GC18/4: the FCA consults on Senior Managers and Certification Regime: Proposed guidance on statements of responsibilities and responsibilities maps for FCA firms

The FCA consults on its proposed guidance on statements of responsibilities and responsibilities maps for FCA firms, in the context of the extension of SMCR.

Context

In July 2018, the FCA confirmed that the Senior Managers and Certification Regime (SMCR) would be extended to all FCA solo-regulated firms with effect from 09 December 2019.

Under SMCR:

  • All Senior Managers must have a Statement of Responsibilities (SoR) - a single document which clearly sets out their roles and responsibilities.
  • All enhanced firms must have a Responsibilities Map - an overview of how a firm is managed and governed.

To support firms as they embark on the practical implementation of the regime, the FCA has today published a consultation on proposed guidance to give FCA solo regulated firms practical assistance and information on preparing Statements of Responsibilities and Responsibilities Maps for Senior Managers.

What is proposed?

The guidance sets out the purpose of Statements of Responsibilities and Responsibilities Maps and provides a set of questions that firms should ask themselves and case studies and examples of good and bad behaviour.

It is designed to be read alongside the FCA’s Guide for FCA solo-regulated firms and applicable FCA Handbook rules and guidance.

The consultation confirms that:

  • The guidance is not binding.
  • The FCA will not presume that a firm’s departure from its guidance indicates a breach of its rules (although certain poor practices will be sufficient to break rules).
  • The guidance should be applied in a risk-based and proportionate way, including by reference to the size, nature and complexity of the firm.
  • The examples of good and poor practice are not exhaustive.
  • Example responsibilities maps provided in the GC are examples only and should not be interpreted as guidance on how firms should organise governance/management arrangements.

Statements of Responsibilities (SoR) - proposed guidance

The proposed guidance reiterates that from a practical point of view, SoRs should:

  • be clear and easy to understand - by the regulators, others in the firm and the Senior Manager
  • contain enough information to clearly describe the Senior Manager’s actual responsibilities and accountabilities, without unnecessary detail, and
  • be self-contained and not refer to other documents.

Firms are advised to ask themselves whether a person who understands their business but does not know the firm structure would understand what the Senior Manager’s responsibilities are.

The guidance breaks out in some detail - for core, enhanced and limited scope firms - the key questions firms need to address when completing the sections on:

  • prescribed responsibilities (PRs)
  • other responsibilities
  • overall responsibilities (for enhanced firms), and
  • supplementary information contained in the form in 10C Annex 10D of the FCA Handbook.

It provides some worked examples of Statements of Responsibilities across different functions in core, enhanced and limited scope firms.

In setting out some good and bad examples of completing the Prescribed Responsibilities section of SoRs at core and enhanced firms, the FCA particularly highlights points around the sharing of PRs. It notes that the good examples set out the rationale for sharing a PR and explain clearly how this is to work in practice. The bad examples do not provide a rationale and tend to confuse shared responsibility with a division of responsibility where accountability is potentially blurred.

It is clear from the FCA’s examples that good SoRs are simple, straightforward and demonstrate clear boundaries of accountability - clarity of a Senior Manager’s role put in the right context are key considerations, but information needs to be focused on what is important and relevant.

Responsibilities Map - proposed guidance

Again, the FCA has made it clear that the purpose is for firms to strike the right balance:

  • Responsibilities Maps should provide a clear overview of how a firm is managed and governed without being too long, too complex or too minimal.
  • They should be a practical document that is clear and easy for regulators and others within and outside the business to understand.
  • They should contain key information about governance bodies, senior management reporting lines and Senior Manager responsibilities.
  • That information is to be presented at legal entity level but where the entity is part of a group, the Map should show clearly how the firm relates to the group.

The FCA has set out a list of helpful key questions that firms can ask themselves in relation to their own structure but also within their group structure. The worked example includes some helpful diagrams and descriptions which will assist firms in determining the right level of content and style, with a focus on how group structures fit together.

What do I need to do now?

Provide feedback: The consultation is open until 10 December 2018. Simmons & Simmons will be submitting a response incorporating feedback from clients and we would welcome your views. Please contact Penny Miller, Andrea Finn or your normal S&S contact should you wish to contribute.

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.