Allocating Prescribed Responsibilities Under SM&CR

Under the incoming Senior Managers and Certification Regime, Core and Enhanced firms will have to allocate Prescribed Responsibilities to appropriate Senior Managers. The Prescribed Responsibilities are specific areas or high-level duties that the assigned Senior Manager must have oversight and ultimate responsibility for, such as the firm’s policies and procedures for countering the risk of the firm being used for financial crime.

It is up to each firm to allocate these responsibilities to an appropriate Senior Manager. The FCA’s position is that firms are best placed to understand their own structures and assess which Senior Manager is most appropriate. They do, however, provide the advice that the holder should be the ‘most senior person responsible for that activity or area’.

Prescribed Responsibilities only apply to Core and Enhanced firms, with between 5 and 7 PRs for Core firms, depending on their business, and 10-12 PRs for Enhanced firms, depending on their business.

Firms need to be giving serious thought to which Senior Managers should be allocated these Responsibilities now, if they haven’t already, so that, in the case of Core firms, they are able to update their Statements of Responsibilities prior to the implementation date, and in the case of Enhanced firms, they have included the PRs within the applicable Statements of Responsibilities and Form K, prior to the deadline date, which the FCA have recently confirmed will be 24 November 2019.

Core Firms

Preparation for PRs at Core firms where all of the current approved individuals are to be converted is relatively straightforward. Firms must understand which PRs apply to their firms and decide which of the PRs to allocate to which Senior Manager, noting the expectation that each PR is allocated to one person. PRs can be shared or divided, but the firm must show that there is a clear, appropriate, reason, for example if the function is part of a job share, part of a handover, or where the area is run by two Senior Managers. Finally, they must ensure the PR is clearly included within the Statement of Responsibilities for each Senior Manager who has been allocated a PR.

The main decision for Core firms, then, is which Senior Manager is the best person to hold each responsibility. In smaller firms while the choice may seem obvious, it should be borne in mind that the holder must have ‘sufficient authority and an appropriate level of knowledge and competence to carry out the responsibility properly’. Larger firms should ensure that the PR is allocated to the most senior person responsible for each area in practice – this may not be immediately apparent. For example, if the MLRO reports to a more senior individual with responsibility for financial crime matters, the PR for financial crime should be allocated to the more senior individual, and not to the MLRO.

Core firms should ensure that, following implementation, if they move a PR from one Senior Manager to another, the SoRs must be updated to reflect the changes, and submitted to the FCA using Form J.

Enhanced Firms

Things are a little more complex for Enhanced firms than for Core. The same principles apply; firms must decide which staff to allocate the PRs to and must ensure that they have the appropriate skills and authority. In the case of Enhanced firms, the FCA expect that the PRs will normally be allocated to an executive, with the exception of the internal audit oversight, compliance oversight, risk control oversight PRs, which should normally be allocated to a Senior Manager who is a Non-Executive Director, or a partner who does not have management responsibilities. Where this is not possible, these PRs should be allocated to an appropriate Senior Manager.

Prescribed Responsibilities, other than the CASS compliance responsibility, must not be allocated to someone performing the Other Overall Responsibility SMF.

Enhanced firms should ensure that their Responsibilities map includes how the PRs have been allocated.

Enhanced firms must submit their Form K to the FCA, which includes the Statements of Responsibilities for all of the approved persons to be converted to SMFs at commencement of the regime, and the responsibilities map, by the deadline of 24 November 2019. If there are changes to approvals prior to commencement, for example in the case of staff changes, Forms A and E must be submitted, including the details of the new SMFs, with their details included on Form K, along with SoRs and responsibilities maps, again by 24 November 2019.

Allocation

Firms can refer to SYSC 24 prior to allocation, which sets out some further helpful information on what each responsibility includes. Taking the example of (a) Responsibility for the firm’s performance of its obligations under the senior managers regime, the responsibility in this case includes compliance with the regulatory system relating to SM&CR, including conditions and time limits on approval, requirements relating to Statements of Responsibilities, with the obligations in relation to candidate vetting, and requirements in relation to Regulatory references. As such, firms should ensure that the most Senior Manager or executive with responsibility for the regulatory system is allocated this PR.

The PR for countering the risk that the firm might be used to further financial crime includes overall responsibility for the firm’s policies and procedures (which include systems and controls in relation to compliance, financial crime and money laundering). SYSC specifically sets out that the firm may allocate the PR to the MLRO, but does not have to; where it does not, then the PR also includes responsibility for the supervision of the MLRO.

If you need further guidance on aspects of the SM&CR, you can download Our Senior Managers & Certification Regime (SM&CR) resources which are specifically designed to support your firm on the journey to compliance with the Regime.

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• NEW! Conduct Rules Training £15-30 per delegate

• Guide for Solo Regulated Firms £75

• Fit & Proper Assessment Template £75

• Statement of Responsibilities Template £25

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