On 27 March 2015, the PRA and FCA released their latest Solvency II Senior Insurance Managers Regime (SIMR) Album – the snappily titled:
FCA CP15/16** PRA CP13/15 FCA and PRA: Changes to the Approved Persons Regime for Solvency II firms: forms, consequential changes and transitional arrangements & FCA only: governance proposals and feedback to CP14/25
This brings the total number of open Approved Persons / SIMR album consultations to 4 – a first in chart history. (Our earlier blog explains.)
Some of these albums are more collectable than others. (Whilst some are hard to avoid, others are hard to find – at least on the FCA website.) So we’ve gathered them all together here, for enthusiasts (only). The complete collection now includes:
Click here to view table.
The regulators’ latest release includes four joint tracks (but who’s on backing vocals?), and two FCA solos.
- The opening track “Overview” is brief, but uninspiring.
- It’s followed by “Transitional arrangements”, a drama in two stages:
Stage 1: 1 January 2016 – Implementation of the ‘fit and proper’ requirements for those who will be performing, or responsible for, key functions; and
Stage 2: 7 March 2016 – The Start of the new Approved Persons Regime for Solvency II firms. (The mood music score for Stage 2 is in the Financial Services (Banking Reform) Act 2013, which comes into force on the same day.)
This track is longer and more complicated than some of the others on this album; and the theme is sometimes difficult to pick out. But it may be worth persevering. The gist seems to be:
In Stage 1:
* New applications for PRA SIMF approval (made from 1 January 2016) and FCA Significant Influence Function (SIF) approval (made from 7 March 2016) will need to include more information about fitness and propriety, along with information about the candidate’s proposed scope of responsibilities;
* Applications that will take effect from 7 March 2016 must be on the new Form A; and
* All Solvency II Key Function Holders who will take up their posts after 1 January 2016, and who will not be in a PRA or FCA controlled function (CF), will have to complete a new “Notification of a NED or Key Function Holder” form and a “scope of responsibilities” document, as soon as the firm knows that the relevant person has accepted the terms of their appointment. (Those who are in post on 1 January 2016, will have to provide the same information to the regulators at that time); and
In Stage 2:
* Individuals who are currently approved to perform, and who will continue to perform, CF 10 (Compliance oversight), CF10a (CASS operational oversight), CF11 (Money laundering reporting) and/or CF30 (the Customer function) will not need to take any action;
* Those who are moving from a current CF to a new CF (the details are in the Annex 1 coda to the CP *) will be grandfathered, without the need for fresh assessment and approval, if: (a) they are performing the CF immediately prior to the commencement date; (b) the CF will become a PRA or FCA SIF at the commencement date; and (c) they submit a grandfathering notification form by 8 February 2016;
* Firms will be expected to complete and submit a new Form A and scope of responsibilities form in respect of those individuals who are not in a current CF, but who it is proposed will become a key function holder on or after 1 January 2016, and a SIMF on 7 March 2016;
- Track 3 “forms” has a much simpler and lighter mood than the cacophoness track 2. If track 2 was “Thunder and storm” (Beethoven – sorry), track 3 is “The Shepherd’s Song. Happy and thankful feelings after the storm“. In the new sunny uplands, there will be:
* A new Form K to be used as a Grandfathering Notification Form;
* A scope of responsibilities template for firms to complete;
* Updated Short and Long Form As; and
* An Updated Form E for approval for proposed internal moves.
- Track 4 “Consequential changes” is the shortest and sweetest track on the album. The FCA’s opens with a brief melody – the consequentials are “mostly minor and technical“, before it fades away (too soon to tell us, in the CP covering text, what these changes might actually be). The PRA takes up the theme: it “expects to dis-apply … SUP10B, APER and FIT for Solvency II firms … from 7 March 2016“. The track closes with a hint that the PRA will “confirm its technical consequential changes in due course“.
- Track 5 “FCA governance proposals for Solvency II firms” is the first of two FCA solo tracks on the album; but it’s a brief lamentation: “The [FSA] consulted on dis-applying certain SYSC rules on the basis that it would make one set of governance rules under Solvency II. The Government’s preference in implementing [Solvency II] is for the PRA only to make the rules required for transposition … The PRA has published final rules covering these requirements“. The FCA therefore consoles itself by making rules that will (somehow) give it new powers. “These include rules to ensure that the maps cover all senior individuals who are persons of interest to the FCA, and that specifications for the maps that mirror the PRA’s” [sic]. The FCA also proposes some small changes to SYSC (in the light of the PRA’s rules “transposing Solvency II governance requirements” [sic] and the disapplication of CF8 (the apportionment and oversight function) for Solvency II firms, “while ensuring that the responsibility for day-to-day management of these accountabilities is appropriately allocated“.
- Track 6 “FCA feedback on CP14/25” is also brief. So brief, in fact, that it seems to fade away before any actual feedback is given.
The overall feel of this album is unsatisfactory. There seem to be inconsistencies between the sleeve notes (the first six chapters of CP text) and the Appendices themselves; some of the sleeve notes seem incomplete, whilst others are inconsistent or difficult to understand. The result is that this is surely an album for the enthusiast (only). Even so, the regulators hint strongly at a sequel; and, perhaps, when all the albums are taken together (in a single ring-like cycle), they’ll make a more pleasing and coherent sound.
In the meantime, because the albums are difficult to read and understand together; and some of the proposals are complex (or they’ve been described in a complex way), we are offering free workshops to insurers and reinsurers with a strong interest in this areas. Listeners who stay awake for the whole of a workshop will leave with a clear understanding of what the regulators intend, and what might actually happen before the fat lady sings at the end of the year. If you’d like us to run a workshop for you, contact us directly (firstname.lastname@example.org and email@example.com) and we’ll pick out and bring you the greatest hits from the show.
(Our apologies, if this turns out to be the day the [UK regulatory] music died.)
* A CF1 (Director) moving to a SIMF2 (CRO), SIMF4 (CRO), SIMF5 (Head of internal audit), SIMF22 (Underwriting function, GI firms), SIMF 23 (Underwriting risk oversight officer (Lloyd’s)), and SIMF7 (Group entity senior manager);
* A CF2 (non-executive director) moving to a SIMF9 (Chairman), SIMF14 (Senior independent director), SIMF10 (Chair of the risk committee), SIMF11 (Chair of the audit committee), SIMF12 (Chair of the remuneration committee); and
* A CF3 (CEO) moving to a SIMF1 (CEO).