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FCA publishes consultation for extension of Senior Managers Regime

The government aims to extend and implement the Senior Managers Regime to all firms regulated by the Financial Conduct Authority (FCA) at the start of 2018, according to a consultation.

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The Senior Managers & Certification Regime (SM&CR) was created by the FCA to replace the Approved Persons Regime, reduce harm to consumers and strengthen market integrity by making individuals more accountable for conduct and competence.

 

In October 2015, the Treasury announced its intention to extend the Senior Managers and Certification Regime (SM&CR) to all sectors of the financial services industry including consumer credit firms.

 

The regime was applied first to banks, building societies, credit unions and PRA‑designated investment firms in March 2016.

 

As part of the extension, the FCA proposes three parts to the SM&CR:

  • Five conduct rules that will apply to all financial services staff at FCA-authorised firms. This set of rules means that individuals must act with integrity, due care, skill and diligence, be open and cooperative with regulators, pay due regard to customer interests and treat them fairly, and observe proper standards of market conduct.
  • The responsibilities of senior managers will be clearly set out and, should something in their area of responsibility go wrong, they can be personally held to account. Senior managers will be approved by the FCA and appear on the FCA Register.
  • Under the Certification Regime, firms will certify individuals for their fitness, skill and propriety at least once a year, if they are not covered by the Senior Managers Regime but their jobs significantly impact customers or firms.

The FCA said it is committed to ensuring the regime is proportionate, according to the size of the firm, and therefore proposes applying a baseline of specific requirements to all regulated firms, called the “core regime”.

 

For the largest and most complex firms, the FCA proposes some extra requirements, under the “enhanced regime”. The FCA estimates the number of firms that will be subject to the enhanced regime will be less than one percent of all firms regulated by the FCA.

 

Jonathan Davidson, executive director of supervision - retail and authorisations at the FCA, said: “This is about individuals, not just institutions. The new conduct rules will ensure that individuals in financial services are held to high standards, and that consumers know what is required of the individuals they deal with.

 

“The regime will also ensure that senior managers are accountable both for their own actions, and for the actions of staff in the business areas that they lead.”

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