Peter Wright, partner and head of the financial services group, provides initial comments on yesterday’s (Wednesday 26 July 2017) FCA announcement on the extension of the SMCR to all investment firms.

  • The FCA has issued their consultation paper on the extension of the SMCR to all FCA authorised firms. The proposed new regime mirrors many of the existing features of the regime imposed for the Banking community and continues the FCA’s focus on developing its personal accountability agenda.
  • The new proposed SMCR regime will simplify and codify the regime for personal accountability to ensure a more consistent approach across all financial services firms.  Presently we have the “Code of Conduct” for certified staff in Banks and a separate Code of Conduct for Approved Persons (APER) in current non-SMCR firms. This should ensure that there is an equivalent regulatory playing field between Banks and other FCA authorised firms.
  • The new regime envisages a two-tier approach to FCA firms and the extent to which the new regime will apply – the majority of FCA firms (which are small and relatively low risk) will be deemed “core” firms and larger firms with a more substantive profile will be classed as “enhanced SMCR” firms and subject to greater regulation. One of the key differences at present is that it appears that only “enhanced” firms will need to produce “responsibilities maps”, which is a compulsory requirement of the regime applying to banks. Whilst the FCA have deliberately steered away from saying they are applying a proportionality approach to implementation, this appears to be what is being proposed in practice. We will need to see how this classification will work in practice and how firms will try to implement these new requirements.
  • The consultation paper also proposes some minor changes to the provisions which already apply to the Banking Community including a requirement for a senior manager to hold the prescribed responsibility for training staff on the Conduct rules.
  • These proposed changes ought to be reviewed by all FCA affected firms, particularly firms which may potentially fall to be classed as “enhanced firms”.  The FCA’s consultation remains open to 3 November 2017 so there is limited time to review and formulate responses. The FCA presently envisages that its policy statement on the changes will be delivered in Summer 2018.

For further information you can view the FCA firm checker diagram here (page 14). 


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