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The FCA has set out its expectations around Covid-19 and the Senior Managers and Certification Regime, recognising that governance arrangements may well need to change during the pandemic. While there is greater flexibility for firms coping with the crisis there are a number of requirements senior managers should keep in mind.

The impact of coronavirus is being felt in every sector of the economy and financial services is no different. Firms are facing unprecedented challenges, including managing government guidelines, responding to an increasing number of queries from customers who are concerned about their job security, paying bills etc. and looking after the health of their staff.

As you’d expect, there’s been an increased focus from the FCA on firms’ contingency plans and the arrangements they have put in place to steer their businesses through this crisis. While the FCA expects firms to continue to meet regulatory expectations, including managing their SM&CR obligations and governance arrangements, it also recognises that firms need flexibility to meet the challenges presented by the virus.

The FCA has set out its expectations to help solo-regulated firms apply the SM&CR in ‘Senior Managers and Certification Regime (SM&CR) and coronavirus (Covid-19): our expectations of solo-regulated firms

What senior managers need to know

  • Senior managers should be considering how the current situation might lead to new risks emerging and the impact on existing risks, along with the adequacy of controls used to manage them.
  • Firms aren’t expected to allocate responsibility for managing the impact of coronavirus on its business to a single senior manager. However, they should make sure responsibilities are allocated with an appropriate level of oversight and that processes are put in place to effectively manage any challenges and risks.
  • Where firms need to make arrangements to cover temporary absences or change senior Manager responsibilities as a result of the virus, the FCA doesn’t intend to enforce the requirement to submit updated Statements of Responsibilities (SoRs), if the change:
    1.  is made to cover multiple sicknesses, or other temporary changes in responsibilities directly related to the virus, and
    2.  is temporary and expected to revert to the firm’s previous arrangements.
  • Where firms cannot replace senior manager functions within the usual 12-week period, the FCA will extend temporary arrangements to 36 weeks, if required by firms
  • Firms can re-allocate the prescribed responsibilities of the absent senior manager to another individual, who should be another approved senior manager, where possible. However, if a temporary replacement for a furloughed senior manager is appointed under the 12-week rule, firms can re-allocate the prescribed responsibilities to the replacement, even if they are not a senior manager.
  • Re-allocated responsibilities should be clearly documented internally, so that everyone understands who is responsible for what.
  • Individuals who perform mandatory functions, for example Compliance Oversight, or the MLRO function, should only be furloughed as a last resort.
  • Unless a furloughed senior manager is permanently leaving their post, they will retain their approval during their absence and will not need to be re-approved by the FCA when they return.

Further details from the regulators

Full details are provided in the publication here. The FCA has also issued a joint statement with the PRA of their expectations in relation to dual-regulated firms:

How we can help

You can read our latest coronavirus insights on how to deal with the pandemic. If you can’t find what you’re looking for, get in touch and one of our team can help you understand what coronavirus means for your firm.

 

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