Coronavirus – FCA Expectations - Senior Managers and Certification Regime (SMCR).

Relevance:        All firms.

Action required:    Consider current arrangements to ensure appropriate Senior Manager coverage


General information and guidance from the FCA can be found on their website, using the following link: https://www.fca.org.uk/coronavirus

This newsletter concerns aspects of SMCR where the FCA has provided a reminder of some of your responsibilities and some flexibility in managing them.

Operational resilience and business continuity:

It is essential that all general insurance firms have plans in place to manage and mitigate the operational impact of coronavirus.

The FCA expects firms to:

•    Have sufficiently robust systems and controls to continue to operate effectively in a stressed situation with business continuity plans to manage this.
•    Have a Senior Manager responsible for business continuity and for managing the impact of coronavirus.
•    Act fairly, honestly, and professionally in accordance with the best interests of customers.
•    Ensure that all customer communications are clear, fair, and not misleading.

Despite being directly affected by coronavirus, firms will need to keep their governance arrangements under review and make appropriate changes as circumstances change.

Senior Managers are responsible for risks in their areas of responsibility and should be considering:

•    where the current situation might lead to emerging risks, and
•    how it affects existing risks, along with the controls used to manage them.

Statements of Responsibilities (SoRs):

The FCA has stated that it wants to minimise the burden on firms at this time, so they do not intend to enforce the requirement on firms to submit updated Statements of Responsibilities (SoRs), if the change is:
•    made to cover multiple sicknesses, or other temporary changes in responsibilities in direct response to the pandemic, and is
•    temporary and expected to revert to the firm’s previous arrangements.

Do remember though that allocations (however temporary) must be clearly documented internally, so that everyone understands who is responsible for what.

The 12-week rule

The 12-week rule allows an individual to cover for a Senior Manager without being approved by the FCA, where the absence is temporary or reasonably unforeseen, and the appointment is for less than 12 consecutive weeks.

The FCA has indicated that they intend to issue a “Modification by Consent” to the 12-week rule to support firms using temporary arrangements during the crisis. So, if temporary arrangements last longer than 12-weeks as a result of the crisis, firms can notify the FCA that they consent to a modification of the 12-week rule. In these cases, temporary arrangements can be extended up to 36 weeks.

Under this modification, firms will also be able to allocate the Prescribed Responsibilities of the absent Senior Manager to the individual who is standing in for the absent Senior Manager. Usually, Prescribed Responsibilities can only be allocated to another approved Senior Manager under this rule and firms to still aim do this, if possible.

Firms should still allocate to the most senior person responsible for that activity or area, who has sufficient authority and an appropriate level of knowledge and competence to carry out the responsibility properly.

Furloughed Senior Managers:

The Prescribed Responsibilities of a furloughed Senior Manager should be reallocated to another Senior Manager.

However, if the firm appoints a temporary replacement under the 12-week rule, the proposed “Modification by Consent” allows a firm to reallocate the Prescribed Responsibilities to the replacement, even if they are not a Senior Manager.

Other Senior Management Functions are not ‘mandatory’, so firms have greater flexibility to furlough the individuals performing them.


Further newsletters are to follow.