Published: 13th December 2017


Of relevance to: All firms regulated by the Financial Conduct Authority (“FCA”)
Key date: Consultation closes 21 February 2018; implementation in late 2018 for Insurers and in mid-to-late 2019 for solo-regulated firms

The FCA is consulting on its package of proposals on how firms and individuals will move to the Senior Managers and Certification Regime (“SMCR”) in late 2018 for Insurers and in mid-to-late 2019 for solo-regulated firms (to be announced and set by HM Treasury). The aim of this new regime is to make individuals more accountable for their conduct and competence.

The FCA has previously consulted on extending the SMCR to almost all regulated firms. However, given the differences in the size and nature of firms covered by the extension, it is now proposing proportionate approaches for different types of firms.

For the majority of FCA regulated firms, the FCA is proposing to automatically convert individuals from the Approved Persons Regime to the SMCR. This means the majority of firms will not need to submit applications to convert Approved Persons to Senior Managers. Instead, the FCA are expecting firms to focus on embedding the cultural changes the new regime introduces and making sure staff know what they need to do.

They’re also consulting on extending the ‘Duty of Responsibility’ (currently applying only to Senior Managers of banks) to insurers and firms solely regulated by the FCA; under which, Senior Managers are responsible and accountable for the business areas they lead.

The FCA can take action against the Senior Manager responsible where their firm has contravened an FCA requirement in their part of the business. To do this, the FCA must show that the Senior Manager did not take reasonable steps to avoid the breach occurring or continuing.

Jonathan Davidson, Executive Director of Supervision – Retail and Authorisations at the FCA, said:

Culture and governance in financial services and its impact on consumer outcomes is a priority for the FCA. Extending the Senior Managers and Certification Regime will drive forward culture change in financial services firms.

This next set of our proposals outline our plans for a smooth transition to the new regime, which is simple, clear and proportionate. Indeed, the vast majority of firms will not need to submit applications to convert existing Approved Persons to Senior Managers.’

The FCA is also considering what effect the move to the SMCR will have on the Financial Services Register.

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