Published: 31st January 2018

Of relevance to: FCA-solo regulated firms, insurers and banks
Key date: Comments to FCA by 21 February 2018

In December 2017, the FCA published Consultation Papers CP17/40, CP 17/41 and CP 17/42 on transitioning FCA firms, insurers and individuals to the SMCR, with a view to implementing the new rules at the end of 2018 for insurers, and mid-to-late 2019 for FCA-solo regulated firms.

The main areas of focus in these new Consultation Papers are:

  • There will be automatic conversion or ‘grandfathering’ for core and limited scope firms, for the majority of existing Senior Managers into their appropriate Senior Management Function(s), meaning that firms will not be required to submit an application. The FCA is suggesting firms focus on embedding the new culture that the SMCR will introduce and make all staff aware of their responsibilities under the new regime. ‘Enhanced’ firms (significant IFPRU firms, CASS large firms, firms with £50 billion or more AUM etc.) will have to submit a Form K conversion notification, a Statement of Responsibilities and a Responsibilities Map.
  • There will be a further 12 month period for firms to certify their employees as ‘fit and proper’. The FCA is of the view that a gradual introduction of the Certification Regime will allow firms to adequately prepare for and implement the new regime. Nevertheless, employees must meet the Conduct Rules immediately, so firms will need to be able to identify their certified staff from the outset, if not before.
  • The regime will introduce a new Prescribed Responsibility to banking firms. A Senior Manager will have to be allocated to make sure the firm trains its staff in the conduct rules and complies with the FCA’s notification requirements.

Related to the SMCR, the FCA issued a Consultation Paper (CP17/42) in December last year. The Duty of Responsibility will apply to Senior Managers of insurers and FCA solo-regulated firms when the SMCR is extended. Under the Duty of Responsibility, the FCA can take action against Senior Managers when a firm contravenes an FCA requirement and is able to demonstrate that, 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 that contravention and that the Senior Manager in question did not take any preventative steps to avoid it from occurring or continuing to occur.

The FCA does not propose to amend the current guidance that is already set out in the Decision Procedure and Penalties manual (“DEPP”) of the FCA Handbook as the definitions will simply be extended to include the relevant Senior Managers from insurers and FCA solo-regulated firms.

As set out in its July Consultation Paper (CP17/25), the FCA confirmed that the new regime will not be applicable to Appointed Representatives and any firm so authorised will be bound by the current Approved Persons regime.


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