SMCR Rules effective 9th December. FCA Conduct rules for Senior Managers (5) Communication with the FCA

YOUR COMPETENCE MATTERS

Reason for issue:         SMCR Rules effective 9th December.

Action required:           Please send this note on to any other Approved Persons, within the business, read and ensure your CPD record is updated.

We have previously provided a training note covering the Conduct Rules applicable to all staff and Senior Managers Rules SC1, SC2 and SC3.

As a reminder, the Senior Manager rules are as follows:

SC1: You must take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively.

SC2: You must take reasonable steps to ensure that the business of the firm for which you are responsible complies with the relevant requirements and standards of the regulatory system.

SC3: You must take reasonable steps to ensure that any delegation of your responsibilities is to an appropriate person and that you oversee the discharge of the delegated responsibility effectively.

SC4: You must disclose appropriately any information of which the FCA or PRA would reasonably expect notice.

This training note will focus on SC4 relating to expected disclosures to the regulator. FCA guidance is as follows:

·              For the purpose of rule SC4 there may be regulators, in addition to the FCA, which have recognised jurisdiction in relation to activities to which the rules apply and have a power to call for information from the relevant person in connection with their function or the business for which they are responsible. This may include an exchange or an overseas regulator.

·              This rule imposes a duty on a senior conduct rules staff member to disclose appropriately any information of which the appropriate regulator would reasonably expect, including making a disclosure in the absence of any request or enquiry from the appropriate regulator.

·              A senior conduct rules staff member is likely to have access to greater amounts of information of potential regulatory importance and to have the expertise to recognise when this may be something of which the appropriate regulator would reasonably expect notice.

·              Where a Senior Manager is responsible for reporting matters to the regulator, failing promptly to inform the regulator concerned of information of which they are aware and which it would be reasonable to assume would be of material significance to the regulator concerned, whether in response to questions or otherwise, constitutes a breach of rule SC4.

o  If a senior conduct rules staff member comes across a piece of information that is something of which they think a regulator could reasonably expect notice, they should determine whether that information falls within the scope of their responsibilities. For a Senior Manager those responsibilities will be set out in that person’s Statement of Responsibilities.

o  If it does, then they should ensure that, if it is otherwise appropriate to do so, it is disclosed to the appropriate regulator. If it does not fall within the scope of their responsibilities then, in the absence of any reason to the contrary, they might reasonably assume that its disclosure to the appropriate regulator was being dealt with by the senior conduct rules staff member with responsibility for dealing with information of that nature. If a senior conduct rules staff member was not sure that the matter was being dealt with by another senior conduct rules staff member, or if they were not sure whether this was in their area or not, the FCA would expect them to make enquiries to inform themselves, rather than disregard the matter.

In determining whether or not a person's conduct complies with rule SC4, the factors which the FCA would expect to take into account include:

(1)   whether it would be reasonable for the individual to assume that the information would be of material significance to the regulator concerned;

(2)   whether the information related to the individual themselves or to their firm; and

(3)   whether any decision not to report the matter was taken after reasonable enquiry and analysis of the situation.

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