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From Asset Managers to Car Salesmen the FCA has published its proposals to extend the senior managers and certification regimes to all FCA regulated businesses

Duncan Black
28/07/2017
After some delay, the Financial Conduct Authority (FCA) has published a consultation paper on its proposals to extend the senior managers and certification regimes to all FCA regulated firms.

After some delay, the Financial Conduct Authority (FCA) has published a consultation paper on its proposals to extend the senior managers and certification regimes to all FCA regulated firms.  The senior managers and certification regimes already apply to banks, building societies, credit unions, and PRA designated investment firms.  However, they will now be extended to all other FCA regulated firms, including hedge funds, LLPs, asset managers and IFAs, replacing the approved persons regime.  The FCA's proposals also include changes to the current senior managers and certification regimes, so the consultation paper is relevant to all regulated firms.

The FCA recognises that it is not appropriate to apply the current senior managers regime to all firms which it regulates so it proposes "a proportionate and flexible approach to accommodate the different business models and governance structures of firms".  The FCA proposals are for:

  • a 'core regime' applying a baseline set of requirements to the majority of FCA authorised firms;
  • an 'enhanced regime' applicable to a small number of firms (the FCA estimates that this will affect fewer than 1% of FCA regulated firms) whose size, complexity and potential impact on consumers or markets are deemed to warrant more attention; and
  • a reduced set of requirements that will apply to firms that already have exemptions under the approved persons regime who will be defined as 'Limited Scope' firms.

The certification regime will apply to all employees who are not senior managers but whose role means it is possible for them to cause significant harm to a firm or its customers.  Firms will need to certify that they are fit and proper to perform their role at least once a year.

The new conduct rules introduce new high level standards of behaviour that will apply to almost all employees who do financial services activities in a firm.  Some rules apply to all employees while others apply only to senior managers.  Firms are required to notify the FCA when they have taken formal disciplinary action against a person for breaching a conduct rule.

Consultation closes on 3 November 2017 and it is proposed to implement the new regimes at some point in 2018. 

While a more proportionate approach to the senior managers and certification regimes is to be welcomed, they introduce yet another layer of regulation with which FCA regulated firms must comply.  With many firms focussing on implementing MiFID II, GDPR and dealing with the uncertainty of Brexit there is a risk that your business could fall behind in implementing the new senior managers and certification regimes. 

Implementing the new regimes into your business will take time and careful planning with which our team of regulatory and employment specialists can assist. In addition to mapping exercises, drafting statements of responsibility, management responsibility maps, reviewing terms and conditions of employment, policies and procedures, grandfathering, implementing training and reviewing recruitment, appraisal, record keeping and handover processes firms should not underestimate the employee relations issues that may arise with key senior staff discussing their responsibilities and agreeing the lines of business for which they will be accountable to the business and the FCA. If you would like to discuss this further and how it will impact on your business please do not hesitate to get in touch.

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