Wed, Jan 3, 2018

Senior Management and Certification Regime (SM&CR) Extension

On the December 13 2017, the FCA published further consultation papers on the fundamental requirements to be met by both firms and individuals, in “converting” from the current Approved Persons Regime (“APR”) to SM&CR. This follows from earlier publications on the SM&CR extension in July 2017.

For the majority of FCA regulated firms (Core and Limited Scope Firms), the FCA is proposing to automatically convert individuals. This means that the majority of firms will not need to submit applications to convert Approved Persons to Senior Managers. This will instead allow firms to focus their attention on embedding the cultural changes that the new regime introduces and making sure their staff know what they need to do.
Firms are expected to assess where they sit within the new regime and the transitional requirements that will apply to them. Helpful “Checker Tool” diagrams have been included to aid firms rel="noopener noreferrer" with this process in CP 17/40.
For Enhanced Firms and Non-Executive Director Chairs, the FCA intends to require submission of a conversion notification and accompanying documentation to convert individuals. This will be known as a “Form K” and it is intended that the proposed cut-off date for submission will be one week before the commencement of the regime.
Although it is stated that some firms will have individuals automatically converted over from the APR, the FCA are proposing that as part of the extension of the SM&CR, solo-regulated firms classified as Enhanced will have to submit “Statements of Responsibilities” and a “Responsibilities Map” upon their application. This documentation will also be required to be submitted to the FCA upon any significant changes to the individual’s responsibilities.

Duty of Responsibility and Conduct Rules
The FCA outlines its plans to extend the “Duty of Responsibility” and “Conduct Rules” in CP 17/42, which it currently applies to banks and which will be applied to Insurers and FCA solo-regulated firms. It also outlines the powers the FCA will have to take action against a Senior Manager where:

  • There was a contravention of a relevant requirement by the Senior Manager’s firm
  • At the time of the contravention, or during any part of it, the Senior Manager was responsible for the management of any of the firm’s activities in relation to which the contravention occurred
  • The Senior Manager did not take the steps a person in their position could have reasonably been expected to take to avoid the contravention occurring or continuing

Appointed Representatives
While there are areas of the amendments that will be of interest to Appointed Representatives (ARs) of authorised firms, the SM&CR extension does not affect individuals and Approved Persons working at those ARs. The provisions of the APR will still apply and principal firms will remain fully responsible for ensuring that individuals within the AR remain fully compliant.

The one exception to this is for Limited Permission Consumer Credit firms that also act as ARs for other business. Such firms will fall into the scope of SM&CR, as they are authorised firms.

The consultations set out that the FCA will consider feedback until February 21, 2018 and publish policy statements following this. The Duty of Responsibility extensions are subject to approval from the Treasury. It is expected that the extension to SM&CR will commence for insurers in late 2018, followed by all other solo-regulated firms in mid-to-late 2019, which should coincide with the Treasury’s approval.

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