The FCA has published its near final rules (PS18/14) on the extension of the Senior Managers and Certification Regime (SM&CR) to almost all regulated firms. Firms have been keenly awaiting these rules, not least to be given an indication of their implementation date. As many suspected, the implementation is pushed back; the planned implementation date for solo-regulated firms is 9 December 2019, subject to commencement regulations to be made by HM Treasury. The FCA also confirms a one-year transitional period for some aspects of the regime.
The FCA is implementing the rules substantially as they were consulted on. We published a detailed paper on this in January: Extension of the senior managers and certification regime. However, as a result of the consultation responses it received, the FCA has made some changes to its previous proposals in CP17/25 and CP17/40. It has:
- removed the Prescribed Responsibility (that only applied to Core firms) to inform the governing body of their legal and regulatory obligations;
- provided an easy process for firms to voluntarily apply a higher regime tier;
- amended three of the Enhanced criteria to smooth single‑year anomalies;
- lengthened the time period from six to twelve months for a firm to implement the Enhanced tier, once they have met relevant criteria;
- aligned the REP008 reporting period for Limited Permission Consumer Credit firms with their annual return; and
- adjusted a number of regulatory forms.
While the FCA stresses that it does not expect firms to have to change the way they are organised as a result of the implementation of the SM&CR, firms may find that some adjustments are necessary when reporting lines are reviewed and roles are scrutinised in preparation for statements of responsibility. In addition to involving legal and risk, there is a heavy HR and training task ahead - for example, in updating contracts and job descriptions, reviewing HR policies and procedures, tailored training of staff to be familiar with the conduct rules which will apply to them, and the assessment and approval of certified individuals.
With experience of the implementation of the SM&CR in banks, Macfarlanes is well-placed to advise on what firms can do now to prepare for this forthcoming regulatory challenge.
…the SM&CR aims to: • encourage a culture of staff at all levels taking personal responsibility for their actions • make sure firms and staff clearly understand and can demonstrate where responsibility lies This Policy Statement sets out near-final rules for the extension of the SM&CR.