What is proposed?
The FCA recognises that it needs to bring in a regime which is proportionate and flexible so there will be different standards for different types of firm:
- Core Regime: This is a baseline requirement which will apply to almost every firm.
- Enhanced Regime: This will apply an additional set of requirements to larger firms (approximately 350) whose size, complexity and potential impact on customers warrants more attention.
- Limited Scope Regime: This will apply to all firms that currently apply the Approved Persons Regime on a limited basis, for example sole traders.
The regime itself covers three areas:
- Senior Managers: This covers anyone who undertakes a Senior Management Function. Each senior manager will have a Duty of Responsibility and a Statement of Responsibility but there is no need for a responsibilities map or handover procedures.
- Certification Regime: This covers people who are not senior managers but whose job means it is possible for them to cause significant harm to the firm or its customers. For example, algorithmic trading, client dealing, CASS oversight etc. These individuals will not be approved by the FCA but the firm must ensure are certified as fit and proper on at least an annual basis.
- Conduct Rules: These basic rules apply to all employees except ancillary staff who do not perform a role specific to financial services. There are 5 high level obligations which apply to all, and an additional 4 obligations for senior managers.
What does it mean for me?
Firms would be well advised to get ahead of the game, and consider how their current internal governance processes stack up against the requirements. For anyone running a financial services firm and who has approved person responsibilities, the implications of non-compliance are severe. So understanding the regulator’s expectations and what this means in practice for your firm is key. Things to consider include:
- Who are your senior managers and what are their core responsibilities?
- Are these properly documented and can you articulate these clearly to the regulator?
- Do your governance arrangements align with the new regime?
If you need any help with these requirements, Bovill can help. For example, we can assist you with your project, undertake a health check of your current processes and documentation, provide training on senior management responsibility, as well as offering practical tips to achieve compliance.