In July 2017, the FCA published a Consultation Paper in which it proposed changes that would extend the senior managers and certification regime (SM&CR) to FCA solo-regulated firms (our blog is here). At the time of this consultation the FCA stated that it would separately consult on the operational aspects of the new regime, including how firms would transition from the Approved Persons Regime (APR) to the SM&CR.
The FCA has now published Consultation Paper 17/40: Individual Accountability: Transitioning FCA firms and individuals to the Senior Managers & Certification Regime (CP17/40).
In chapter 3 of CP17/40 the FCA sets out its proposed transitional arrangements for moving from the APR to the SM&CR. The proposed approach to conversion of relevant individuals is set out in chapters 4 and 5 (conversion proposals for EEA and third-country branches can also be found in chapter 4). The proposals are different for Core, Limited Scope and Enhanced Firms. The FCA has set out a Firm Checker Tool in para 1.3 of CP17/40 to help firms work out which category applies to them.
The FCA proposes:
- to automatically convert most of the approved persons at Core and Limited Scope firms into the corresponding new senior management functions; and
- that Enhanced Firms need to submit a conversion notification (Form K) and accompanying documents.
In chapter 6 the FCA sets out its proposed changes to regulatory forms. These reflect the move to the SM&CR, while keeping the APR for Appointed Representatives, and some consequential changes, including applying the late returns fee to late or non-submitters of REP008 (the annual report of Conduct Rules breaches).
In chapter 7 of CP17/40 the FCA sets out certain consequential amendments to its Handbook . These include:
- changes necessary to keep the APR for Appointed Representatives;
- changes to SUP 10C, to reflect the extension of the SM&CR to FCA solo-regulated firms;
- some changes to clarify how the regime applies to different types of firms;
- consequential changes to the Enforcement Guide and the Decision Procedure and Penalties Manual;
- additional guidance on the Chief Operations senior management function; and
- changes to the Glossary.
The FCA does not propose any requirements for benchmark administrators, these will be addressed separately.
In chapter 8 of CP17/40 the FCA sets out certain proposals for those firms already subject to the SM&CR (banks, building societies, credit unions and PRA-designated investment firms). In particular, banks will need to note the FCA’s proposal to apply the late returns fee to non-submitters of REP008.
The deadline for comments on CP17/40 is 21 February 2018.
The FCA will consider the feedback to CP17/40 and publish final rules, including its final approach to transition and conversion, in a Policy Statement in summer 2018.
The FCA states that the new rules will start when the HM Treasury sets the dates. The FCA has assumed that the rules for solo-regulated firms will apply in mid-to-late 2019.