Senior Managers and Certification Regime

YOUR COMPLIANCE MATTERS:   Senior Managers and Certification Regime

Relevance:                   All firms.

Action required:           None – Information only

The regime replaces the Approved Persons system in 2018. The FCA has advised it wanted most transitions to take place automatically.

The Financial Conduct Authority (FCA) is consulting on how firms should transition from the Approved Persons regime to the new Senior Managers Regime.

The regulator said it wanted “proportionate approaches for different types of firms”.

It noted in a statement:  “For the majority of FCA regulated firms, the FCA is proposing to automatically convert individuals from the Approved Persons Regime to the new regime.

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  “This means the majority of firms will not need to submit applications to convert Approved Persons to Senior Managers. Firms can instead focus on embedding the cultural changes that the new regime introduces and making sure their staff know what they need to do.”

  The Senior Managers and Certification Regime aims to make individuals more accountable for their conduct and competence. In July last year the FCA proposed to extend the regime to cover more firms.

  The FCA has proposed that individuals at “core and limited scope” firms will move automatically to the new regime. Those that fall into the definition of “enhanced firms” will need to submit conversion notification, statements of responsibilities, and a responsibilities map before moving to the new regime.

  The watchdog has provided a firm checker tool so companies can check their status.

  Insurers
  In addition the FCA is also consulting on extending the ‘Duty of Responsibility’ to insurers and firms solely regulated by the FCA. The Duty of Responsibility currently only applies to Senior Managers of banks.

  The watchdog explained that under the Duty of Responsibility, Senior Managers are responsible and accountable for the business areas they lead. The FCA can take action against the Senior Manager responsible where their firm has contravened an FCA requirement in their part of the business. The FCA must show that the Senior Manager did not take reasonable steps to avoid the breach occurring or continuing.

  The FCA has also proposed that insurers move over in a different way to other firms:

• a firm subject to Solvency II or a large Non-Directive Firm and Insurance Special Purpose Vehicles will move automatically

• a small Non-Directive Firm or a small run-off firm will need to submit forms

  Jonathan Davidson, executive director of supervision, retail and authorisations at the FCA, said: “Culture and governance in financial services and its impact on consumer outcomes is a priority for the FCA. Extending the Senior Managers and Certification Regime will drive forward culture change in financial services firms.

  “This next set of our proposals outline our plans for a smooth transition to the new regime, which is simple, clear and proportionate. Indeed, the vast majority of firms will not need to submit applications to convert existing Approved persons to Senior Managers.”

  In response to feedback, the FCA is considering what the move to the new regime means for the Financial Service Register.

  The FCA is calling for feedback on the proposals and aims to finalise its approach in summer 2018. The consultation closes in February 2018.

  The date for the implementation of the new rules will be announced and set by HM Treasury in due course.