On 26 July 2017, the FCA outlined its proposals for the extension of the Senior Managers and Certification Regime. The FCA intends that these rules, which came into force on 7 March 2016, be extended to all sectors within the financial services industry and that they will essentially replace the Approved Persons Regime. Though an implementation date will be set by the Treasury, the FCA expects this to be from 2018.
As we reported last year, the Senior Managers Regime, Certification Regime and Conduct Rules are intended to strengthen accountability and encourage good governance. The regime requires clear delegation of responsibilities to senior managers, and means that they can be held personally liable for governance failures.
The FCA now wishes to extend this regime to almost all regulated firms, and has proposed three parts to the new regime:
- Five Conduct Rules that will apply to all financial services staff at FCA authorised firms. The FCA has described this as a simple set of rules which mean that individuals must “act with integrity, act with due care, skill and diligence, be open and cooperative with regulators, pay due regard to customer interests and treat them fairly, and observe proper standards of market conduct”.
- The responsibilities of Senior Managers will be clearly set out and, should something in their area of responsibility go wrong, they can be personally held to account. The Senior Managers will be approved by the FCA and appear on the FCA Register.
- Under the Certification Regime, for individuals who are not covered by the Senior Managers Regime but who have jobs that significantly impact customers or firms, they will need to be certified at least once a year by their firm as to their fitness, skill and propriety.
The FCA has said that it will ensure that the regime is proportionate to the size of the firms affected. It has therefore proposed a “core regime” which will set out the minimum requirements for all regulated firms. For the largest and most complex firms (which the FCA state is less than 1% of regulated firms) the FCA proposes an “enhanced regime”.
Importantly, the FCA has proposed that “extra requirements” will be included in the enhanced regime. These are stated to include Responsibilities Maps, Handover Procedures, and the need to ensure that there is a Senior Manager responsible for every area of a firm (“Overall Responsibility”).
For insurers too, change is afoot. Insurers currently apply a revised version of the FCA’s Approved Persons Regime and the PRA’s Senior Insurance Managers Regime. The FCA now proposes that this framework be built upon to introduce to insurers all elements of the Senior Managers and Certification Regime.
The FCA’s consultation asks for feedback on its proposals by 3 November 2017, and a link to the response forms can be found here: https://www.fca.org.uk/firms/senior-managers-certification-regime.