High level overview

A high level summary of the new senior managers and certification regime (SMCR) and how the FCA propose to extend it to all FCA solo-regulated firms.

This summary is based on the consultation paper (CP17/25) published by the FCA on 26 July 2017. The consultation has now closed and we have submitted our response to the FCA (details available here).

Timing: the consultation paper was released on 26 July 2017. The consultation on the proposed rules closed on 03 November 2017 and the final rules are expected in Summer 2018. We then expect a phased implementation from late 2018.

Application: the extension of SMCR will apply to all FCA solo-regulated firms and replace the current FCA Approved Persons Regime for them.

Three main elements: the proposed new regime largely reflects the arrangements which have been in place for banks since March 2016, consisting of three main elements:

  1. Senior Managers Regime: Firms will need to identify their Senior Managers and firms in the enhanced regime will need to allocate certain Prescribed Responsibilities to them. Senior Managers will need to be approved by the FCA.
  2. Certification Regime: Firms will take on (from the FCA) responsibility for assessing (and certifying on an annual basis) the fitness and propriety of their certification staff (effectively individuals capable of causing significant harm to a firm or its customers).
  3. Conduct Rules: All staff (other than ancillary staff, such as receptionists or security) will be subject to conduct rules and firms will need to provide training on those rules.

Different requirements for different firms: the regime is designed to be proportionate to the size and nature of the firm. The requirements for each firm will depend upon which of the following three categories it falls into:

  1. Core: Most firms will be subject to the "core regime", a baseline of specific requirements applying to all FCA solo-regulated firms.
  2. Enhanced: There will be additional requirements that apply only to the largest and more complex firms (less than 1%), known as the "enhanced regime". These requirements will include additional Senior Management Functions, additional Prescribed Responsibilities, a Responsibilities Map, Handover Procedures and the requirement that there be a Senior Manager responsible for every area of the firm (Overall Responsibility) There are six criteria identifying Enhanced firms:
    • a firm that is a Significant IFPRU firm
    • a firm that is a CASS Large firm
    • firms with assets under management of £50bn or more (at any time in the previous 3 years)
    • firms with total intermediary regulated business revenue of £35m or more per annum
    • firms with annual regulated revenue generated by consumer credit lending of £100m or more, and
    • mortgage lenders with 10,000 or more regulated mortgages outstanding.
  3. Limited Scope: There will be a reduced set of requirements for a specific group of firms, known as ‘Limited Scope’ firms.  These include (among others) Limited Permission Consumer Credit Firms, sole traders and internally managed AIFs.

A recording of our recent conference call on the extension of the regime is available here.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.