Conversion from the Approved Persons Regime to the SM&CR

Most firms will have their Approved Persons Regime (APR) functions automatically converted to the corresponding Senior Management Functions (SMFs). However, Enhanced firms and some Core firms (where they have a Non-Executive Chair) will need to complete a conversion notification form (Form K) on Connect to convert individuals. 

Enhanced firms

For full information on how to convert Approved Persons at Enhanced firms, read Chapter 16 of our SM&CR Guide for solo-regulated firms (PDF) and refer to our checklist.

Please note that failure to submit your Form K (Conversion Notification) by 23.59 on 24 November 2019 may mean your Controlled Functions are withdrawn at commencement of the new regime and not mapped to Senior Management Functions. This means your firm would be in breach of regulatory requirements and, as a result, we may take action

Please note that any individuals not converted using a Form K will have their functions withdrawn at commencement. However, if a currently Approved Person is not converted to a Senior Management Function due to fitness and propriety concerns, a Form C must be submitted for that individual.

For help completing Form K, see Form K explained.

Limited scope and Core firms

Limited Scope and Core firms will have most of their APR functions automatically converted to the corresponding Senior Management Functions (SMFs). So, if you have an individual holding Controlled Functions, as long as there is a corresponding SMF, these individuals will be automatically converted to the new regime; no form is required. You can find a list of the mapping CFs to SMFs on page 58 of the SM&CR Guide for solo-regulated firms (PDF).

The exception to this is where you are a Core firm with a CF2 (Non-Executive Director) who is the Chair of the governing body (eg the Board), because there is no equivalent of the CF2 under the SM&CR. So, if you have any CFs who carry out the role of the Chair, you will need to submit a Form K to convert the individual(s) to SMF9 (Chair) under the new regime.

On Connect, Form K will only show the CF2 functions that you can convert; all other Controlled Functions at your firm will be converted automatically so will not appear on the form.

If you do not wish to convert any of your CF2 to the SMF9, no action is required.

Firms with a Chair who is an executive director will have to apply for the function using Form A.

Form K is available on Connect from 9 September 2019. The deadline for submission is 23.59pm on 24 November 2019.

Read our SM&CR Guide for solo-regulated firms (PDF) for full information on how we will move solo-regulated firms and individuals to the new regime.

Further information for specific firm types

We have provided additional information below for some firm types:

 

Senior Management Functions for Core firms

We have a streamlined set of Senior Management Functions for Core firms. This is proportionate to the needs of these firms and focuses on the most senior people in firms. It is not intended to change how firms organise themselves.

Read Chapter 5 of the SM&CR Guide for solo-regulated firms  to find out how SM&CR applies to Core firms, including:

  • Applicable SMFs and Prescribed Responsibilities
  • Conduct Rules
  • Fit and Proper requirements
  • Certification Regime

EEA and Third Country Branches

EEA branches don’t have Prescribed or Overall Responsibilities. However, you may want to describe the responsibilities of Senior Managers in the Other Responsibilities section of their Statements of Responsibilities.

Read Chapter 8 of the SM&CR Guide for solo-regulated firms  to find out how SM&CR applies to EEA and Third Country Branches, including:

  • Applicable SMFs and Other Responsibility
  • Certification Regime where applicable (see page 36 of the SM&CR Guide for solo-regulated firms to see how it applies)
  • Conduct Rules
  • Fit and Proper requirements

Limited scope firms

The number and type of functions that a Limited scope firm needs will depend on specific permissions and activities. The Certification Regime, Conduct Rules and Fit and Proper requirements apply to Limited Scope firms.

While Prescribed Responsibilities and Overall Responsibilities don’t apply to Limited scope firms, each Senior Manager will still need a Statement of Responsibilities. We will not need this as part of the conversion process, but firms do need to maintain a version for their records.

Read Chapter 6 of the SM&CR Guide for solo-regulated firms  for more information.

Limited Permission Consumer Credit firms

Limited Permission Consumer Credit firms are Limited scope firms. As a Limited Permission Consumer Credit firm, you are already subject to fewer requirements, as your principal business is not financial services (but something else, such as car dealerships, dental practices and veterinary practices).

The only Senior Management Function that applies to limited permission consumer credit firms is the SMF29 Limited Scope function. The individual at your firm holding the CF8 under the Approved Persons Regime will be automatically converted to SMF29. If you are a limited permission consumer credit firm trading as a sole trader, then you are likely to have no Approved Persons at your firm, so auto conversion is not required. If you currently don’t have a requirement to hold any CFs, then this does not change under SM&CR.

Oil Market Participants and Energy Market Participants

Oil Market Participants (OMPs) and Energy Market Participants (EMPs) will generally be categorised as Core if their principal purpose is to carry on regulated activities, or if they are a MiFID investment firm.

If your firm’s principal purpose is to carry on activities other than regulated activities, and you are not a MiFID investment firm, you may be a Limited scope firm. If you think you are a Limited scope firm, you will need to contact us.

Retail intermediaries who do not complete RMA-B

Currently, only firms with total intermediary regulated business revenue of £35m or more per annum (calculated as a 3-year rolling average) and who also submit RMA-B are categorised as Enhanced.

We have introduced a notification requirement for firms who do not submit RMA-B, but still have over £35m in relevant business revenue (over a 3-year average) in the relevant categories. This only affects firms in the following categories:

  • with a permission that includes insurance distribution activity in relation to non-investment insurance contracts
  • with a permission that includes home finance mediation activities
  • that are retail investment firms
  • that meet both of the following conditions:
    • they have permissions that include advising on P2P agreements
    • their permission, so far as it relates to advising on P2P agreements, is not limited to activities carried on exclusively with or for professional clients

We will update this page with further information when we have published a Policy Statement.

Sole traders

Sole traders are Limited Scope firms. The only Senior Management Functions (SMFs) that normally can apply are SMF29 (the Limited Scope Function) and SMF16 (the Compliance Oversight function). If a sole trader doesn’t have employees, only the SMF16 Compliance Oversight function will apply. This function is only required if other rules require it or, in the case of CMCs, where the firm’s annual total income is £1 million or above.

A few sole traders with employees may have a governance structure. In this case, the same SMFs apply as for firms in the Core category.

The Certification Regime does not apply to a sole trader as an individual, but may apply to their employees. So, the Certification Regime does not apply to a sole trader with no employees.

Most sole traders will not need to conduct a fit and proper assessment on themselves. This is because neither the governing SMFs nor the Certification Regime apply to a sole trader themselves, though these functions can apply to their employees.

Sole traders won’t need to get references about themselves from previous employers to perform a Senior Management Function as the sole trader. Firms do not need to request a regulatory reference for a candidate if they were previously a sole trader.

Sole traders do not need to conduct criminal records checks on themselves.

The Conduct Rules do not apply to a sole trader as an individual unless they hold an SMF. The Conduct Rules will apply to employees of sole traders (unless they perform one of the excluded ancillary roles).