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PS18/14: Extending SMCR to All FCA Firms

July 2018

SMCR Extension set for December 2019

The FCA has now published a Policy Statement (PS18/14) in relation to Extending the Senior Managers and Certification Regime (SMCR), due to be implemented on 9th December 2019.

The Senior Managers and Certification Regime currently applies to banking firms (and will commence for insurers on 10th December 2018), however come December 2019, it will be extended to all FSMA authorised firms, whether they are dual-regulated (by both the PRA & FCA) or solo-regulated. The commencement for the Extension of the SM&CR for all FCA Firms is being rolled out more than a year later than it was previously anticipated and allows firms and individual to properly prepare for the change in regime.

The SMCR will replace the Approved Persons Regime that is currently in place and will thus change how individuals that work within the financial services industry are regulated.

PS18/14 aims to provide near-final rules on the extension of SMCR to all solo-regulated FCA Firms. Whilst the rules published now are described as ‘near-final’ the FCA does not expect to make any significant changes to them in the coming months.

Purpose Overview of the SMCR:

The purpose of the SMCR is to reduce harm to consumers as well as strengthen market integrity by making individuals more accountable for their actions, conduct and competence.

Therefore the SMCR aims to:

Improve culture of staff at all levels;

Encourage individuals to take personal responsibility for their actions; an

Make sure firms and staff clearly understand and can demonstrate where responsibility lies;

This Policy Statement sets out near-final rules for the extension of the SM&CR.

SMCR for Solo-Regulated Firms

In conjunction with the FCA’s Policy Statement published on this month on 4th July 2018, an SMCR Guide for FCA Solo-Regulated Firms was also published to help firms understand what their new obligations will be and how the new regime operates by answering questions such as ‘What do firms need to do under the new SM&CR regime’ and ‘How will the FCA move firms and individuals from the existing Approved Persons Regime to the new SMCR?’

Firms that will be captured under the new SMCR Regime will be categorised as one of the following:

Limited Scope SM&CR Firm

Core SM&CR Firm

Enhanced SM&CR Firm

Limited Scope SM&CR Firms will be subject to fewer requirements than Core SM&CR firms. This invariably covers all firms that currently have a limited application of the Approved Persons Regime. Core SM&CR Firms will have a base-line of SM&CR requirements applied whilst there will be a small proportion of solo-regulated firms that will be categorised as Enhanced SM&CR Firms. For these firms, additional rules will be applied.

SMR Regulatory Support: Who can help?

If you would like to discuss how the extended Senior Managers Regime and Certification Regime might affect your firm or if you would like assistance in planning or preparing for any of your firm’s current or future regulatory requirements, please get in touch with our helpful and friendly compliance support team.

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Comment from the FCA:

“We believe that holding individuals to account is a key component of effective regulation.”

FCA, July 2018