Senior Managers and Certification Regime: solo-regulated firms

On 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 almost all FSMA authorised firms from 9 December. It also applies to branches of non-UK firms with permission to carry out regulated activities in the UK.

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

Guide for solo-regulated firms

The SM&CR Guide for solo-regulated firms 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.

The Guide was last updated in July 2019. In this update, we included:

  • Information on claims management companies
  • An explanation of the policy relating to the Head of Legal role
  • An update to the definition of client dealing
  • An explanation of the status of partnerships
  • Update to the section on territoriality
  • Clarification of the definition of oil market participants and energy market participants that fall within the Limited Scope category
  • Clarification on thresholds for Enhanced firms (relating to the reporting process)

Guidance on Statements of Responsibilities and responsibilities maps

We have published guidance to help solo firms with producing Statements of Responsibilities and (for enhanced firms) responsibilities maps. This guidance explains the purpose of these documents and contains questions for firms to consider. It also contains some examples.

Although aimed at solo firms, it may also be of interest to banks and insurers.

How the SM&CR applies

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

For solo-regulated firms, there are 3 categories under the SM&CR:

  • Limited Scope: these firms will be exempt from some baseline requirements and will typically have fewer Senior Management Functions. Firms that already have exemptions under the Approved Persons Regime will be Limited Scope.
  • 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 have contacted firms with our assessment of their 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, particularly section 2.

Firm checker tool

For a list of firm types that currently have a limited application of the Approved Persons Regime, 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 (‘opt 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).

Read 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 personal conduct issues across firms.

The Conduct Rules will apply to almost all employees who carry out 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).

You can also listen to our Podcast on Conduct Rules for practical tips.

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, its customers or the market more generally. 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 confirm  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 listen to our Podcast on the Certification Regime, which covers the practical steps firms need to take.

Implementation

We will automatically convert most Approved Persons Regime (APR) functions to the corresponding Senior Management Functions (SMFs) at Limited Scope and Core firms. 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 23.59 on 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