SM&CR and COVID-19
Deadline extension for solo-regulated firms and changes to the Approved Person Regime
Posted on 8 Jul 2020
The original deadline for solo-regulated firms to undertake the first assessment of the fitness and propriety of their Certified Persons has been extended to 31st March 2021, from 9th December 2020.
The Treasury has provided firms with additional time and aim to replicate this extension for the following SM&CR requirements, also to 31st March 2021:
- The deadline for submission of information about Directory Persons to the FCA Register;
- The date the ‘Conduct Rules’ come into force; and
- References in the FCA’s rules to the deadline for assessing Certified Persons as fit and proper.
The FCA aims to finalise this policy soon and provide certainty on the deadline of the three requirements above.
Concerning Conduct Rules training, Senior Managers are obliged to ensure that the training is ‘effective’ and that staff should be aware of these rules and how they apply in practice. Further comments on the FCA’s expectations on this matter will be published in due course.
Furthermore, if firms can certify staff earlier than March 2021, they should continue with this process, and they should not wait to remove employees who they see as not fit and proper.
Moreover, the FCA highlights that the ‘Certification Regime’ and the reporting of ‘Directory Persons’ does not apply to benchmark administrators. This is because the FCA has stated that the COVID-19 pandemic should not prevent “effective implementation of Conduct Rules training in these firms”.
FCA sets out its expectations for applying the Approved Persons Regime during the COVID-19 pandemic
Since the original extension of the Senior Managers and Certification Regime to all solo regulated firms in December 2019, the Approved Persons Regime has applied to Appointed Representatives ('ARs') and benchmark administrators only.
The FCA has recently published guidance on how they expect Principal firms, ARs and benchmark administrators to apply the Approved Persons Regime more broadly during the COVID-19 pandemic.
The FCA is to extend the 12-week rule temporarily to 36 weeks for the duration of the pandemic. The 12-week rule allows for an individual to temporarily cover a Controlled Function during the absence of an Approved Person for a maximum of 12 weeks without requiring approval, so long as the absence is temporary, not foreseen, and is not to cover a CF30 role.
To take advantage of the 12 weeks rule, the firm (or Principal where an AR is concerned) must notify the FCA.
Where an Approved Person is furloughed, they will not be subject to reapproval once they return to the firm or AR. The firm is still responsible for ensuring that the Approved Person remains fit and proper for the role.
Notification and documentation
While firms are not required to notify the FCA of all of the above arrangements using a Form D, the firm is expected to keep internal records to ensure it is clear who is responsible for what. The FCA expects this internal documentation to be available upon request.
Responsibilities of the Principal firm
The FCA has made clear that Principal firms remain responsible for ensuring that all obligations from arising from their ARs are met, including maintaining sufficient compliance and financial oversight of the AR.
How can we help?
Laven can help outline a list of action points that you need to complete in order to be SM&CR compliant, provide training to staff and assist with drafting your SORs and other compliance documentation. We have also incorporated relevant parts of SM&CR into Laven Tech, our built in-house compliance software.
Laven's SM&CR Services:
- Fitness and propriety certification,
- Statement of Responsibilities (SORs),
- Firm's annual SM&CR attestations,
- Regulatory references,
- SM&CR issues register,
- Online training modules for all employees,
- Software for monitoring and processing reviews.