associated environmental beliefs to improve indoor environment quality for users’ needs. We present this matter on the example of the Polish office space market, providing statistics and analyzing the architecture of six certified office buildings from Warsaw, Poznań and Wrocław. They are a representative sample of buildings designed following the certification regime. It was demonstrated how this aids in improving work comfort, enhances the program of office spaces and the organization of service spaces within buildings, which increases the rank of this architecture and positively affects the urban environment.

AI Certification: Advancing Ethical Practice by Reducing Information Asymmetries

As artificial intelligence (AI) systems are increasingly deployed, principles for ethical AI are also proliferating. Certification offers a method to both incentivize adoption of these principles and substantiate that they have been implemented in practice. This paper draws from management literature on certification and reviews current AI certification programs and proposals. Successful programs rely on both emerging technical methods and specific design considerations. In order to avoid two common failures of certification, program designs should ensure that the symbol of the certification is substantially implemented in practice and that the program achieves its stated goals. The review indicates that the field currently focuses on self-certification and third-party certification of systems, individuals, and organizations - to the exclusion of process management certifications. Additionally, the paper considers prospects for future AI certification programs. Ongoing changes in AI technology suggest that AI certification regimes should be designed to emphasize governance criteria of enduring value, such as ethics training for AI developers, and to adjust technical criteria as the technology changes. Overall, certification can play a valuable mix in the portfolio of AI governance tools.

Identifying and mitigating ‘conduct risk’ in algorithmic FICC trading

From 31st March, 2021, pursuant to the Senior Managers and Certification Regime (SMCR), British investment firms are required to have performed their first fitness and propriety assessments of persons overseeing the deployment of trading algorithms. Inherent in this requirement is an assumption that natural persons will continue to play the leading role in algorithmic design and calibration for the foreseeable future. Popular non-fiction works), however, are evocative of a future dominated by artificial intelligence with significant levels of autonomy. Building on his recent review of the extant literature concerning conduct risks and their mitigation in algorithmic trading (AT) firms (Culley, 2020), the author proposes a research agenda to assess if initiatives such as the SMCR are considerate of new conduct risks that could emerge in the machine age. Favouring a pragmatic epistemology that the author asserts is consistent with the Financial Conduct Authority’s (FCA) own approach to regulation, the author suggests three possible research strategies (case studies, mixed methods and action research) that could be employed by researchers interested in this topic, before settling on what the author considers to be the most suitable strategy for his own study. In addition, the author provides details on the primary data (elite interviews, focus groups) and secondary data collection techniques that will be utilised, together with an insight into appropriate sampling and data analysis methods. While the author plans to use this research agenda in the context of AT in the fixed income, currencies and commodities markets because of the dearth of studies in this area, it is hoped that it will inspire other scholars to conduct examinations into the conduct risks posed by the automation so that both policymakers and firms can make informed decisions regarding their mitigation in the future.

The United Kingdom’s client assets regime: Problematic issues of threshold application

This paper considers certain difficult legal threshold matters of application in relation to the United Kingdom’s client assets regime. Consideration of such matters is especially timely as the regime transitions from a period of rapid change to a more business-as-usual environment. Topics covered include title transfer collateral arrangements, mandates and evidencing compliance with the Senior Managers and Certification Regime.