Senior Managers and Certification Regime: solo-regulated firms

From 9 December 2019, we are extending the Senior Managers and Certification Regime (SM&CR) to solo-regulated firms. By doing this, we aim to reduce harm to consumers and strengthen market integrity. This presents a unique opportunity to set a new standard of personal conduct for everyone working in financial services.

This extension affects almost every solo-regulated firm, from very small firms (including sole traders and limited permission consumer credit firms) to some of the largest global firms.

The SM&CR will apply to all FSMA authorised firms. It also applies to branches of non-UK firms with permission to carry out regulated activities in the UK.

Guide for solo-regulated firms

The SM&CR Guide for solo-regulated firms (PDF) is a summary of our final rules and guidance on SM&CR. It gives an overview of how the SM&CR works and how we will move firms and individuals to the new regime.

We have also published finalised guidance to help firms prepare for the Senior Managers and Certification Regime (SM&CR). The guidance gives practical assistance and information to firms preparing Statements of Responsibilities and Responsibilities Maps. It builds on the information we published in the SM&CR Guide.

To find out more about the regime, watch our overview of the SM&CR.

How the SM&CR applies

We are extending the SM&CR in a way that is proportionate to the size of the firm.

There are 3 categories under the SM&CR:

  • Limited scope: this will apply to firms who already have exemptions under the Approved Persons Regime. These firms will be exempt from some baseline requirements and will typically have fewer senior management functions.
  • Core: firms in this tier will have to comply with the baseline requirements.
  • Enhanced: this will apply to a small number of firms whose size, complexity and potential impact on consumers or markets warrant more attention. These firms will have extra requirements.

Your SM&CR categorisation

We will contact firms with our assessment of your SM&CR category, based on information we hold. This assessment is indicative. You are responsible for determining which category you fall into based on the rules. If you disagree with our assessment, you must tell us so that you can be categorised correctly.

It is important to make sure you are correctly categorised, as your category determines how the SM&CR applies to you.

You can find out which category of the regime your firm belongs to by either using the firm checker tool or by reading the SM&CR Guide for solo-regulated firms (PDF), particularly section 2.

Firm checker tool

For a list of firms that currently have a limited application of the APR please see page 8 of the SM&CR Guide for solo-regulated firms (PDF).

Some firms may prefer to be categorised in the Enhanced regime (‘opting up’) rather than the core or limited scope regimes. We have a simple process that allows a firm to notify us if it decides to do this. More information is available in section 12 of the SM&CR Guide for solo-regulated firms (PDF).

We have more information on 'opting up' and reviewing your SM&CR categorisation for solo-regulated firms

The 3 key parts of the SM&CR

The Conduct Rules

The Conduct Rules set minimum standards of individual behaviour in financial services. By applying the Conduct Rules to a broad range of staff we aim to improve individual accountability and awareness of conduct issues across firms.

The Conduct Rules will apply to almost all employees who do financial services activities, or linked activities, in a firm. Some Conduct Rules apply to all employees, while others only apply to senior managers.

For more information, read section 11 of the SM&CR Guide for solo-regulated firms (PDF).

The Senior Managers Regime

The most senior people ('senior managers') who perform key roles ('senior management functions') will need our approval before starting their roles.

Every senior manager will need to have a 'statement of responsibilities' that clearly says what they are responsible and accountable for. Our Guidance on Statements of Responsibilities and responsibilities maps can help you prepare these documents.

For more information, read section 4 of the SM&CR Guide for solo-regulated firms (PDF).

The Certification Regime

This applies to employees 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 won't need to be approved by us. Instead, firms will need to check and certify that they are fit and proper to perform their role at least once a year. Firms will be able to do this via Connect (these forms are not currently available) and they will receive email reminders when these are due.

For more information, read section 9 of the SM&CR Guide for solo-regulated firms (PDF). You can also find a list of staff that the Certification regime will apply to specifically on page 32 of the guide.

Implementation

We will automatically convert most firms Approved Persons Regime (APR) functions to the corresponding Senior Management Functions (SMFs), but some firms will need to complete a form to convert individuals manually.

Find out more about conversion from the Approved Persons Regime to the SM&CR.

Use our checklists to determine what you need to do to implement SM&CR, depending on your firm’s categorisation.

Key dates

Date  

9 June 2019

Form O (Opt Up Notification – for Core and Limited Scope firms only) available

9 September 2019

Form K (Conversion Notification – for Core and Enhanced firms only) and SM&CR Form A (for applying for a Senior Manager to be approved) available

24 November 2019

Deadline for submitting Form K and Form O

If you decide to opt-up from your current SM&CR category to Enhanced, please ensure you are ready to meet all the relevant requirements, including submitting a Form K, Statements of Responsibilities and a Management Responsibility Map by 24 November 2019.
Failure to meet the requirements by the relevant deadlines may mean your firm is in breach of its threshold conditions and the FCA may take action. For more information about the Enhanced requirements, please refer to Chapters 7 and 15 of SM&CR Guide for Solo-Regulated Firms.

9 December 2019

SM&CR for solo-regulated firms begins