Most firms had 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) needed to complete a conversion notification form (Form K) on Connect to convert individuals.
For full information on how conversion applied to Enhanced firms, read Chapter 15 of our SM&CR Guide for solo-regulated firms (PDF).
Limited scope and Core firms
Limited Scope and Core firms had most of their APR functions automatically converted to the corresponding Senior Management Functions (SMFs). So, if you had an individual holding Controlled Functions, as long as there was a corresponding SMF, these individuals were automatically converted to the new regime; no form was 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 a Core firm with a CF2 (Non-Executive Director) who is also the Chair of the governing body (eg the Board), because there is no equivalent of the CF2 under the SM&CR. So, if you had any CF2s who also carried out the role of the Chair, you needed to submit a Form K to convert the individual(s) to SMF9 (Chair) under the new regime.
If you did not submit a Form K and so have an unapproved director performing the role of Chair, you are in breach of our rules and need to apply for the individual to hold SMF9 as soon as possible.
Read our SM&CR Guide for solo-regulated firms (PDF) for full information on how we moved 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
- EEA and Third Country Branches
- Limited scope firms
- Limited Permission Consumer Credit firms
- Oil Market Participants and Energy Market Participants
- Retail investment intermediaries who do not complete RMA-B
- Sole Traders
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 (PDF) 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 (PDF) 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 37 of the SM&CR Guide for solo-regulated firms (PDF) 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.
Read Chapter 6 of the SM&CR Guide for solo-regulated firms (PDF) 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 was 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 was not required. If you currently don’t have a requirement to hold any CFs, then this does not change under the 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
"Firms with current total intermediary regulated business revenue of £35 million or more per annum calculated as a 3-year rolling average" is one of the six Enhanced criteria.
Our rules originally stated that this was based on RMA B. However, this excluded those retail intermediaries who meet the £35m three-year rolling average revenue criterion but do not complete RMA B.
This was not our intention, so we amended this rule in 2019 to bring non-RMA B firms into the scope of this Enhanced criterion. Read PS 19/20 Optimising the SM&CR for more information.
Non-RMA B firms with the relevant permissions will be required to self-assess annually and notify us if they have (as a 3-year rolling average) over £35m in regulated revenue from the activities undertaken using the permissions below:
- retail investment activities
- advising on P2P agreements (except when carried on exclusively with or for professional clients)
- advising on pensions transfers & opt-outs
- arranging (bringing about deals) in retail investments
- home finance mediation activity
- insurance mediation activity (non-investment insurance contracts)
Once a non-RMA B firm no longer meets the £35m three-year rolling average revenue criterion, it must notify us of this.
Notifications can be sent by email to [email protected].
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).