Category: SMCR

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The FCA is making forms easier to complete

On 12 October 2023, the UK Financial Conduct Authority published a blog setting out the improvements it is making to the application process (including the publication of new forms).

The FCA says:

– it’s “making improvements to the process to make it quicker and easier for firms and people to apply for authorisation“;

– it’s making changes so it can “collect higher quality data and applications, while responding quickly to protect consumers from emerging harms“;

– the changes will mean that “duplicative requests for information are being removed and some of the data we already hold will be prepopulated to save time and effort“.

The first form the FCA is looking to update is Form A (which is one of the longest and most-used forms).

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FCA tells firms to improve their treatment of struggling small business borrowers

On 12 July 2022, the UK Financial Conduct Authority published a press release telling firms to improve their treatment of struggling small business borrowers together with (a) its review into small and medium enterprise collections and recoveries and (b) a ‘Dear Chair’ letter to firms.

The FCA reviewed the practices of eleven banks. It found a number of issues including:

– lenders not treating small businesses fairly when trying to agree sustainable payment plans (for example, arranging clearly unaffordable payment plans);

– staff not having the right training to provide effective support to consumers and to make fair decisions;

– lenders not having clear policies to help staff identify and support vulnerable customers; and

– not having quality assurance and testing for their processes to ensure that they deliver fair results for consumers.

The FCA has given feedback to individual firms. It has also written to the chairs of all retail banks with small business customers. The FCA makes it clear that their ’Dear Chair’ letter is based on the existing principles, rules and guidance. It reminds firms that it will not wait for the introduction of the consumer duty in 2023 to take action where it finds evidence of customer detriment.

The ‘Dear Chair’ letter makes it clear that “all regulated firms offering lending to individuals and relevant recipients of credit (“RRCs”) should consider the findings and recommendations and where necessary, act on them“. The FCA expects “accountable Senior Manager(s) to proactively engage to achieve good practice when overseeing SME collections and recoveries“.

The FCA has set out some of its expectations in the ‘Dear Chair’ letter. These include:

– Where borrowers are treated as if they have a regulated credit agreement, either by requirement or voluntarily, firms should be able to demonstrate they are meeting these standards.

– Policies and procedures are clear with adequate information to support staff to make judgements when required.

– Systems and controls should be arranged to help with the delivery of fair customer outcomes.

– Firms should be able to accurately maintain records and be able to use such records to test whether they have delivered fair outcomes. Firms should also be able to produce customer records without gaps in a timely manner;

– Firms should be able to demonstrate forbearance and due consideration are being offered in accordance with CONC 7.3.4R (where it applies).

– Where CONC 7.2.1R applies, the firm must establish and implement clear, effective and appropriate policies and procedures for the fair and appropriate treatment of customers, who the firm understands, or reasonably suspects, to be vulnerable.

– The management of third parties should be subject to a suitable risk framework that helps ensure fair treatment of SMEs

– The FCA encourages all firms to carry out both quality assurance and customer outcomes testing for customer processes. This assurance should follow a holistic approach so that the customer’s overall outcomes are understood and these are assessed for fairness. There should be clear evidence that root cause analysis is effectively identifying opportunities to improve customer outcomes.

– Staff should receive suitable training that equips them to effectively support SME customers to receive fair outcomes during collections and recoveries.

– Senior management should receive effective MI that allows holistic oversight of SME customer treatment during collections and recoveries

– Senior managers responsible for collections and recoveries should have suitable levels of awareness and oversight of SME customer matters including treatment during collections and recoveries.

The FCA is expected to publish its review of its final findings into firms’ provision of appropriate support to borrowers in financial difficulty both during and after the COVID-19 pandemic, and next steps. This publication is currently expected on Q3 2022.

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FCA publishes updated expectations to help solo-regulated firms apply the SMCR following the exceptional circumstances of COVID-19

On 18 December 2020, the UK Financial Conduct Authority published updated information on its expectations to help solo-regulated firms apply the Senior Managers & Certification Regime (‘SMCR’) following the exceptional circumstances of COVID-19.

This follows the FCA’s publication in April 2020.

The FCA:

– says it expects firms’ application of the SMCR rules will shortly return to normal;

– maintains its position that firms do not need to have a single Senior Manager responsible for a firm’s response to COVID-19;

– says its relaxation of the requirement for firms needing to make temporary arrangements because of COVID-19 to submit updated Statements of Responsibilities (if certain conditions were met) will end on 7 January 2021 (but firms do not need to submit updated Statements of Responsibilities for changes before 7 January 2021);

– confirms the opportunity to modify by consent for temporary arrangements for senior management functions lasting longer than 12 weeks will end on 30 April 2021 (and all consented modifications will end on 30 April 2021); and

– has made very little change to its position on furloughed staff.

The FCA and the Prudential Regulation Authority also jointly published (on 18 December 2020) an updated statement on the impact of COVID-19 on SMCR for dual regulated firms.

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FCA publishes new webpage on the conversion of individuals from the approved persons regime into the corresponding senior management functions under the SMCR

On 11 October 2019, the UK Financial Conduct Authority published a new webpage explaining the process of converting individuals under the current approved persons regime into corresponding senior management functions under the Senior Managers and Certification Regime.

Individuals wishing to convert must do so by filing a Form K with the FCA no later than 23:59 on 24 November 2019.

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FCA publishes further information on extension of SMCR to solo regulated firms

On 11 September 2019, the UK Financial Conduct Authority published extra information on a webpage for firms only regulated by the FCA on the extension of the Senior Manager and Certification Regime.

The webpage includes extra information about Form K. This is the form that must be submitted by firms to the FCA no later than 11:59pm on 24 November 2019 to convert an approved person to a senior management function.

From 9 December 2019, the SMCR regime will apply to firms only regulated by the FCA.

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Banking Standards Board publishes its finalised version of its statement of good practice on the certificate regime and regulatory references under SMCR

On 3 September 2019, the Banking Standards Board published the final version of its statement of good practice on the certification regime and regulatory references under the Senior Managers and Certification Regime.

This statement provides some very useful guidance on the certification regime and regulatory references (including the thorny issue of what the reference must include).

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FCA publishes final rules on extension of SMCR to FCA solo-regulated firms and new financial services directory

On 26 July 2019, the UK Financial Conduct Authority published a policy statement, PS19/20, setting out its final rules and guidance on:

– the extension of the Senior Managers & Certification Regime to FCA solo-regulated firms and a new directory; and

– a new directory of individuals working in financial services.

For in-house lawyers, and importantly, a Head of Legal is excluded from the requirement to be approved as a Senior Manager.

The new SMCR rules come into force on 9 December 2019.

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Employment Tribunal decides adverse credibility findings by a judge are enough to justify dismissal of an employee subject to the FCA’s approved person regime

On 30 November 2018, the Employment Appeals Tribunal decided in Radia v Jefferies International Limited [2018] UKEAT 0123_18_3011 that a firm regulated by the UK Financial Conduct Authority (the FCA) was entitled to dismiss an equity research analyst for not being a “fit and proper person” under the FCA’s approved persons regime after an employment tribunal expressed the view the analyst lacked credibility as a witness.

The Employment Tribunal “made adverse findings about the Claimant’s credibility” and “found that the Claimant’s evidence was “not credible in many respects” and “on lots of occasions evasive” and that he had not told the truth or had misled the” Tribunal.  These findings were enough, the Employment Appeals Tribunal said, to justify the analyst’s dismissal (and it was not necessary to prove dishonesty).