The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) are looking to provide more flexibility to help business comply with the senior managers & certification regime (SMCR) following the outbreak of covid-19.
Under the regime, a person can perform ‘senior management functions’ (SMF) without regulatory approval for up to 12 weeks.
The regulators believe this is enoufgh time for firms to deal with temporary or unexpected absences of senior managers
But the FCA and PRA said they are assessing the situation, as the coronavirus outbreak might mean firms require more time to comply with SMCR.
Any changes would apply to companies that are regulated by both watchdogs, known as ‘dual-regulated’ firms.
Temporary leeway
“If firms cannot reallocate an absent SMF’s prescribed responsibilities among their remaining SMFs due to reasons relating to coronavirus, they can temporarily allocate them to the individual who is acting up as interim SMF under the 12-week rule, even if they are, at the time, unapproved as an SMF,” the two regulators said.
“An unapproved individual acting up as an SMF under the 12-week rule will not have a statement of responsibility – unless the firm applies for them to be permanently approved as that SMF.
“So, it is essential that firms ensure that their records – responsibilities maps, role profiles etc. – keep a clear ‘running commentary’ of any temporary allocation of prescribed responsibilities to unapproved individuals during this period.
“Firms should also update their PRA and/or FCA supervisors of any temporary allocation of prescribed responsibilities to unapproved individuals acting up as SMFs under the 12-week rule by emailing or calling us,” they added.
Mandatory roles
But many people have been furloughed due to coronavirus.
The two watchdogs warned firms that, if this applies to them, they must have individuals performing core functions.
These include:
- Chief executive (SMF1), chief financial officer (SMF2), and chair of the governing body (CRR firms and Solvency II insurers);
- Head of overseas branch (SMF19) (UK branches of third-country banks and insurers);
- Small insurer senior management function (SMF25) (small, non-Solvency II insurers); and,
- Head of small run-off firms (SMF26) (small, run-off insurance firms).
Don’t put off reporting
While dual-regulated companies could be given relief on the 12-week rule, certification deadlines cannot be extended.
The FCA and PRA added: “Firms should continue to take reasonable steps to complete any annual certifications of employees that are due to expire while coronavirus restrictions are in place.
“We understand it may be necessary to adjust standard certification processes and policies. And we recognise that what constitute reasonable steps may be altered by the current circumstances.
“However, even in these circumstances, certified staff who are not fit and proper should not be re-certified.
“Certification is an important mechanism for firms to ensure their critical people are fit and proper. It is even more important now for the public to be able to trust in the individuals delivering critical financial services,” they said.
