“Advisers to be removed from the FCA Register!”
This is the headline that is bubbling over in the trade press. It arises out of Consultation Paper CP17/25 that the FCA issued back in July in relation to the intention that the Senior Managers and Certification Regime (SM&CR – has been applicable in the Banking and Investment sectors since March 2016) will be extended to all firms. The consultation ends on 3 November so, if you have any views, get them in quick! A summary of the key points of the paper are shown below.
The FCA proposes to apply a baseline of requirements to every firm, known as the ‘core regime’. This means that the three main elements of the SM&CR will apply to every firm.
Senior Managers Regime
This focuses on the most senior people in the firm. The rules will define which roles are ‘Senior Management Functions’ depending on the type of firm involved.
- Anyone who holds a Senior Management Function needs to be approved by the FCA before they start their role, the same as under the Approved Persons Regime;
- Firms also need to make sure that Senior Managers are suitable to do their jobs;
- Every Senior Manager will need to have a document that says what they are responsible and accountable for (a ‘Statement of Responsibilities’);
- Firms need to give the FCA this statement when a senior manager applies to be approved, and whenever there’s a major change to their responsibilities. This is a requirement under legislation;
- Every Senior Manager will also have a ‘Duty of Responsibility’ – which means if something goes wrong in an area that they are responsible for, the FCA will consider whether they took ‘reasonable steps’ to stop this from happening. This is also a requirement under legislation.
The FCA also proposes some new responsibilities that firms will need to give their Senior Managers (‘Prescribed Responsibilities’). This won’t apply to some firms (such as sole traders or firms with limited permissions, and EEA branches), and more responsibilities will apply to bigger firms.
This covers people who aren’t Senior Managers, but whose jobs mean they can have a big impact on customers, markets or the firm. The FCA will say what these roles are in the rules. The FCA won’t approve these people, but firms will need to check and confirm (‘certify’) that they are suitable to do their job at least once a year. This is a requirement under legislation.
People subject to the Certification Regime will not appear on the FCA Register.
These are basic rules that will apply to almost every person who works in financial services. They include things like ‘acting with integrity’ and ‘treating customers fairly’. The Conduct Rules are about improving the behaviour of all staff in financial services firms.