On December 13, the UK Financial Conduct Authority (FCA) published three consultation papers (CPs) on the transition from its existing Approved Persons Regime (APR) to the new Senior Managers and Certification Regime (SM&CR).

The CPs follow the FCA’s July 2017 consultation papers, which consulted on extending the SM&CR regime to all regulated firms (including both FCA solo-regulated firms and insurers) (for further information, please see the Corporate & Financial Weekly Digest of July 28, 2017). However, in these most recent consultations, the FCA accepts that proportionate approaches are required to extend the SM&CR to different firms.

The FCA also is consulting on its plans to offer guidance on the introduction of the “duty of responsibility” for FCA solo-regulated firms and insurers (such duty of responsibility currently only applies to senior managers of banks). Under the duty of responsibility, senior managers are both responsible and accountable for their business. This means that the FCA can take action against the senior manager responsible for a firm’s contravention of an FCA requirement relating to the part of the business the senior manager is responsible for. In doing so, the FCA would have to be able to prove that the senior manager did not take reasonable steps to avoid the occurrence or continuation of a breach.

Notably, the CPs also state that for the majority of FCA regulated firms, current senior managers will be converted automatically into the relevant senior management function, meaning that there will be no need for these firms to submit an application. Instead, the FCA suggests that these firms focus on embedding the cultural changes that the SM&CR introduces, as well as ensuring their respective staffs are aware of their responsibilities. Furthermore, FCA solo-regulated firms also have up to 12 months from the SM&CR’s introduction to certify their employees as “fit and proper.”

The starting date for SM&CR has yet to be set; however, the FCA states that it is hoping to finalize its approach in the summer of 2018, and will announce the date for implementation in due course (likely sometime in 2019). Firms can comment on the CPs until February 21, 2018.

The CPs are available here.