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Status: You are viewing the version of the handbook as on 2019-12-18.

SYSC 23.3 Overview of the senior managers and certification regime

SYSC 23.3.1G

1There are three main elements to the regime:

  1. (1)

    the senior managers regime;

  2. (2)

    the certification regime; and

  3. (3)

    conduct rules that apply directly to a firm’s workforce.

SYSC 23.3.2G

1The table in SYSC 23.3.3G gives more details about each of those three elements. The first two columns of the table apply to all firms. The third column only covers firms that are not regulated by the PRA.3

SYSC 23.3.3G

1Table: Summary of the senior managers and certification regime

(1) 3

Description of component of the regime

(2) 3

Handbook provisions

3(3)

Application to solo-regulated firms

The senior managers regime: Parts that apply to all firms

Pre-approval by the FCA of senior management (the FCA Handbook calls senior management subject to pre-approval SMF managers)

SUP 10C

Applies to all solo-regulated firms3

Firm to be satisfied that a person is fit and proper before applying for them to be approved as an SMF manager by the FCA or PRA

This requirement is in section 60A of the Act. There is guidance on it in SUP 10C.10.14G (Vetting of candidates by the firm).

Applies to all solo-regulated firms3

Annual assessment of fitness and propriety by the SMF managers’ firms

This requirement is in section 63(2A) of the Act. There is guidance and related notification obligations in SUP 10C.14.18R to SUP 10C.14.25G (Notifications about fitness, disciplinary action and breaches of COCON).

Applies to all solo-regulated firms3

A firm should carry out criminal records checks before applying for someone to be approved as an SMF manager

SUP 10C.10.16R (Criminal records checks and verifying fitness and properness)

Applies to all solo-regulated firms except for a sole trader without employees3

A firm should ask for a regulatory reference before appointing someone to be an SMF manager, or to certain other senior management positions, and give one if asked to by another firm doing so

SYSC 22 (Regulatory references)

Obligation to give a reference applies to all solo-regulated firms.3

Obligation to ask for one applies to all solo-regulated firms except for a sole trader without employees.3

Statements of responsibilities

This is a document that sets out the responsibilities that an SMF manager performs as part of their designated senior management function. It is prepared as part of the firm’s application to the FCA or (if the firm is a PRA-authorised person)3 PRA for them to be approved as an SMF manager. It should be updated after approval when there has been any significant change in the responsibilities of the SMF manager

SUP 10C.11 (Statements of responsibilities).

Many of the requirements are in the Act itself but they are summarised in SUP 10C.11.

SUP 10C.11 also adds some further requirements, particularly about there being one statement of responsibilities per SMF manager per firm.

Applies to all solo-regulated firms3

Duty of responsibility

This applies to SMF managers in all types of firm.

This is dealt with in section 66A(5) of the Act.

There is guidance on this in DEPP 6.2.9-AG to DEPP 6.2.9-FG.

Applies to all solo-regulated firms3

The senior managers regime: Parts that apply to many firms

A firm should allocate certain specified management responsibilities among its SMF managers

The FCA Handbook calls them FCA-prescribed senior management responsibilities

SYSC 24 (Senior managers and certification regime: Allocation of prescribed responsibilities)

Does not apply to a limited scope SMCR firm.3

Applies to a core SMCR firm and an enhanced scope SMCR firm.3

3A firm solo-regulated by the FCA should carry out criminal records checks before appointing a board director who is not an SMF manager

SYSC 23.4 (Criminal record checks for non-executive directors)

Does not apply to a limited scope SMCR firm.

Applies to a core SMCR firm and an enhanced scope SMCR firm.

3The senior managers regime: Parts that only apply to a limited range of firms

A firm should maintain a comprehensive and up-to-date document (called the management responsibilities map) that describes its management and governance arrangements

SYSC 25 (Senior managers and certification regime: Management responsibilities maps and handover procedures and material)

Does not apply to a limited scope SMCR firm or a core SMCR firm.3

Applies to an enhanced scope SMCR firm.3

A firm should ensure that, at all times, one or more of its SMF managers have overall responsibility for each of the activities, business areas and functions of the firm.

SYSC 26 (Senior managers and certification regime: Overall and local responsibility)

Does not apply to a limited scope SMCR firm or a core SMCR firm. 3

Applies to an enhanced scope SMCR firm.3

A firm should ensure that a person becoming an SMF manager has all the information and material that they could reasonably expect to have to perform their responsibilities

SYSC 25.9 (Handover procedures and material)

Does not apply to a limited scope SMCR firm or a core SMCR firm.3

Applies to an enhanced scope SMCR firm. 3

3A retail intermediary firm should check whether it meets the financial criteria for being an enhanced scope SMCR firm and report to the FCA when it meets those criteria for the first time or ceases to meet them.

SUP 15.15 (Notification by retail intermediaries of qualifying as an enhanced scope SMCR firm)

Only applies to certain UK retail intermediaries. The full details of who this covers are in SUP 15.15.

The senior managers regime: Parts outside the Handbook

Criminal offence relating to a decision that causes a financial institution to fail.

It applies to a UK SMCR banking firm but does not apply to a credit union.

It does not apply to any firm that is not a UK SMCR banking firm.

This is contained in section 36 of the Financial Services (Banking Reform) Act 2013

Does not apply to any solo-regulated firm3

The certification regime

A firm should not permit an employee to carry out certain functions (certification functions) unless it has issued them with a certificate.

The certificate is only valid for a year. The firm will have to renew it if the employee is to carry on performing the function.

A firm may not issue or renew a certificate unless it is satisfied that the person is fit and proper.

Certification does not involve pre-approval by the FCA or PRA.

Most of the requirements of this regime are in sections 63E (Certification of employees by authorised persons) and 63F (Issuing of certificates) of the Act.

SYSC 27 (Senior managers and certification regime: Certification regime) describes the regime and explains which employees are covered.

Applies to all solo-regulated firms except for internally managed AIFs and certain firms that only carry out benchmark activities.3

A firm should ask for a regulatory reference before appointing someone to perform an FCA certification function (or a PRA equivalent) and give one if asked to by another firm doing so.

SYSC 22 (Regulatory references)

Applies to all solo-regulated firms3

2A firm must report information to the FCA about its Directory persons, including its certification employees.

SUP 16.26 (Reporting of information about Directory persons)

Applies to all solo-regulated firms3

Conduct rules (applies to all firms)

Rules of conduct that apply directly to a firm’s workforce other than ancillary staff

COCON

Applies to all solo-regulated firms3

A firm should report breaches of COCON to the FCA

Section 64C of the Act (Requirement for authorised persons to notify regulator of disciplinary action) and SUP 15.11 (Notification of COCON breaches and disciplinary action)

Applies to all solo-regulated firms3

A firm should:

(a) ensure that all persons subject to COCON are notified of the rules that apply to them; and

(b) take all reasonable steps to ensure that they understand how COCON applies to them

These obligations are in section 64B of the Act (Rules of conduct: responsibilities of authorised persons).

There is guidance in COCON 2.3 (Firms: Training and breaches).

Applies to all solo-regulated firms3

SYSC 23.3.4G

1The PRA has requirements corresponding to the senior managers and certification regime that apply to PRA-authorised persons. The FCA and PRAs’ regimes are designed to work together and complement each other. A PRA-authorised person will therefore need to consider the PRA’s requirements to get a complete picture of the requirements that apply to it (and its workforce) in the area covered by the senior managers and certification regime and the requirements in the Act on which it is based.