On April 6, the UK’s Financial Conduct Authority (FCA) updated its joint statement with the UK’s Prudential Regulation Authority (PRA) on its expectations of dual-regulated firms applying the Senior Managers and Certification Regime (SM&CR) during the COVID-19 pandemic (the Statement).
The FCA and PRA intend that the measures set out in the Statement would provide flexibility for firms to comply with their obligations under the SM&CR. The measures include:
- the FCA and PRA expect firms to resubmit their statement of responsibilities as soon as reasonably practicable taking into account the current circumstances. The FCA and PRA understand that firms may take longer than usual to submit such statements;
- the FCA and PRA are currently collating evidence on whether the 12-week rule is likely to give dual-regulated firms enough flexibility to deal with temporary absences of senior management functions (SMFs);
- if an SMF becomes temporarily vacant, firms should reallocate those SMFs’ prescribed responsibilities (PRs) among their remaining SMFs until a permanent replacement is in place. If a firm cannot reallocate an absent SMF’s PRs to a remaining SMF, then such firm is permitted to temporarily allocate them to the individual acting as interim SMF under the 12-week rule, even if they are, at the time, unapproved as an SMF. The Statement notes that firms should record any temporary allocation of PRs to unapproved individuals and notify the FCA and/or PRA of such allocation;
- firms are not required to have a single senior manager responsible for their COVID-19 pandemic response (as had previously been reported), but instead the responsibility of identifying ‘key workers’ should be allocated to the CEO (SMF1). Where firms have an SMF24 (enhanced firms only), this individual would naturally be expected to oversee business continuity, information security and outsourcing during the COVID-19 pandemic;
- relevant firms with such functions must ensure that those individuals performing SMF1 (CEO), 2 (CFO), 19 (head of overseas branch), 25 (small insurer senior management function), 26 (head of small run-off firms) and other SMFs required by the FCA are only furloughed as a last resort;
- if a senior manager is furloughed, they will retain their FCA approval during their absence, unless they permanently leave their post; and
- firms should continue to take reasonable steps to complete any annual certifications of employees that are due to expire during the COVID-19 pandemic.
The Statement is available here.