FCA Publishes Draft Rules to Extend the Senior Managers and Certification Regime to all Firms

The FCA published its long-expected consultation paper (CP17/25) on 26 July, with proposed rules to extend the senior managers and certification regime (SM&CR), which is currently applicable only to senior managers in the banking sector, to all firms authorised by the FCA. The extended SM&CR would replace the current FCA approved persons regime.

The FCA considers that the extension will make individuals more accountable for their conduct and competence, thus strengthening market integrity.

The proposals include five conduct rules that will apply to all financial services staff at FCA authorised firms and which will enforce individual accountability for acting with integrity, due care, skill and diligence and will ensure that individuals are open and cooperative with regulators, treat customers fairly and observe proper standards of market conduct.

The responsibilities of senior managers will be clearly defined and such persons can be held personally to account. They will be approved by the FCA and appear on its register.

Under the Certification Regime, firms will certify individuals for their fitness, skill and propriety on an annual basis, if they are not covered by the Senior Managers Regime but their positions significantly impact customers or firms.

The existing exemption for firms under the Approved Persons Regime will be maintained in a category called “Limited Scope Firms”.

A follow-up consultation paper on the SM&CR’s relevance for appointed representatives is due in November.

The FCA expects to issue its final rules on the extended regime in the summer of 2018.

Read the consultation.

Read Dechert’s OnPoint "FCA Publishes Proposed Rules to Extend Senior Manager & Certification Regime to All Financial Services Firms".

FCA Publishes Final Report on its Asset Management Market Study and Consults on Proposed Rules

The FCA has published its final report on its asset management market study (AMMS).

The report confirms the FCA's interim findings that price competition is weak in a number of areas of the industry and that investors are not always clear what the objectives of funds are, and fund performance is not always reported against an appropriate benchmark.

In its interim report, the FCA had consulted on whether to make a market investigation reference to the Competition and Markets Authority (CMA) on the investment consultancy market. The FCA considered that competition was being adversely affected in the institutional advice market by a weak demand side, persistent levels of concentration, high barriers to entry and vertically integrated business models. In its final report, the FCA has provisionally decided to reject undertakings in lieu of a market investigation reference offered by the three largest investment consultants. It invited comments on that decision by 26 July 2017, and will announce its decision in September 2017.

In a consultation paper published alongside the AMMS, the FCA proposes a significant package of remedies that seek to make competition work better in this market. Implementation of the remedies will take place in a number of stages; with some requiring consultation, others not. The proposed remedies include a strengthened duty on asset managers to act in the best interests of investors, introducing an all-in fee so that investors in funds can easily see what is being taken from the fund, a number of measures aimed at helping retail investors identify which fund is right for them, clarifying and strengthening the use of benchmarks and providing tools for investors to identify persistent underperformance.

The FCA will launch a market study into investment platforms and recommends that HM Treasury considers bringing investment consultants into the FCA's regulatory perimeter.

The deadline for responses to the consultation is 28 September 2017.

The FCA also states that it wants to do some more work in other areas following the AMMS. It has set out its current thinking on issues including fund objectives, use of benchmarks, performance reporting and the transparency of fees and charges in its AMMS final report. It plans to consult on these further issues, where relevant, later in 2017.

Read the FCA related webpage

Read the consultation paper

FCA Publishes Second MiFID II Policy Statement with Final Rules

The FCA published its second policy statement (PS17/14) on 3 July 2017 on the UK implementation of MiFID II (No. 2014/65/EU) and the Markets in Financial Instruments Regulation (Regulation 600/2014) (MiFIR).

PS17/14 sets out the FCA's final rules relating to matters including conduct of business and client assets, and largely track its position in its MiFID II consultation papers. The final rules are set out in the following Handbook instruments:

  • Glossary (MiFID 2) Instrument 2017 (FCA 2017/36).
  • MiFID 2 Fees (Data Reporting Applications) Instrument 2017 (FCA 2017/37).
  • Markets and Organisational Requirements (MiFID 2) Instrument 2017 (FCA 2017/38).
  • Conduct, Perimeter Guidance and Miscellaneous Provisions (MiFID 2) Instrument 2017 (FCA 2017/39).

MiFID II applies from 3 January 2018.

Read the policy statement