On 26 July 2019, the FCA published Policy Statement 19/20: Optimising the Senior Managers & Certification Regime and feedback to CP19/4 (PS19/20).
In January 2019, the FCA consulted on changes to optimise the Senior Managers and Certification Regime (SM&CR). In PS19/20 the FCA summarises the feedback it received to the consultation, its response to the feedback and sets out final rules.
In general, the FCA has implemented the proposed changes to the SM&CR as consulted on, which include:
- confirming that the Head of Legal function is excluded from the requirement to be approved as a Senior Manager;
- amending the intermediary revenue criterion for the Enhanced regime;
- clarifying the requirements and scope of the Certification Regime; and
- extending Senior Manager Conduct Rule 4 (SC4) to non-approved Executive Directors at Limited Scope firms.
The FCA considers that including the Head of Legal in the Certification Regime and applying conduct rules delivers most of the benefits of including these individuals within the SM&CR, without compromising the law of legal privilege. The procedure for the application of the Certification Regime to the Head of Legal is the same as it is for other Certified Staff. Firms will have a year to complete certification and need to ensure that they are assessing these individuals on an annual basis. Banking firms will have until the commencement date of 9 December 2019. A firm will not be required to undertake regulatory referencing or redo fit and proper assessments for these individuals as long as their job does not change.
In terms of amendments to the Certification Regime the FCA has amended the scope of the Client Dealing Function as consulted on. A definition of the Client Dealing Function can be found in SYSC 27.8.19 of the Senior Management Arrangements, Systems and Controls sourcebook (SYSC). The amended rule has been drafted in a way that provides firms with the flexibility to exercise judgment on whether a role requires certification. The relevant factors that firms would be required to consider in assessing individuals include whether the role: (i) is simple or largely automated; and (ii) involves exercising discretion or judgment. Whilst the FCA gave some examples in its consultation, it states that it is not possible for it to give an exhaustive list of all the ways an individual could be considered to be undertaking client dealing activities within the published definition.
The FCA is also implementing its proposal to introduce a Certification Function to cover individuals in systems and controls functions at firms where these functions do not require approval.
An online client briefing note on PS19/20 will be published shortly.
