01 Aug The Senior Managers & Certification Regime: FCA solo-regulated firms
As discussed in previous Elemental news articles available here, the Financial Conduct Authority (‘FCA’) is creating a new regime called the Senior Managers & Certification Regime (‘SM&CR’) that will change how individuals are assessed and held accountable for what they do.
The FCA recently published a policy statement PS 18/14 providing feedback on CP17/25 and CP 17/40 along with near-final rules in respect of the SM&CR regime.
The FCA has also published a helpful guide for FCA solo-regulated firms. The guide provides more information about the transition to the SM&CR from the current Approved Persons Regime.
Elemental CoSec can provide advice and help your firm’s transition to the new regime.
For FCA solo regulated firms, the SM&CR will commence on 9 December 2019. However, the provisions are being introduced gradually. Firms will have to identify their Certification Staff at the start of the new regime but have 12 months from the commencement date to complete the initial certification process.
Senior Managers and Certification Staff will need to have been identified and trained and abide by the new Conduct Rules (COCON) from the start of the SM&CR but firms will have 12 months to train their other staff on the Conduct rules.
The Financial Services Register
Only details of people holding Senior Management Functions will be included on the Financial Services Register upon the implementation of the SM&CR because only these roles will be approved by the FCA under the new regime.
Individuals performing so-called Certification Functions will not appear on the register. This will result in a large number of individuals who are currently approved persons in respect of CF30 (customer function) only being removed from the register as they will be considered to be undertaking the client dealing function under the SM&CR.
However, the FCA has proposed a new Directory to help consumers and firms check the status and history of individuals working in financial services. This Directory will include both Senior Managers and those whose roles require firms to certify that they are fit and proper.
Certification Regime implementation
Once a year firms will need to confirm that their certified staff are fit and proper for their roles. The first certification requirement will be 12 months after the start of the SM&CR (9 December 2020).
Although firms will need to certify existing employees who will be performing the same role after the start of the new regime, they will not need to provide regulatory references or criminal record checks (which will be required for new employees performing a Certified Function).
Senior Management Regime implementation
Firms will not have to apply for re-approval for their approved individuals. No extra checks will be required because firms already have to ensure that these individuals are, and continue to be, fit and proper.
The following table maps the current controlled function to the corresponding Senior Management Function:
|Current controlled function||Possible corresponding Senior|
|CF1 – Director||SMF3 – Executive Director|
|CF2 – Non-Executive Director||SMF9 – Chair|
|CF3 – Chief Executive||SMF1 – Chief Executive|
SMF19 – Head of Third Country Branch
|CF4 – Partner||SMF3 – Executive Director|
SMF27 – Partner
|CF5 – Director of Unincorporated Association||SMF3 – Executive Director|
|CF6 – Small Friendly Society Function||SMF3 – Executive Director|
|CF8 – Apportionment and Oversight Function||SMF29 – Limited Scope|
|CF10 – Compliance Oversight||SMF16 – Compliance Oversight|
|CF11 – Money Laundering Reporting|
|SMF17 – Money Laundering Reporting|
|CF29 – Significant Management Function||SMF21 – EEA Branch Senior Management Function|
Source: SM&CR Guide for FCA solo-regulated firms, Chapter 14
For most firms the transition to the SM&CR should be relatively painless. However, it remains important to understand the new regime and what is expected moving forward.
The FCA will contact firms to check that they are aware of the rules and are planning accordingly. The FCA will also suggest that what the ‘status’ of each firm is in respect of the rules, i.e. Enhanced, Core or Limited.
If you require any guidance in respect of the SM&CR, please contact Elemental CoSec.
Elemental CoSec Limited
Useful resources and links:
Guide for FCA solo-regulated firms: https://www.fca.org.uk/publication/policy/guide-for-fca-solo-regulated-firms.pdf
Policy Statement PS18/14: https://www.fca.org.uk/publication/policy/ps18-14.pdf
FCA video overview: https://play.buto.tv/Nhdg5
This overview has been provided for general information only. It does not purport to be complete and should not be relied upon and advice should always be taken if you are in any doubt as to the relevant rules.