FCA publish new guidance for solo-regulated firms as first conduct reporting deadline under the Senior Managers and Certification Regime approaches
The FCA has published a new webpage on conduct rules reporting, and updated another on good and bad practice relating to staff training and carrying out fitness and propriety assessments.
In December 2019, the Senior Managers and Certification Regime ("the Regime") was extended to cover solo-regulated firms (although at the time it seemed many such firms were unaware of it). The Regime, introduced after the banking crisis in 2008, is intended to "reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct and competence".
The Regime has three key parts. First, there is the Senior Managers' Regime which, as the name suggests, focuses on the most senior people in a firm. All senior managers must be approved by the FCA and are subject to a "duty of responsibility". Then there is the Certification Regime that covers employees who are not senior managers but whose jobs can impact on customers, markets or the firm. These employees need certified as fit and proper to perform their roles at least annually. Finally, there are Conduct Rules applying high-level standards to the majority of people who work in the financial services sector. Currently that includes Senior Managers, Certification Staff and Directors of SM&CR firms who are not Senior Managers. Under transitional arrangements it is proposed that the Conduct Rules only start to apply to other employees (except ancillary staff) from 31 March 2021 - moved from 9 December 2020 due to the coronavirus.
The Financial Conduct Authority ("FCA") published a new webpage on 13 August 2020 setting out the annual Conduct Rules reporting requirement for solo-regulated firms. Firms need to make a REP008 report showing whether they have taken disciplinary action against individuals who are not senior managers for breaches of the Conduct Rules, and, if so, detail the breach. Where no such disciplinary action has been taken firms must still submit a nil return. A failure to submit a report by the deadline will be charged a late return fee of £250. The deadline that firms need to comply with depends on whether the firm is a Limited Permission Consumer Credit ("LPCC") firm - LPCC firms need to submit their REP008 within 2 months of their accounting reference day. All other solo-regulated firms need to submit REP008 by 31 October, or the next business day if this falls on a weekend.
The FCA has also updated their webpage providing more general information on the Regime for solo-regulated firms to set out their expectations on positive and negative indicators of fitness and propriety of both Senior Managers and Certification Staff. Firms must demonstrate they are making "regular, thorough and consistent assessments". Similar lists of positive and negative indicators have been provided in respect of the FCA expectations on training staff on the Conduct Rules. The deadline for firms to assess the fitness and propriety of their Certified Persons has been delayed until 31 March 2021.
With the first REP008 reporting deadline for solo-regulated firms (other than LPCC firms) set to fall on 2 November 2020 (31 October falling on a Saturday this year) and the reporting year ending on 31 August, this is a timely reminder for affected firms to make the necessary submissions.
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