Business Risk Services

New FCA proposals for transitioning to SM&CR

The FCA publishes its delayed proposals on ‘Transitioning FCA firms and individuals to the Senior Managers & Certification Regime (SMCR)’ – CP17/40


In July 2017, the Financial Conduct Authority (FCA) consulted on proposed changes on how to extend the Senior Manager Regime to almost all FCA regulated firms. Implemented in March 2016, the regime already applied to deposit takers and insurance. The consultation affects firms ranging from small organisations to some of the largest global players. It will make specific people personally responsible for considering consumers’ interests and treating them fairly.

In December, a further consultation set out how FCA proposes to move solo regulated firms, as well as EEA and third-country branches to the new regime. The consultation paper considers some 47,000 firms grouped into three classifications; Limited Scope (33,000 firms), Core (14,000 firms) or Enhanced (350 firms). It aims to streamline what could have become a massive exercise for the FCA by simplifying the conversion process for most firms.

The regulatory changes do not affect individuals and Approved Persons working at Appointed Representatives of firms.

Core and Limited Scope firms

The FCA is proposing an automated conversion process to transition these firms and individuals to the new regime. It is proposing to automatically convert Approved Persons Regime (APR) approvals to corresponding Senior Management Functions (SMF) wherever possible. Every converted Senior Manager must have a Statement of Responsibilities (SoR) even though they are not required to be submitted to the FCA on conversion.

No additional checks on individuals are required and firms will continue to ensure they are fit and proper.

The main exception will be firms that currently have a non-executive chair. These firms will need to tell the FCA and convert this (non-executive director) NED role to Chair function.

Enhanced Firms

Individuals at Enhanced firms will need to submit a Form K conversion notification, SoR and a Responsibility Map to convert an existing approved individual to a new SMF.

The role of an Executive Chair will be created as an additional controlled function.

Transitional arrangements

The Treasury will announce when the new regime will start and anticipate mid to late 2019 for solo regulated firms.

For Core and Limited Scope firms, they will need to check the updated Financial Services Register after the start of the new regime to ensure they hold the correct approvals after automatic conversion has taken place.

The FCA plan to gradually implement rules for certification, so that firms can get used to applying the new regime. Once a year firms will need to certify their staff are fit and proper for their roles even if the individuals were in these roles before the Certification Regime comes into force, or were approved by the FCA under the APR. Some people who previously needed to be approved by the FCA will now fall under the Certification Regime

What to consider now

To prepare for the new SM&CR requirements, firms should review the transitional requirements depending on their size and scale. Firms should:

  1. Consider what type of firm they are
  2. Prepare SoR for every converted SMF
  3. Review the role of non–executive Chair’s
  4. Enhanced firms prepare SoR and a Responsibility Map
  5. Updates for the outcome of this consultation

Download How to thrive in the new regulatory climate [ 754 kb ] now to discover what to watch out for in the new regulatory climate. Additionally you can speak to Paul Young or Marc Tendler.