FCA delays implementation of SMCR conduct rules certification

Out-Law News | 02 Nov 2020 | 10:52 am | 2 min. read

The UK’s Financial Conduct Authority (FCA) has confirmed that it is delaying the implementation of the Senior Managers & Certification Regime (SMCR) Conduct Rules for solo-regulated firms.

The announcement follows a consultation in July and means the date the rules come into force will be extended from 9 December 2020 to 31 March 2021. The extension gives firms more time to assess the fitness and propriety of certified staff and submit details to the FCA as well as train staff on the conduct rules.

In a policy statement confirming the plans (31 page / 547KB PDF), the FCA said the extension formed part of its response to reduce the regulatory burden on firms “adversely affected” by the Covid-19 pandemic, while continuing to ensure that consumer protections and regulatory standards are upheld.

The regulator has extended the deadline for solo-regulated firms for four key dates: the date the conduct rules come into force, for staff who are not senior managers, certification staff or board directors; the date by which relevant employees must have received training on the conduct rules; the deadline for submission of information about certified and assessed persons to the register for inclusion; and references in the FCA rules to the statutory deadline for assessing certified persons as fit and proper following agreement with the Treasury.

The FCA said the delay was aimed at supporting firms that had been adversely affected by the coronavirus pandemic. Although the FCA was asked during the consultation period to clarify what it would mean for a firm to be “significantly affected” by Covid-19, it did not set thresholds or conditions for firms to meet to use the extension.

It said it expected firms to use their own judgement on the circumstances where it would be beneficial to rely on the additional time, adding that the statutory instrument made by the Treasury applied unconditionally to all firms.

The FCA said firms that had not been impacted should aim to meet the original deadline to train staff and address any issues in governance and culture required to fully implement the SMCR, and noted that conduct rules continued to apply for senior managers and certified staff. Consultation responses indicated that most firms would be able to meet the original deadline.

Employment law expert Anne Sammon of Pinsent Masons, the law firm behind Out-Law, said the decision was likely to be welcomed by solo-regulated firms.

“However, it is clear that this extension has been provided to enable firms to ensure that they properly implement the new regime and create lasting improvements. As such, solo-regulated firms need to ensure that they have taken the necessary time to design and implement their processes so that they are effective and appropriate for the way in which their particular businesses operate,” Sammon said.

The move follows announcements by the FCA and the Prudential Regulation Authority in April that they would give temporary leeway in SMCR compliance during the pandemic. The FCA said senior managers could be furloughed if there was a business requirement, provided that mandatory senior management functions were still covered.

The regulators said firms should keep records of their actions, although they gave firms flexibility in the amount of time required to submit statements of responsibility as set down in statute.