Regulators update on Covid-related SMCR expectations

The regulators have reminded firms of their expectations in respect of the SMCR, bearing in mind the challenges Covid-19 has presented:

  • FCA has reminded firms that it still does not require a single senior manager to be responsible for their Covid-19 response, but that they should allocate responsibilities in the way that best enables them to manage the risks they face. These managers should consider where the current situation might lead to new risks, and how it affects existing risks and control mechanisms;
  • FCA notes that the temporary leeway it gave firms, whereby they would not need to submit updated SoRs in relation to changes to deal with the pandemic expires on 7 January, so firms will, from then on, need to apply normal notification and submission requirements – but only for changes made after that date;
  • the modification by consent to the 12 week rule is still in force, but firms will not be able to consent to it after 30 April 2021 and all modifications consented to before then will come to an end at that date. This means that, in practice, it will not help with any temporary appointment beginning after 5 February 2021;
  • there is little change to the guidance on furloughed staff – but FCA note that if a firm is subject to the overall responsibility rule in SYSC 26, the furloughed role must be allocated to another senior manager, that mandatory function holders should be furloughed only as a last resourced and covered until their return, and that any allocation must be appropriate and comply with FCA’s rules – in particular, an oversight role should not be allocated to an executive;
  • FCA and PRA have published a joint update for dual-authorised firms, consistent with the update for solo-authorised firms, but highlighting that aspects of a dual-authorised firm’s response to Covid-19 may sit within the SMF 24 function, and noting that dual authorised firms must have certain function holders in place at all times – for CRR firms and Solvency II insurers this is the SMF 1, 2 and Chair functions (as well as FCA required functions). These firms are also reminded of the importance of the certification regime for ongoing compliance; and
  • FCA has updated on its expectations in relation to the approved persons regime: this adapts the guidance to solo-regulated firms and stresses the need for principals to ensure approved persons within their ARs are fit and proper, and that the 12-week rule modification does not apply to the CF30 role.

Emma Radmore