FCA reduces senior managers regime compliance burden

UK private fund managers will have one year to comply with a regulation that holds individuals to account when things go wrong at a firm after it is enforced from July 2018.

The Financial Conduct Authority said firms being brought under the scope of the Senior Managers & Certification Regime next year must test, certify and have documentation in place to prove that staff are “fit and proper” for their roles by July 2019.

The regulator added that limited scope firms – which include alternative investment fund managers – will not need to submit paperwork to transition from the existing Approved Persons Regime to the SM&CR when it comes into force.

“For the majority of firms, we are planning to automatically convert APR approvals to Senior Management Functions. This means the majority won’t need to submit anything to the FCA to make this happen,” the regulator said.

The FCA has also launched a consultation to establish whether SM&CR Duties of Responsibility for senior managers as read in their current form, and as they apply to banks, are reasonably applicable to fund management and other businesses to which the regulation is being extended.

The Duty of Responsibility states that if a firm breaches an FCA requirement, the senior manager responsible for that area could be held accountable by the regulator if they did not take reasonable steps to avoid the firm’s breach.

The FCA also said it was removing gender-specific language from the SM&CR’s documentation, as part of a drive to improve diversity in financial services. Words such as “chairman” will be replaced by “chair,” while “they” will replace gender pronouns.

The SM&CR is similar to the US Compliance Program Rule and requires firms to develop good compliance procedures and culture. In addition to producing documentation such as a statement of responsibilities for each senior manager, the SM&CR introduces a new regulatory referencing scheme that could change the way firms hire, as reported by pfm.