FCA consults on extending Senior Managers and Certification Regime to all FCA firms


4 mins

Posted on 27 Jul 2017

The FCA has issued a consultation paper setting out its proposed approach to extending the Senior Managers and Certification Regime (SMCR) to all FCA regulated firms. The SMCR will replace the current Approved Persons Regime. The consultation closes on 3 November 2017 and the final rules will be published in Summer 2018.  The new regime will be implemented “from 2018”.  

The FCA proposes to take a proportionate approach according to the size of the firm.  The “core regime”, comprising the Senior Managers Regime, the Certification Regime and the Conduct Rules will apply to all firms.  The Regulatory References requirements will also apply to all firms.  An “enhanced regime” will impose additional requirements on a small number of firms whose size complexity and potential impact on customers warrant more attention.  There will also be a reduced set of requirements for “Limited Scope” firms.  You can check which category of firm you fall into by using the “Firm Checker” on page 14 of the Consultation Paper.   

Senior Managers Regime

The FCA rules will define which roles are Senior Manager Functions (SMF), depending on the type of firm involved.   Anyone holding a SMF will have to be approved by the FCA before they start their role.  Firms will also have to make sure that Senior Managers are suitable to do their jobs.  

Every Senior Manager will have a Statement of Responsibilities, setting out what they are responsible and accountable for.   This will have to be provided to the FCA when applying for approval and whenever there is a major change to their responsibilities. 

Senior Managers will have a “Duty of Responsibility” and if something goes wrong in their area of responsibility the FCA will consider whether they took “reasonable steps” to prevent it happening.   

There will also be some new “Prescribed Responsibilities” for Senior managers, although this will not apply to Limited Scope firms, such as sole traders, firms with limited permissions and EEA branches.   

Certification Regime 

The FCA will specify which roles are covered by the Certification Regime, but it will cover people whose jobs can have a big impact on customers, markets or the firm.  The FCA will not approve these people but firms will need to check and certify that they are suitable to do their job at least once a year.

Conduct Rules

The Conduct Rules will apply to almost everyone working in financial services and comprise the basic standards expected including “acting with integrity” and “treating customers fairly”.  The largest and most complex firms (fewer than 1% of firms), referred to as “enhanced firms”, will be subject to extra requirements including Responsibilities Maps, Handover Procedures and ensuring that there is Senior Manager with “Overall Responsibility” for every area of their firm. 

Regulatory References 

Firms will have to request regulatory references going back six years from Senior Management and Certification Function candidates' past employers.  This will also apply to non-approved non-executive directors (i.e.those who are not Senior Managers).  References will have to be given using a standard template and disclose information going back six years, including disciplinary action taken due to breaches of the Conduct Rules and any finding that the person was not fit and proper. References will also have to disclose any other information relevant to assessing fitness and propriety, going back six years, except in the case of serious misconduct where there will be no time limit.  Firms will have to update regulatory references where new, significant information comes to light.   

You can read the consultation by clicking here.  

The FCA has also issued a separate consultation containing similar proposals for extending the SMCR to all insurers.  You can see the consultation paper here

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