The FCA Consults on Optimising the Senior Managers and Certification Regime

28 January 2019

The Financial Conduct Authority (FCA) has published its Consultation Paper (CP19/4: Optimising the Senior Managers and Certification Regime (SMCR) and Feedback to DP16/4 - Overall Responsibility and the Legal Function) to provide extra clarity on the SMCR and help firms adjust to the SMCR. In this latest Insight, our Financial Services Regulatory experts consider:



What proposals is the FCA consulting on?

1. Removing the requirement for the Head of Legal to be approved as a Senior Manager.

The Head of Legal falls under the Certification Regime as a Material Risk taker or a Significant Management Function. In-house lawyers are already subject to Individual Conduct Rules under the SMCR.

The FCA considers that this delivers most of the benefits of the SMCR (such as driving up standards and ensuring the fitness and propriety of legal staff) without compromising the laws of legal privilege.

The FCA proposes including additional guidance on this in its Handbook to make this clear.

2. Introducing a notification requirement to bring intermediaries with regulated revenue of more than £35 million (as a three year rolling average) into scope of the regime for enhanced tier firms.

3. Allowing firms to exclude purely administrative roles that involve 'taking part in' investment activities from the scope of the Client Dealing Function in the Certification Regime.

This would exclude individuals who have no scope to choose, decide or reach a judgement on what should be done in a given situation and whose tasks do not require them to exercise significant skill.

In assessing individuals, the FCA says firms should consider whether the role is simple or largely automated and whether it involves exercising discretion or judgement.

4. Including individuals performing the Systems and Controls Function into the Certification Regime.

This change will affect firms where individuals are not required to be approved as senior management function holders for Systems and Controls roles - e.g. FCA solo-regulated firms (Core and Limited Scope), small insurers and small run-off firms.

5. Applying Senior Manager Conduct Rule 4 to non-approved executive directors at Limited Scope firms.

This means non-executive directors will have to disclose appropriately to the FCA any information it would reasonably expect notice.

Who will be affected by these proposals?

The FCA's proposals will affect:

  • Banks;
  • Insurers;
  • FCA solo-regulated firms; and
  • European Economic Area (EEA) and third country branches.

Payment services firms and incoming EEA firms (providing cross-border services only) are not affected by these proposals.

What are the next steps for firms?

Firms have until 23 April 2019 to respond to the FCA's consultation. Firms can do so using the FCA's online response form.

The FCA will consider feedback received and publish its policy statement and rules in summer 2019. 


NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.