FCA publishes rules to extend the Senior Managers & Certification Regimes

Published: 27 July 2017

On 26 July 2017, the UK Financial Conduct Authority (FCA) published proposals (CP17/25) to extend the Senior Managers and Certification Regimes (SMCR) (brought in for banks in 2016) to almost all UK-regulated firms, including asset managers. The new regime will essentially replace the Approved Persons Regime.

The FCA proposes three parts to the SMCR:

  1. Five Conduct Rules that will apply to all financial services staff at FCA-authorised firms.
  2. The responsibilities of Senior Managers will be clearly set out and, should something in their area of responsibility go wrong, they can be personally held to account. The Senior Managers will be approved by the FCA and appear on the FCA Register. Senior Managers will also be subject to an additional set of conduct rules specific to carrying out their responsibilities.
  3. Under the Certification Regime, firms will certify individuals for their fitness, skill and propriety at least once a year, if they are not covered by the Senior Managers Regime but their jobs significantly impact customers or firms.

The majority of AIMA members will likely be classified as ‘Core SMCR firms’ under the new proposals.

Under the proposals, Core SMCR Firms WILL NOT:

  • be required to draw up responsibilities maps
  • have to appoint senior managers if there is no one performing a role that is listed as an SMF (unless the FCA Handbook requires that role to exist)
  • have to establish handover procedures for senior managers
  • be subject to the ‘Overall Responsibility’ requirement (this will apply to enhanced firms, which means they must ensure that every activity, business area and management function has a senior manager with overall responsibility for it)

Core SMCR Firms WILL:

  • have to prepare Statements of Responsibilities for senior managers
  • have their senior managers subject to the Duty of Responsibility
  • have to allocate prescribed responsibilities to senior managers (noting that there’s a shorter list of prescribed responsibilities than for enhanced firms)
  • have to, at the time of recruitment, and annually thereafter, self-certify employees capable of causing significant harm to the firm or its customers, ensuring they are fit and proper
  • have to apply conduct rules to all staff, and additional senior manager conduct rules to persons holding a senior management function
  • be subject to the full regulatory reference regime requiring firms to obtain and give regulatory references in relation to senior managers and certification staff

Firms with more than £50 billion Assets Under Management will be classified as ‘Enhanced SMCR Firms’ and will be subject to heightened requirements, including additional senior management functions and prescribed responsibilities, and requiring full responsibilities maps to be prepared.

AIMA will liaise with members to develop a response to the FCA’s consultation, which closes on 3 November. The FCA will release a further consultation paper after the current consultation closes to outline the technical arrangements to transition to the SMCR. The final policy statements are expected in mid-2018, with the regime likely to apply from late 2018.

If members have any questions, please contact Adam Jacobs-Dean, Oliver Robinson or Adele Rentsch.