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The switch for CASS responsibility before and after SM&CR won’t have been straightforward for some. As the dust settles, and with CASS a theme in several of the FCA’s recent Dear CEO letters, it’s important to be clear what elements come under which people.
Understanding your firm type under SM&CR – and what it means for CASS
The Senior Management and Certification Regime has now been extended to include all to solo regulated firms. In preparation, most firms identified which categorisation they would have under the new regime. Part of this was considering which type of SMCR firm they would be:
- Core Regime: This is a baseline requirement which will apply to almost every firm.
- Enhanced Regime: As well as the Core Regime requirements, the Enhanced Regime will apply an additional set of requirements to larger firms whose size, complexity and potential impact on customers warrants more attention. All CASS large firms – that is, those with more than £1bn client money or more than £100bn custody assets – are enhanced firms.
- Limited Scope Regime: The Limited Scope Regime is a ‘light touch’ version of the rules. Whilst accountability is still at the foundation of the Limited Scope Regime, it requires less of certain firms due to the nature of the financial services that they offer, for example Limited Scope Firms do not need to allocate Prescribed Responsibilities (explained further below).
From a CASS perspective, because all CASS large firms are subject to the Enhanced Regime, it is important that these firms understand the additional requirements they’re subject to. CASS medium firms that are likely to move to CASS large categorisation in the next 12 months should take time to start planning for the Enhanced Regime. In fact, CASS medium firms can ‘opt up’ and adopt the Enhanced Regime early in preparation for an expected CASS reclassification.
CASS responsibilities in the SM&CR – what happened to the CF10a?
Prior to SM&CR, the Approved Persons Regime applied and required CASS medium and large firms to have someone in the CF10a controlled function responsible for CASS operational oversight. However, under SM&CR this was changed and instead of one individual being approved by the regulator as the CF10a, the role and its responsibilities were split between a Senior Manager Prescribed Responsibility, and a Certification Function.
Senior Manager Prescribed Responsibility for CASS
SM&CR brought in the concept of Prescribed Responsibilities, known as PRs. These are specific responsibilities, defined in SYSC 24 of the FCA Handbook, each of which must be allocated to a Senior Manager of Core and Enhanced firms. They are prescribed directly by the FCA and are in addition to the inherent responsibilities that are an essential part of the Senior Manager’s role. They are intended to ensure a Senior Manager is accountable for key areas of conduct and prudential risk. The PRs cover several areas, including CASS (PR Z), which must be given to the individual who is ultimately responsible within the firm for compliance with the CASS rules. But to add complexity, this could be reflected in different senior management functions.
In Enhanced Regime firms, it is possible that the individual with PR Z will have no other Senior Manager responsibilities due to the firm’s size, governance structure and allocation of responsibilities and duties. If that is the case, the Senior Manager will be appointed as an SMF 18 – ‘Other Overall Responsibility’. Enhanced Regime firms should be aware that an SMF 18 can only be assigned PR Z, they can’t hold any other PR. If they do need to hold another PR alongside PR Z, that will need to be done under another SMF (for example, SMF 16, the Compliance function). This allows for flexibility and accuracy for when firms are mapping their responsibility lines, particularly CASS responsibility lines. It’s worth noting that SMF 18 is not applicable to Core firms, so those firms will need to have a different SMF allocated with PR Z
Certification Function and CASS
It is recognised that the person who has ultimate responsibility for CASS may not be responsible for the day-to-day oversight of CASS operations. If this day-to-day oversight has been delegated to someone else, then the delegate will fall into the certification regime as the certified individual responsible for CASS operational oversight.
For many firms, this function equates to the CF10a role seen in the past under the Approved Persons Regime. As well as having this certified individual, firms will still need to have an individual in a relevant SMF responsible for PR Z. In this case, the firm (and the individuals themselves) must be able to clearly define the respective responsibilities of the Senior Manager and the Certified Individual.
In some firms, the Senior Manager allocated PR Z will also have responsibility for the day to day operational oversight of CASS. In this instance the Senior Manager would not need to be certified as well as holding a relevant SMF.
Next steps – make sure your CASS responsibility allocation works on a continuing basis
Firms will need to have allocated responsibilities appropriately by now, but there are few things that should be done on an ongoing basis:
- Review the allocation of PR Z to make sure it continues to be appropriate
- Assess whether that individual holds any other prescribed responsibilities and which SMF they will hold, determine whether that continues to be appropriate
- Determine who is responsible for the day-to-day operational oversight and ensure that responsibilities are appropriately mapped, and individuals maintain current certification, if required
- Keep compliant with the current rules.
Get in touch if you need any help or advice on CASS roles and responsibilities any aspect of CASS compliance.
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