The FCA has published a Guidance Consultation (GC 18/4) to provide practical assistance and information to firms in preparation for the extension of the Senior Managers and Certification Regime (SMCR). Under the new regime, which will apply to all FSMA authorised firms from 9 December 2019, all senior managers must have a Statement of Responsibilities (SoR), and all Enhanced firms must have a Responsibilities Map.
The Guidance sets out the purpose of SoRs and responsibilities maps for FCA solo-regulated firms, provides some questions for firms to ask themselves, and outlines case studies and examples of good and poor practice for Enhanced, Core, and Limited Scope firms (please see the table below to work out your firm’s type). A SoR is a single document that every senior manager will need to have, clearly setting out their role(s) and responsibilities, to ensure it is clear what a senior manager is responsible and accountable for, under the ultimate accountability of a firm’s governing body. A Responsibilities Map provides an overview of how a firm is managed and governed. It is supposed to be a practical document, ideally with a mixture of graphics and text, that is clear and easy for regulators and people who work for the firm to understand. It should contain key information about governance bodies, senior management reporting lines and senior managers’ responsibilities.
One of the questions to ask in relation to SoRs is whether someone who understands the type of business that you do, but does not know how your firm is organised, will understand what the individual Senior Manager is accountable for by reading their SoR? This sets a standard for effective contents for a SoR and confirms that a SoR is not a job description which includes skills and competencies. It is meant to be a new document that is carefully compiled and be self-contained, without referring to other documents. The FCA also clarifies that shared responsibilities should be appropriately distributed, in a manageable way, and with the rational for doing so clearly explained (e.g. job share, or as part of a handover). For prescribed responsibilities that are shared, the related role should be visibly defined and each senior manager should have clear individual responsibilities.
In relation to responsibilities maps, Enhanced firms should verify whether the governance structure of the firm is easy to understand and who is responsible for strategic decisions; or whether it is easy to understand which member of staff reports to whom, or how a firm relates to another firm in a group. The FCA suggests that appropriate responsibilities maps should be neither very long or complex nor very minimal ones: just right.
The Guidance should be applied in a risk-based and proportionate way, considering the size, nature, and complexity of the firm, and should be read alongside the guide for FCA solo-regulated firms as well as the applicable rules and guidance in the FCA Handbook. The FCA makes it clear that the examples are based on fictitious firms and should in no way be interpreted as guidance on how firms must organise their governance or management arrangements. Nevertheless, although not applicable to most case scenarios, these examples of good and poor practices and the self-assessment key questions are undoubtedly helpful for those firms that have already started getting ready for when the regime will apply. December 2019, in fact, is closer than it seems, and it is critical to start planning how to implement the new regime’s requirements.
Comments on the guidance must be submitted by 10 December 2018.
How to work out your firm’s type?
Your firm is currently exempt from the Approved Persons Regime. Not a SMCR Firm
Your firm is currently subject to a limited application of the Approved Persons Regime. Limited Scope Firm
One of the following applies to your firm:
* You are a Significant IFPRU firm
* You are a CASS Large firm
* You are a firm with Assets Under Management of £50 billion or more as a three-year rolling average
* You are a firm with total intermediary regulated business revenue of £35 million or more per annum, calculated as a three-year rolling average
* You are a firm with annual revenue generated by regulated consumer credit lending of £100m or more calculated as a three-year rolling average
* You are a mortgage lender or administrator (that is not a bank) with 10,000 or more regulated mortgages outstanding. Enhanced Firm
None of the above applies to your firm. Core Firm
To ensure you reach a fully compliant position in time and to understand how the requirements apply to your firm, please do not hesitate to contact one of our consultants.