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New FCA rules: Senior Managers and Certification Regime (SM&CR)

New FCA rules: Senior Managers and Certification Regime (SM&CR)

31 October 2019

Do you sell or advise on credit or finance?

If so, the rules are changing. December 9th 2019 will see the Financial Conduct Authority’s, (FCA) new Senior Managers and Certification Regime, (SM&CR), scheme come into force.

What does this mean?

The scheme has three classifications for businesses, these are Enhance, Core and Limited.

Only a very small number of firms will fall into the Enhanced category. To do so, you the firm would need to meet one of six criteria. The most relevant one for our sector would be achieving £100m income from consumer credit lending, and the second most relevant would be if a firm derived an income of £35m or more from regulated activities.

Some larger organisations will fall into the Core category, mainly financial institutions such as banks and insurance companies.

Most independent garages selling financial products, such as car finance, will fall in to the Limited Scope Category. If your firm is already a Limited Permissions Consumer Credit Firm, you will transfer over to become a limited scope category firm un SM&RC.

The FCA have provided an online tool for checking your firms category which can be found by following this link: www.fca.org.uk/decision-tree/firm-checker-tool

As the name would suggest this new regime places more focus on the accountability of senior managers within a business and the control functions they hold within the business. Those senior managers will need to seek approval before they can take up their role, if they are not already approved under the current CF format.

Firms will need to set out a clear and concise Statement of Responsibilities, (SoRs), for Senior Managers and this will need to be submitted to the FCA when seeking to obtain approval for someone to take on the Senior Management Function, (SMF), or significant role changes. FCA Guidance on SoRs can be found here: www.fca.org.uk/publication/finalised-guidance/fg19-02.pdf

SMF’s within an organisation will have a Duty of Responsibility for their area of the business. The FCA can take action against the individual, the business, or both in the event of a breach or if no action was taken to prevent a breach.

Companies will need to undertake due diligence and undertake annual checks to ensure those in the role of SMF’s are undertaking their duties in line with the rules.

Another area that is covered under the new rules is the so-called Certification Regime. This relates to employees who deal with customers, but who are not Senior Managers and the Conduct Rules, and applies to all employees across the financial services sector.

Anyone undertaking a Certification Function will need to be certified by the firm as fit and proper to do the role. This certification must be done at least one a year and the certificate must state:

  • The authorised person, (the SM) is satisfied that the person is fit and proper
  • The aspects of the firm’s business in which they will be involved.

The new certification regime will mean that some people who would have needed FCA approval under the old Approved Persons regime, will now no longer need to be.

Not all firms will need to have Certification Functions, such as smaller firms where there are only a small number of senior staff who also cover the Senior Manager Functions.

If an individual carries out more than one function the firm must certify that individual as fit and proper for each function they undertake.

Significant Management Function applies to those below Senior Managers who are for business units that are considered significant for their firm due to their size, nature or impact.

More detailed information on the new rules and how these relate to your business can be found at:

www.fca.org.uk/publication/policy/guide-for-fca-solo-regulated-firms.pdf

See the FCA information video by following this link: play.buto.tv/Nhdg5

If you need any further assistance, please call the IGA Direct Member Helpline or 0845 305 4230.