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Approved Persons and SMCR

We support senior staff through the Approved Persons process including the completion of the Long Form A and any supporting material, as well as assisting with questions which the FCA may ask.  We provide Approved Persons training tailored to the particular elements of an individual’s role as well as the wider business.  We assist firms in allocating and delegating responsibilities to help support manageable spans of control while still providing the robust oversight which an Approved Person relies upon to meet their regulatory responsibilities.  We also assist firms in drawing up role specifications and take part in the interview and selection process where an independent and experienced view is needed.

We have been supporting firms since mid-2017 to prepare for the forthcoming Senior Managers and Certification Regime (SMCR).  This work has involved reviewing business and company structures (including outsourcing), roles and responsibilities to help organisations – particularly those likely to be captured by the enhanced regime – make adjustments now to ensure the governance framework will support SMCR.

We are providing training and project plans to inform boards and senior management and to allow businesses to begin assessing and planning for the impacts in good time. For more information about the SMCR click on the headings below.

  • Introduction to SMCR

    At the end of July 2017 the FCA published a consultation paper on the extension of the Senior Managers and Certification Regime (SMCR). This CP, which is one in a series covering the regime, sets out the key elements and includes draft rules and proposed rule amendments.

    The SMCR effectively replaces the current Approved Persons regime; its introduction has been driven by criticism of the failure of the Approved Person regime in the light of the banking crisis.  From 2016 the new regime it was introduced for the banking sector in its entirety and for insurers in terms of the Senior Managers element only.

    The SMCR consists of three key parts:

    • The Senior Managers Regime – applies to the most senior people in the company; individuals must be approved by the FCA before undertaking a Senior Manager role.  There are three levels to this element: Core, Limited Scope and Enhanced.
    • The Certification Regime – applies to those who aren’t Senior Managers but whose job can cause significant harm to the firm or its customers. The FCA won’t approve these individuals but firms will now be responsible for checking them and confirming suitability for their role at least once a year.
    • Conduct Rules (COCON) these set out certain standards of behaviour – a number of the rules are taken from the Approved Persons Code of Conduct and so will be familiar.  However CONCON will apply to virtually all staff (except those in ancillary roles such as post room staff or cleaners) – with additional rules for Senior Managers.
  • Three levels of the regime

    The Senior Managers Regime separates firms into three categories:

    Firms captured by the Core Regime – this is the baseline category; the Core Regime will capture most solo-regulated firms. Firms outside this category may be subject to fewer (Limited Scope) or more (Enhanced) requirements depending on where they sit.

    Firms captured by the Limited Scope Regime – subject to fewer requirements; currently these firms will typically have a limited application of the Approved Person regime. Among others this will be limited consumer credit firms and secondary insurance intermediaries; it may also include sole traders.

    Firms captured by the Enhanced Regime – the FCA estimates only 1% of firms will fall into this category; it will capture the largest, most complex firms and there are specific criteria which apply to determine if a firm is captured. Firms in this category will be subject to additional requirements.

    Currently, if your firm falls into one of the categories in the list below you will be an Enhanced Scope firm. There are ongoing consultations about the regime so it is possible that these criteria may change. The number in brackets represents the total number of firms which the FCA believes will fall into each category:

    1. 1. A firm which is a Significant IFPRU firm [100]
    2. 2. A firm which is a CASS Large firm [15]
    3. 3. Firms with Assets Under Management of £50 billion or more (at any time in the previous 3 years) [110]
    4. 4. Firms with current total intermediary regulated business revenue of £35 million or more per annum [75]
    5. 5. Firms with an annual regulated revenue generated by consumer credit lending of £100m or more [25]
    6. 6. Mortgage lenders (that are not banks) with 10,000 or more regulated mortgages outstanding [25]
  • What each level includes

    The Core Senior Managers Regime includes:

    • • Senior Management Functions (SMF)
    • • Prescribed Responsibilities
    • • Duty of Responsibility
    • • Statement of Responsibilities
    • • Criminal Record Checks
    • • Fit and Proper Assessments
    • • Regulatory Reference

     

    The Limited Scope regime as its name implies includes fewer requirements, the main differences between this and the core regime are that for Limited Scope firms:

    • • Fewer SMFs will apply
    • • There are no Prescribed Responsibilities
    • • Fit and Proper Checks, Criminal Record Checks and Regulatory References will not be required for Non-Executive Directors but will still be required for anyone holding an SMF

     

    Enhanced Scope firms include the same elements as the Core Regime plus the following:

    • • Additional Senior Management Functions
    • • Additional Prescribed Responsibilities
    • • Overall Responsibility requirement
    • • Responsibilities maps
    • • Handover procedures

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