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COVID-19: FCA's expectations under SMCR

COVID-19: FCA's expectations under SMCR

Overview

The Financial Conduct Authority (FCA) has set out its expectations of solo-regulated firms under the Senior Managers and Certification Regime (SMCR) in light of the coronavirus (COVID-19) pandemic.

The FCA's expectations may be found here: https://www.fca.org.uk/news/statements/smcr-coronavirus-our-expectations-solo-regulated-firms.

These include the following key points:

  • Responsibility for COVID-19: Firms are not required to have a single Senior Manager responsible for their COVID-19 response but should allocate these responsibilities in the way which best enables them to manage the risks they face.

  • Statements of Responsibilities: Firms which need to make arrangements to cover absences or change Senior Manager responsibilities as a result of COVID-19 are not required to submit updated Statements of Responsibilities where the change is temporary and made in direct response to the pandemic.

  • 12-week rule: Individuals will be able to cover for a Senior Manager without being approved, where the absence is temporary or reasonably unforeseen, and the appointment is for less than 36 consecutive weeks upon notification to the FCA. This is being implemented through a "modification by consent" to the FCA's existing 12-week rule on temporary arrangements. Where possible, the individual providing cover should be a person who has already been approved for other Senior Manager responsibilities.

  • Temporary changes: Temporary changes should be clearly documented internally, including keeping up to date Statements of Responsibilities.

  • Furloughed Senior Managers: Firms must reallocate the Prescribed Responsibilities of a furloughed Senior Manager to another Senior Manager (or another individual if relying on the 12-week rule). The FCA should also be notified of any furloughing of a Senior Manager.

  • Required functions: Individuals performing required functions, such as Compliance Oversight and the money laundering reporting officer, should only be furloughed as a last resort and the firm should replace the furloughed individual until their return.

  • Re-approval by FCA: Senior Managers who have been furloughed are not required to be re-approved by the FCA when they return to their post.  However, firms must still ensure that the Senior Manager is fit and proper.

To find out how we can help your firm in complying with its SMCR obligations during this challenging time, please speak to your usual Travers Smith contact or any of the partners below.

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