On 2 June 2020, the FCA published Policy Statement 20/5: Extending the Senior Managers Regime to benchmark administrators: final rules (PS20/5). In PS20/5 the FCA sets out its final rules and guidance for extending the Senior Managers Regime (SMR) and conduct rules to benchmark administrators. PS20/5 will affect benchmark administrators authorised in the UK that do not undertake any other regulated activities. It also affects appointed representatives and their principals.
The FCA is not applying the certification regime to benchmark administrators that do not undertake any other regulated activities. This is because the provisions in the Benchmarks Regulation, including Article 4 which outlines governance and conflict of interest requirements, should ensure a similar outcome. As part of this approach, the FCA will not require non-certification staff that would otherwise be captured, including executive and non-executive directors, to be included in the directory.
The FCA confirms that only benchmark administrators that are authorised in the UK will be required to comply with the SMR. As a result, third country benchmark administrators and their UK-based legal representatives will not be required to implement the regime. The rules will also not apply to exempt persons, including operators of a Recognised Investment Exchange. But they will apply to an exempt person who also has a Part 4A permission for administering a benchmark, including exempt persons operating a Recognised Investment Exchange.
After considering feedback from its earlier consultation the FCA remains of the view that categorising all benchmark administrators as a Core firm in the first instance is the most appropriate categorisation. This is because benchmark administrators play an important role in financial markets and the benchmarks they produce can significantly impact the FCA’s ability to discharge its statutory objectives. However, the FCA agrees that the Core regime will not be appropriate for all benchmark administrators, including, potentially, some Annex II firms. The FCA believes that the waiver process will provide a clear route for these firms to move to Limited Scope if appropriate. The FCA is proceeding with the waiver process as consulted on.
In line with the extension of the SMR to other FCA regulated firms, benchmark administrators will have 12 months to train staff that are not Senior Managers on applying the Conduct Rules.
The SMR will come into force for benchmark administrators that do not undertake any other regulated activities on 7 December 2020. Administrators should ensure they have the right individuals in the right controlled functions to support the conversion from the approved persons regime (APR). Administrators should also ensure they have implemented the regime, including training relevant employees in the conduct rules, and preparing statements of responsibilities for Senior Managers. The FCA will continue to process applications for controlled functions under the APR until the commencement date.