FCA confirms plans for post-2020 financial services staff Directory

Out-Law News | 19 Mar 2019 | 9:30 am | 3 min. read

A new, public Directory that can be used to search for information on directors, Senior Managers and Certification function staff at financial services firms regulated by the Financial Conduct Authority (FCA) will not go live until 2020, the regulator has indicated.

Banks and insurers will have until 9 March 2020 to upload details of relevant staff to the new FCA Directory, which will go live for banking firms and insurers shortly afterwards, according to a policy statement setting out final FCA rules. The deadline for FCA solo-regulated firms to upload information on their relevant staff to the Directory is 9 December 2020, to reflect the later introduction of the SM&CR to these firms, for which the Directory interface will go live shortly afterwards, according to the FCA.

The FCA Directory will operate alongside the existing Financial Services Register and will enable users to find information on both Senior Managers, who are approved by the FCA, and staff certified by their firms as being 'fit and proper' under the SM&CR. By establishing the Directory, the FCA seeks to address industry concerns about the removal from the Financial Services Register of persons who previously appeared there as 'approved persons' but who will, under SM&CR, no longer be included there - in particular those formerly 'approved persons' who become Certified staff under the SM&CR.

Financial regulation expert Elizabeth Budd of Pinsent Masons, the law firm behind Out-Law.com, said: "The Directory will in many respects be more comprehensive than the Financial Services Register as regards the individuals that can be searched for there. It will provide access to information covering Senior Managers, non-senior manager directors and on individuals with Certification Functions under the SM&CR - among others – although it is worth noting that junior partners who are not Senior Managers in a partnership or LLP will not be listed in the Directory, due to a quirk of the SM&CR".

"The benefit of a more comprehensive regime is that it allows customers and other stakeholders to be more informed about the individuals that they rely on or work with. However, the flip side for firms is that there is a significant obligation to keep the information up to date, with a £250 administration charge for inaccurate or late submissions. Fortunately, changes now have to be notified within seven business days, as opposed to the originally proposed one business day," she said.

Employment law expert Ben Brown of Pinsent Masons said: "Given that FCA regulated firms within scope of the new Directory rules will have up to seven business days to notify the FCA of any changes to the Directory data submitted by them, they must update their internal processes so as to ensure they do so and, in particular, be aware this applies to relevant individuals ('Directory Persons') when they join or leave the firm".

"Regulated firms should be alive to potential issues arising from the new disclosure rules, including the inadvertent identification of individuals certified as material risk takers only by virtue of their earnings (i.e. those earning over  EUR 500,000). In such cases firms will need to consider whether there are grounds to approach the FCA or PRA for an exemption to identification,” he said.

The SM&CR will be extended to FCA solo-regulated firms in December 2019. It came into force for banks in March 2016, and insurers in December 2018. The SM&CR requires firms to assign responsibility for certain areas of the business to named senior individuals, while the certification part of the regime requires firms to annually assess the fitness and propriety of staff in certain roles.

The new Directory will, once fully up and running, enable users to find information on Senior Managers and non-senior manager directors; staff certified as fit and proper by their firm to hold a Certification function; and on "other individuals" - sole traders or appointed representatives (ARs) (including those within ARs) "where they are undertaking business with clients and require a qualification to do so" the FCA explains. Entries in the Directory will incorporate the employer's name and other contact information; roles held by the individual; work that the individual is qualified to undertake; memberships of relevant accredited bodies; details of any regulatory sanctions or prohibitions; and the date that the information was last updated.

Brown said: “The Directory is another step towards improving transparency and accountability in the financial services sector. This new public register of key individuals being introduced alongside the roll out of the SM&CR to support the existing FS Register also emphasises the increasing level of openness required by the FCA."

The FCA intends to display a 'health warning' next to entries which may be out of date – for example, where a firm has not made any changes to its information within 12 months or did not confirm whether the information was still up to date.