On December 16, 2015, the Prudential Regulation Authority and the Financial Conduct Authority published their Policy Statements and final rules on the application of the UK Senior Managers and Certification regimes and new Conduct Rules to UK branches of EEA and non-EEA banks and PRA-designated investment firms. The PRA also published a related updated Supervisory Statement. Both of the regulators published near-final rules in August this year, pending legislation being adopted by Parliament which would formally extend the SM&CR to UK branches of such firms. That legislation has now come into force, allowing the regulators to publish their final rules. The PRA’s final rules are the same as those published in August, except for some minor corrections.
The FCA’s final rules for UK branches of EEA firms remain unchanged. The rules for UK branches of non-EEA firms have been amended following concerns about the wide extraterritorial reach of the FCA’s proposed approach. The FCA will only apply the Certification regime and the Conduct Rules to individuals who perform significant harm functions for branches to individuals who are based in the UK. Other individuals that deal with UK clients will no longer automatically be within scope. The FCA intends to keep the territorial scope of its rules under review and may amend the rules in the future if it considers it necessary to meet its objectives (although not before commencement of the regime in March 2016). The FCA has also confirmed that, in line with legislation, EEA firms that accept deposits or deal in investments as principal under a passport and which have a UK branch are caught by the SM&CR, even if the firm undertakes deposit-taking through a services passport and other (non-deposit-taking) activities through an establishment passport (i.e. if the UK branch does not undertake deposit-taking or proprietary trading). The final rules on regulatory references will be published by the UK regulators in Q1 2016 as will the PRA’s Supervisory Statement on board responsibilities. The FCA final rules on the applicability of the new rules to wholesale trading (to capture algorithmic traders) are also outstanding. The SM&CR comes into effect on March 7, 2016. Certain changes to the regime have been proposed by the UK Government, including extending the regime to all financial services firms and replacing the presumption of responsibility with a duty of responsibility. It remains to be seen whether Parliament will approve those changes.
The PRA’s Policy Statement is available at:
http://www.bankofengland.co.uk/pra/Documents/publications/ps/2015/ps2915.pdf and the PRA’s updated Supervisory Statement is available at: http://www.bankofengland.co.uk/pra/Documents/publications/ss/2015/ss2815update.pdf.
The FCA’s Policy Statement is available at: http://www.fca.org.uk/static/fca/documents/policy-statements/ps15-30.pdf.
Our client note on the Government’s proposals is available at: http://www.shearman.com/~/media/Files/NewsInsights/Publications/2015/11/Implementation-Issues-Arising-from-theRevised-UK-Senior-Manager-and-Certification-Regime-FIA-100215.pdf.