The Financial Conduct Authority (FCA) has released consultation paper 19/4: Optimising the Senior Managers & Certification Regime (SM&CR) and feedback to DP16/4 – Overall responsibility and the legal function (CP19/4).
CP19/4 proposes several amendments to the SM&CR for banking firms, insurers, FSMA-authorised solo-regulated firms and EEA/third country branches. The proposals are designed to ensure the effectiveness of the SM&CR and support its objectives of reducing harm to consumers and strengthening market integrity.
The SM&CR was introduced for banking firms in 2016 and insurers in December 2018. It will apply to solo-regulated firms from 9th December 2019. Near final rules for the SM&CR were produced in July 2018 and final rules for insurers in September 2018. When consulting on these rules, the FCA identified areas where change may be required. CP19/4 sets out the proposed changes to help firms adjust to the SM&CR.
The core objectives of CP19/4 are:
- Clarifying the application of the SM&CR to the Legal Function;
- Amending the intermediary revenue criterion for the Enhanced regime; and
- Amendments to the Certification Regime
CP19/4 also provides a high-level summary of the proposals being consulted on and those firms affected. The key proposals within the consultation are:
- Following DP16/4 in September 2016, the FCA proposes to exclude the Legal Function from the Overall Responsibility Requirement;
- In PS18/14, the FCA explained that it would propose rules bringing intermediaries with regulated revenue of more than £35m that do not complete RMA-B into scope of the Enhanced regime. In CP19/4, the FCA proposes to implement a notification requirement to bring these firms into scope;
- The FCA proposes to amend the scope of the Client Dealing Function in the Certification Regime to allow firms to exclude purely administrative roles that involve ‘taking part in’ investment activities;
- The FCA proposes to ensure that the Certification Regime applies to individuals performing roles that were Systems and Controls functions under the Approved Persons Regime, but which are no longer approved under the SM&CR;
- The FCA proposes to apply Senior Manager Conduct Rule 4 (SC4), in COCON 2.2 of its Handbook, to nonapproved executive directors at Limited Scope firms to ensure that executive and non-executive directors at these firms are subject to equivalent requirements. SC4 requires relevant individuals to disclose appropriately any information of which the FCA would reasonably expect notice;
- The FCA proposes to make a number of minor changes to its regulatory forms to ensure they are consistent
with FCA rules
The deadline for feedback on CP19/4 is 23rd April 2019.
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Please Note: This publication is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying the information contained in this publication to specific issues or transactions.
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