The Senior Managers and Certification Regime (SMCR), which was introduced in 2016 to increase the accountability of individuals working in the banking sector, will be extended to the wider financial services industry on 9 December 2019. In preparation for this wider remit, the Financial Conduct Authority (FCA) launched a consultation on its proposed changes to “optimise” the regime. Its final policy statement was published on 26 July 2019.
The FCA received only 29 responses to its consultation, with most supporting the proposals. Therefore, in general, the proposals have been implemented in the form in which they were consulted on. The key points confirmed in the policy statement include:
- extending the Senior Manager Conduct Rule 4 (SC4) to non-approved executive directors at “limited scope” firms so that it applies to all directors at such firms (SC4 requires disclosure of any information of which the FCA/PRA would reasonably expect notice);
- confirmation that the position of Head of Legal will not require approval as a Senior Manager under the regime (it will still require certification and be subject to the Conduct Rules);
- an amendment to the rules applying to the Client Dealing Function so that firms will have more flexibility to exclude purely administrative staff from the Certification Regime;
- amending the intermediary revenue criterion to ensure the Enhanced Regime applies to the firms the FCA intended; and
- some clarification of the requirements and scope of the Certification Regime.
While these optimisations are welcomed, there remains scope to amend these rules by subsequent handbook changes. The FCA has already indicated that this could include changes relating to the UK’s exit from the European Union. Firms should continue to look out for any changes that might affect the application or scope of the SMCR in response to the UK’s exit strategy in the coming months.