The Do’s & Don’t’s Of Delegation

CONCON 4.2 SC1: “You must take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively”

“You can delegate authority but you can not delegate responsibility”

Former U.S. Senator Byron Dorgan

Background

For most staff, there are five Conduct Rules. However, for members of the Senior Manager Regime, a further four Conduct Rules apply. Senior Manager Conduct Rule 3 focuses on delegation and is defined as; “You must take reasonable steps to ensure that any delegation of your responsibilities is to an appropriate person and that you oversee the discharge of the delegated responsibility effectively”.

This short blog will focus on this key Conduct Rule, providing some key insights and some practical guidance on how to make sure you are delegating appropriately under the new SM&CR rules.  

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Principles of Delegation Under SM&CR – Good practice guidance: …

The two key factors for effective delegation and to comply with SMCR3 are ‘the right person’ and ‘the right oversight’.

As a minimum, the delegating senior manager will need to address the following four considerations:

• Regulatory Awareness i.e. what have I done to ensure the line manager, and their team where relevant, understand the regulatory nature of the responsibilities being delegated, for example;
  • Do I receive regular regulatory awareness training and updates?
  • Do the employees in my area fully appreciate the regulatory requirements and expectations?
  • Do the employees in my area receive regular training?
• Competence and Expertise i.e. what have I done to ensure the line manager, and their team where relevant, has the competence, knowledge, skill and time to reliably fulfil the delegated responsibility, for example;
  • Do I assess the ongoing suitability of individuals working within my area?
  • Is my approach consistent with the agreed ‘best practice’ standards of delegation?
  • Could I explain to the Regulator the nature and extent of the measures I take in this respect?
• Performance Management i.e. what have I done to ensure the performance cycle and appraisal process provides the level of oversight to reassure me of the effective management of this delegated responsibility
  • Is the delegated responsibility(ies) explicitly included in the line manager’s:
    • Personal objectives
    • Monitoring and reporting activity
    • Reviews and appraisal
    • Performance ratings and reward decisions
  • Have MI and reporting requirements been specified exclusively for the delegated responsibility(ies)
• Personal Responsibilities i.e. what have I done to ensure the line manager knows what is expected of them to maintain this delegated responsibility
  • Fitness and Propriety standard and obligations:
    • Personal profile
    • Maintaining Competence
    • Training and professional development
  • Conduct and behaviour
  • Satisfactory performance records been kept

Principles to Remember

Do:

• Take note if you are overwhelmed and your team members don’t seem to have enough to do — it’s a warning sign
• Keep a visual reminder of your team’s development goals so you can easily identify opportunities to delegate
• Ask your direct reports to call you out when you haven’t delegated enough

Don’t:

• Assume that you are not biased about other people’s performance
• Give someone else responsibility for something and then micromanage the task to death
• Be impatient — practice and learn from your mistakes

Reasonable Steps

Examples of breaches of the Conduct Rules i.e. where the SMF is considered not to have taken reasonable steps, are provided by the FCA:

Failing to take reasonable steps to apportion responsibilities clearly among those to whom responsibilities have been delegated, which includes establishing confusing or uncertain:

(a) reporting lines; or

(b) authorisation levels; or

(c) job descriptions and responsibilities

Failing to take reasonable steps to maintain an appropriate level of understanding about an issue or part of the business the SM has delegated to an individual(s) (whether in-house or outside contractors) including:

(a) disregarding an issue or part of the business once it has been delegated;

(b) failing to require adequate reports once the resolution of an issue or management of part of the business has been delegated; and

(c) accepting implausible or unsatisfactory explanations from delegates without testing their accuracy

Failing to supervise and monitor adequately the individual(s) (whether in-house or outside contractors) to whom responsibility for dealing with an issue or authority for dealing with a part of the business has been delegated including any failure to:

(a) take personal action where progress is unreasonably slow, or where implausible or unsatisfactory explanations are provided; or

(b) review the performance of an outside contractor in connection with the delegated issue or business.

Essential good practice to avoid breaches of the Conduct Rules i.e. reasonable steps to take: 

• Clear and documented process i.e. scope / boundaries / authority levels / referrals
• Well defined and documented evidence e.g. Fit and Proper, ongoing performance etc.
• Summary of communication between SMF and delegate to confirm actions, expected communication/reporting and level of supervision to be applied
• Specify the outcomes as well as the outputs
• Define and agree appropriate Management Information
• Assess MI obtained in depth to effectively monitor on-going issues
• Maintain a record of specific feedback and challenge provided
• Discuss issues as they are identified, reviewing them and following them up with relevant committees, staff and, where deemed necessary, the board
• Common DLL policy/approach to delegation to achieve consistency across all SMFs
• Review the effectiveness of your delegation processes