The latest from the FCA plus some comments below;
Firms will benefit from reduced costs and greater flexibility, and find it easier to comply with the Senior Managers and Certification Regime (SM&CR), following reforms set out today by the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA).
The changes, which come as the first phase of a multi-stage package of reform from Government and regulators, will maintain the core principle of senior leader accountability, and will benefit firms by:
- Giving more time to submit senior manager applications when there has been an unexpected or temporary change.
- Removing the need to certify people to hold multiple overlapping functions, which will reduce the total number of certification roles required by around 15%.
- Helping to streamline annual checks to certify individuals as ‘fit and proper’.
- Making only larger, more complex firms meet enhanced standards, by raising many of the enhanced firm thresholds by 30%.
- Helping to better understand the definition of certain senior management roles.
- Allowing more time to report updates to senior manager responsibilities.
- Increasing how long criminal record checks for senior manager applications are valid for, prior to application submission.
- Giving more time to update the directory, which lists certified staff.
The Government’s further changes to the regime, published in its consultation response today, follow its consultation last year. Proposals include removing the Certification Regime, which applies to less senior roles, from legislation. The Government also proposes giving more flexibility to the regulators to further reduce the number of senior management functions (SMFs) which require pre-approval.
The regulators plan to consult on wider changes, taking advantage of any increased legislative freedom later in the year, as part of the Leeds reforms to halve the SM&CR’s regulatory burden on firms.
Lucy Rigby, Economic Secretary to the Treasury, said:
“The UK has some of the highest standards for financial sector governance in the world. They protect consumers, strengthen market integrity and are emulated internationally, helping make our financial services sector one of the great jewels in our economic crown.
“We are committed to preserving those high standards — while making regulation simpler and easier to navigate. By working with regulators to streamline the Senior Managers and Certification Regime, we are cutting unnecessary complexity, halving the administrative burden, and building a simpler, faster and more competitive system.”
Sarah Pritchard, deputy chief executive at the FCA, said:
“These joint reforms will keep consumers and markets protected while making the regime more proportionate. We’ve also used our current powers to streamline the regime now, so firms can benefit before future legislation unlocks even more efficiencies”.
David Bailey, executive director for prudential policy at the PRA, said:
”The SM&CR plays an important role in ensuring accountability in the provision of financial services, but it is right that we work to ensure it is well-targeted and efficient. Today’s reforms are an important first step in allowing firms to focus on what matters most, and we will continue to deliver further improvements to the regime as part of the wider reforms being made by the Government.”
Today’s announcement builds on work already done to speed up SM&CR approvals:
- The FCA’s most recent published quarterly metrics show 99.7% of applications were determined within the current 3-month statutory deadline, with 94.7% determined within the Government’s proposed new 2-month statutory deadline.
- The PRA’s most recent quarterly metrics show 100% of applications were determined within the current 3-month statutory deadline, with 98% determined within the Government’s proposed new 2-month statutory deadline.
CORKER BINNING
Commenting on the FCA announcement, FCA and PRA confirm changes to streamline senior manager accountability and boost growth, Priya Dave, Of Counsel at Corker Binning and a former contentious regulation lawyer at the FCA, says:
“The FCA has listened to the industry’s calls to reduce the regulatory burden of compliance with the Senior Managers and Certification Regime (SM&CR), making the SM&CR more fit for purpose. In particular, the increased time to submit senior manager applications where there has been an unexpected or temporary change and increasing the validity period of criminal record checks will lighten the load for regulated firms, enabling them to focus their efforts on culture, conduct and good governance rather than the intricate dance of compliance paperwork.”
NORTON ROSE FULBRIGHT
Jonathan Herbst, Global Head of Financial Services at law firm Norton Rose Fulbright adds;
“The FCA and PRA are clearly trying to strike a more workable balance between accountability and proportionality. These changes look to reduce friction in the Senior Managers regime, without diluting its core purpose, and are likely to be welcomed by firms that have long struggled with duplication and process-heavy compliance. The real test will be whether future phases deliver meaningful simplification while preserving the personal responsibility that underpins confidence in the UK’s regulatory framework.”
ABI
“The FCA and PRA’s Senior Managers & Certification Regime (SM&CR) policy statements mark a welcome step towards reducing operational complexity while maintaining robust standards of individual accountability. We’re pleased to see the regulators take a pragmatic approach to improve the regime’s efficiency, alongside the intended legislative changes announced today by HM Treasury to enable more far-reaching reform.
These measures should help to streamline processes and alleviate some of the complexity firms currently face under SM&CR. We look forward to working with the regulators to harness this increased flexibility and further reduce the administrative requirements on firms in this and other areas.”
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