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Senior management 

01 December 2011

Impact Green traffic light Low impact since FSA rules already substantially equivalent

Other areas to consider

Organisation Employees

Current MiFID rules

Senior Management

A firm’s senior management (i.e. the person(s) who effectively direct(s) the business of a firm) must be of sufficiently good repute and sufficiently experienced as to ensure the sound and prudent management of the firm. A firm must ensure that its management is undertaken by at least two such senior managers.

MiFID Level 2 Directive Arts: 9(1) and (4)

FSA rules

SYSC 4 (Specifically 4.2 and 4.3)

Proposed changes
Draft Directive
Articles 4(27) – (29) and 9

The draft Directive inserts new definitions of “management body” and “senior management”. These distinguish between the individuals with executive functions in a firm and its governing body. The draft Directive also provides that:

  • Competent authorities must be satisfied at all times, that all members of the board are and continue to be of sufficiently good repute and sufficiently experienced to perform their duties;
  • Members of the board must have sufficient time to commit to the firm, and are not permitted to combine more than (i) one executive directorship with two non-executive directorships or (ii) four non-executive directorships. Directorships held in same group are considered as one single directorship and regulators have some flexibility to permit persons to exceed those limits;
  • Firms must devote adequate resources to the induction and training of members of the management body;
  • Each member of the management body must act with honesty and integrity so as to assess and challenge the decisions of senior management;
  • Firms are also required to take into account diversity as one of the criteria for selection of the management body;
  • Draft regulatory standards to clarify notions of sufficient time commitment, diversity, honestly and integrity, induction and training and collective knowledge of the management body are to be prepared by ESMA;
  • The management body, as part of ensuring the sound and prudent management of a firm, shall define, approve and oversee the strategic objectives of the firm as well as providing oversight of senior management, the organisation of the firm and the policy concerning the services, activities and products offered by the firm, in accordance with its risk tolerance. The management body should monitor and assess the effectiveness of these policies and take steps to address deficiencies.
  • Investment firms must notify the regulator of all members of its management body and of any changes to its membership.
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