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LIBOR transition: FCA presses firms to extend their Senior Manager arrangements to cover LIBOR risks

On Tuesday 19 November the Financial Conduct Authority (FCA) published a document answering key questions which they have received on conduct risk arising from the LIBOR transition. The overall drive of the document is to set out the FCA’s expectation that firms have an appropriate strategy in place and take necessary action during LIBOR transition in order to ensure that customers are treated fairly.

Of particular interest were the references to the Senior Managers and Certification Regime (SMCR) and the governance and accountability of firms which are affected more widely. The FCA has suggested that firms which are subject to SMCR should identify the Senior Manager responsible for overseeing the transition away from LIBOR and that this responsibility should be detailed in that Senior Manager’s Statement of Responsibilities. This is a particularly significant development, given that the FCA have made clear that they will look to the Statements of Responsibilities of Senior Managers when establishing responsibility for any failures at FCA authorised and regulated firms.

Continuing with the theme of how the LIBOR transition and firm governance interact, the FCA made clear that firms are required to consider whether LIBOR-related risks are best addressed within existing conduct risk frameworks or whether a separate, dedicated program ought to be established in order to ensure that such risks are adequately dealt with. In any case, firms will be required to meet their obligations to act with due skill, care and diligence and to make and retain adequate records. As a result, firms should consider keeping appropriate records of management meetings or committees which deal with their approach to LIBOR transition in order to demonstrate that they have discharged their obligations.

The full question and answer paper can be accessed for further information.

Tags

financial services, brexit, fca, institutional asset managers, investment management, libor, regulated funds and ucits