Concessions to SM&CR

On the 3rd April the Regulators issued statements for both Dual and Solo Regulated firms concerning the application of SM&CR requirements.

The table below summarises the concessions, in relation to those statements, being made due to the impact of Covid19:

Area of SM&CR

Dual Regulated FCA & PRA

FCA Solo Regulated

Change in allocation of Prescribed Responsibility

  •  Firms are expected to resubmit relevant SoRs as soon as reasonably practicable – The regulators understand that firms may take longer than usual to submit revised SoRs in the present environment.

  • Firms are not expected to submit changes to SoRs during this time if they are made to cover temporary changes in responsibilities in direct response to Covid19, and are expected to revert to the firm’s previous arrangements.

  • Fixed firms should nevertheless supply the FCA with timely detail of the changes they would normally include in updated SoRs.

Performing an SMF without approval

  • The 12 week rule currently applies to allow individuals to perform SMFs without approval for up to 12 weeks in a consecutive one-year period if the firm experiences an SMF vacancy that is temporary; and/or reasonably unforeseen.

  • The FCA & PRA are currently looking at evidence to support the rule staying in place but if they find more flexibility is required they will consider additional measures.

  • The 12 week rule currently applies to allow individuals to perform SMFs without approval for up to 12 weeks in a consecutive one-year period if the firm experiences an SMF vacancy that is temporary; and/or reasonably unforeseen.

  • If temporary arrangements last longer than 12-weeks as a result of Covid19, firms need to notify the FCA that they consent to a modification of the 12-week rule.

  • In these cases, temporary arrangements can be extended for up to 36 weeks.

Notification about temporary arrangements

  • It still remains the preference of the FCA & PRA that Prescribed Responsibilities should be reallocated to remaining SMF’s until the vacant position is filled permanently.

  • Where firms can’t reallocate an absent SMF’s PRs among their remaining SMFs due to reasons relating to Covid19, they can now temporarily allocate them to the individual who is acting up as interim SMF under the 12-week rule.

  • Those acting up will not have a SoR so firms need to ensure records (Responsibilities Maps, role profiles etc.) are kept up to date and reflect the situation and their PRA / FCA Supervisor is advised by either email or call.

  • It still remains the preference of the FCA that Prescribed Responsibilities should be reallocated to remaining SMF’s

  • Where  firms can’t  reallocate an absent SMF’s PRs among their remaining SMFs due to reasons relating to Covid19, they can now temporarily allocate them to the individual who is acting up as interim SMF under the 12-week rule

  • Firms are expected to clearly document the reallocation of responsibilities, however temporary, including on relevant Statements of Responsibilities and Responsibilities Maps (if applicable).

Responsibility for response to Covid19

  • No one SMF is expected to take responsibility for all responses to Covid19.

  • Firms are expected to have a framework for allocating the different aspects.

  • CEO should take responsibility for identification of key workers.

  • The FCA does not require firms to have a single senior manager responsible for their Covid19 response.

  • Firms are expected to allocate these responsibilities in the way which best enables them to manage the risks they face.

  • CEO or the most relevant member of the senior management team should be responsible for your approach to key workers.

Furloughing SMF’s

Firms must have individuals performing one of the following combinations:

  • CEO (SMF1) CFO (SMF2) and Chair of the governing body (CRR firms and Solvency II insurers)

  • Head of Overseas Branch (SMF19) (UK branches of third-country banks and insurers)

  • Small Insurer Senior Management Function (SMF25) (small, non-Solvency II insurers)

  • Head of Small Run-Off Firms (SMF26) (small, run-off insurance firms)

  • Individuals performing these SMF and other SMFs required by the FCA (e.g. Compliance Oversight (SMF16), Money Laundering Reporting Officer (MLRO) (SMF17) and the Limited Scope Function (SMF29)) should only be furloughed as a measure of last resort.

  •  Individuals performing required functions – Compliance Oversight, the money laundering reporting officer (MLRO) and the Limited Scope Function – should only be furloughed as a last resort.

  • Where a required function applies to a firm, the firm should replace the furloughed individual until their return. If the replacement is temporary, firms can use the 12-week rule to arrange cover.

  • Other SMF’s are not mandatory.

The notification and recording of Furloughing SMF’s

  • Furloughed SMFs will retain their approval – no need for a Form C or From J to be completed.

  • Firms must on their return ensure they remain Fit and Proper to undertake the SMF.

  • Reallocation of responsibilities as above.

  • Furloughed SMFs will retain their approval. Firms do not have to complete a Form D

  • Firms must on their return ensure they remain Fit and Proper to undertake the SMF.

  • Firms should update the FCA of any furloughing of one or more Senior Managers by emailing or calling.

Certified Staff

  • Annual Certification needs to be completed if expiry is due while Covid19 restrictions are in place.

  • Certified staff that are not fit and proper should not be re-certified.

  • Currently Annual Certification still needs to be completed by 9th December.

We hope you have found this useful. If you need help looking at the options you have as a firm implementing the SM&CR or other regulatory requirements.

Please contact us via:

Email: info@fstp.co.uk

or

Phone: 0203 178 4230

Philippa Grocott

Business Development Partner

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