Parliament extended the banking sector’s Senior Managers and Certification Regime (SM&CR) to cover all FSMA authorised firms.
The SM&CR will replace the Senior Insurance Managers Regime (SIMR) and the Revised Approved Persons Regime for insurance firms, so the FCA and the PRA are now consulting on how the extension will affect these firms.
We are consulting on extending the SM&CR
Tell us what you think – deadline 3 November 2017
Who it applies to
The SM&CR will apply to all insurance and reinsurance firms regulated by the FCA and the PRA.
- insurers and reinsurers
- insurance special purpose vehicles (ISPVs)
- the Society of Lloyd's
- managing agents
- UK branches of third-country firms and European Economic Area (EEA) firms
There are three key parts to the senior managers and certification regime:
- the Senior Managers Regime
- the Certification Regime
- Conduct Rules
Our proposed Senior Managers Regime
The most senior people ('senior managers') who perform key roles ('senior management functions') will need PRA or FCA approval before starting their roles.
Our Handbook and the PRA Rulebook will set out which roles are senior management functions.
Every Senior Manager will need to have a 'statement of responsibilities' that clearly says what they are responsible and accountable for. This replaces the existing 'scope of responsibilities' document required under SIMR but has a similar function.
There are some specific responsibilities that firms will need to give to their senior managers, known as 'prescribed responsibilities'. This is to make sure there is a senior manager accountable for the SM&CR and key conduct and prudential risks.
A senior manager must also be responsible for each of the firm's business functions and activities. These responsibilities are called 'overall responsibilities'.
Solvency II firms and large non-directive firms will also have to provide 'responsibilities maps' – these replace the current 'governance maps' but have a similar function.
At least once a year firms need to certify that Senior Managers are suitable to do their job.
Our proposed Certification Regime
The Certification Regime will apply to employees who aren't senior managers but whose role means it's possible for them to cause significant harm to the firm or its customers. These roles are called 'certification functions'.
These people don't need to be approved by us, but firms will need to check and confirm ('certify') that they are fit and proper to perform their role at least once a year.
Our Handbook and the PRA Rulebook will set out the roles that are certification functions.
Our proposed Conduct Rules
We are proposing new, high-level standards of behaviour that will apply to almost all employees who do financial services activities in a firm. Some Conduct Rules apply to all employees, while others only apply to senior managers.
Our proposed Conduct Rules are intended to drive up standards of individual behaviour in financial services. They represent a meaningful change in the standards of conduct we expect from those working in the industry. By applying the Conduct Rules to a broad range of staff we aim to improve individual accountability and awareness of conduct issues across firms.
FSMA requires firms to train their staff so that they know how the Conduct Rules apply to them. Firms must also notify us when they've taken formal disciplinary action against a person for breaching a conduct rule.
The Treasury sets the timetable for implementation of the regime. We expect that the regime will commence from 2018.