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Bovill, the international financial services regulatory consultancy, has responded to the FCA’s Consultation Paper on extending the Senior Managers and Certification Regime to all financial services firms.
Lisa Scott, Managing Consultant at Bovill, says:
“Bovill welcomes the FCA’s approach to extending the Senior Managers and Certification Regime in a proportionate way to reflect the different risks posed by firms.”
“The FCA proposes a baseline of requirements to every firm, known as the ‘core regime’. An enhanced regime will apply to c. 350 high impact firms. And a limited scope regime will apply to firms that are currently subject to a limited application of the Approved Persons Regime.”
“The vast majority of firms will fall under the core regime. Compared to banks, these firms will have reduced requirements, namely only a few applicable Senior Management Functions (SMFs) and prescribed responsibilities, and no requirement to produce a responsibilities map or handover certificate. This is welcome because those aspects of the regime have proved to be a bit of a headache for banks.”
“Of course in terms of the key concept of accountability and personal liability, the new proposed regime does not differ much to that for banks. Senior individuals will need to be approved as one of a defined set of Senior Management Functions (SMFs). All SMFs will need individual Statements of Responsibilities and will have a ‘Duty of Responsibility’; this means that if a firm breaches a rule, the responsible SMF could be held accountable if they did not take reasonable steps to prevent or stop the breach. It is this concept of personal accountability that means all senior managers will want to start thinking about the implications of the proposals on accountability and wider governance arrangements within their firms.”
“In addition, the FCA have applied the Certification Regime to core firms in much the same way as they did for banks – namely that firms must put in place robust processes to identify and then assess the fitness and propriety (including requesting regulatory references) of those individuals who pose a risk of significant harm to the firm or its customers. This certification of fitness and propriety must be repeated at least annually. Finally, a new set of Individual Conduct Rules will apply to all staff within financial services firms except for purely ancillary functions such as security or catering. Putting in place appropriate processes around these requirements will create a significant additional burden to financial services firms.”
