FCA 6 month review of the Senior Managers & Certification Regime

30 September 2016

Six months in from the implementation of the Senior Managers & Certification Regime (the SM&CR), the PRA and FCA have provided feedback on how relevant firms (mainly banks, building societies and insurers) have embedded the SM&CR into their business.

The regulators have acknowledged that most firms have made a substantial effort to get this right and embed the ethos of the new regime with clearly defined spans of responsibility and increased personal accountability. However the regulators have also provided examples of where individual firms have not properly met the regulatory requirements. This regulatory feedback on the documentation that firms have submitted (Individual Statements of Responsibility and Management Responsibilities Maps) gives some useful insights into what the regulators expects to see. Firms would be well advised to review their own documentation, in light of this feedback – and also to review the FCA and PRA’s own sets of documentation (both regulators have implemented the fundamental principles of the senior managers regime internally, and have published their own Management Responsibilities Maps and Individual Statements of Responsibility for their Board and Executive Committee) – to consider whether further changes need to be made to these key documents.

The regulators are have also published a number of additional policy statements, consultation papers and discussion papers, which cover a number of proposed measures within the new regime, namely:

  • finalised rules in relation to the request / provision of regulatory references (these requirements will come into force from 7 March 2017)
  • a consultation paper on additional guidance in relation to Senior Managers’ “Duty of Responsibility”
  • a consultation paper on extending the conduct rules to those Non-Executive Directors who are not explicitly caught by the SM&CR (i.e. those who do not chair one of the key committees)
  • a consultation paper on additional rules in relation to whistleblowing arrangements within UK branches of overseas banks
  • a consultation paper on further guidance in relation to remuneration in CRDIV firms
  • a discussion paper in relation to whether the individual heading up the legal function should be designated a senior management function

All these materials are available here.

Whilst there is nothing new or unexpected in this suite of regulatory documents, the greater clarity will be helpful for firms as they look to further bed down finer details of the new regime. In particular, the finalised rules around regulatory references are helpful, as this has been a topic which has given rise to some interesting debate, both from a legal and an operational perspective.

The ongoing debate around whether the individual heading up the legal function should be caught by the new regime will not conclude until the new year.

Finally, whilst the SM&CR only applies to firms that are regulated by both the PRA and the FCA, the FCA has confirmed that the SM&CR will be extended to all regulated firms from 2018. Solo-regulated firms would be well advised to start considering the ethos and objectives of the new regime, and reflect on what changes may be necessary from a senior management / governance perspective, to minimise the disruption to the business when implementing the new regime.

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