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This is the magic date when we migrate from the Financial Conduct Authority’s Approved Persons regime to the new Senior Managers regime.  Further changes will occur during 2020 when firms will have to complete activity to comply with the new rules covering Certification and the Directory, which replaces some aspects of the FCA Register.

All firms should have had an email from the FCA alerting them to their “category” and pointing them towards the FCA website which provides resources on preparations for implementation and examples of the documents required.  The FCA guide for firms explains how the new regime applies to the different firm categories, Enhanced, Core and Limited scope, providing scenarios to help translate the regime’s requirements into situations that firms can relate to in their businesses.  The guides take firms through the allocation of responsibility for their Senior Managers, explaining which senior management functions must be allocated by each firm and those senior management functions that are required because of other FCA Handbook rules i.e. Money Laundering reporting officer, where applicable.

I have heard less noise from small to medium sized advice firms complaining about the complexity than I had expected.  It makes me wonder if firms have actually engaged on the level of change.  All firms should have considered the implications of the Senior Managers element of the new regime and put in place any required documentation by 9 December.

SM&CR introduces new conduct rules for Senior Management and all employees of a regulated firm.  There are two tiers of conduct rules, first tier – Individual Conduct Rules and second tier – Senior Manager Conduct Rules.  These apply immediately to all Senior Managers and Certified staff and firms are required to ensure that all individuals are aware of the conduct rules that they are subject to.  All employees will need to understand what behaviour is required so that when something goes wrong they have acted in a reasonable way and not deliberately taken poor decisions to the detriment of customers or the market sector.

The FCA are clear on their expectations of regulated firms and to coin a cliché ‘it’s a journey not a destination’ and for those working through these changes and considering their implementation that must be the focus.  SM&CR is a regime which creates clear accountability, responsibility and sets expectation for good conduct throughout the firms’ business activities whether a sole trader or firm with employees.  Not just a bureaucratic or HR exercise, but one where the company establishes what it is there to do and how they do it.

The new regime provides an opportunity for intermediary firms to review their culture and governance, confirming that those who make decisions take full responsibility for those decisions.  It is about bringing to life the requirements to act with integrity, with due skill, care and diligence and pay due regard to customer interests, whilst observing proper standards of market conduct.  The FCA is hoping that firms develop discussions which help their teams understand what these rules mean in how they each do their jobs.

The Association of Mortgage Intermediaries has published a range of guides to help members of the trade body with what they should be considering and where to find resources to help.  Firms now need to start now to be ready in time.

 

Robert Sinclair

November 2019

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