Extending the Senior Managers and Certification Regime

Transcription

1 Extending the Senior Managers and Certification Regime

2 The Senior Managers & Certification Regime (SM&CR) is the biggest change in the regulation of individuals in recent history. It introduces a new era of accountability for individuals and aims to improve conduct at all levels. The extension of the Senior Managers and Certification Regime (SM&CR) will apply to dualregulated insurers from 10 December 2018 and to all solo-regulated firms from 9 December It aims to resolve the critical failings of the Approved Persons Regime. THE KEY COMPONENTS OF SM&CR APPLY TO ALL FIRMS: SENIOR MANAGERS REGIME CERTIFICATION REGIME CONDUCT RULES Individuals in senior management functions (SMFs) grandfathered or pre-approved by FCA Statements of Responsibilities Prescribed Responsibilities Duty of responsibility Fitness & Propriety, regulatory references and criminal record checks Additional requirements under enhanced regime Individuals other than SMFs who could cause significant harm to the firm or its customers, but not subject to FCA approval Firms must confirm ( certify ) annually that certification staff are fit and proper to perform their role Regulatory references High-level standards of behaviour applicable to all employees except for ancillary staff First Tier Conduct Rules apply to most employees Second Tier Conduct Rules only apply to Senior Managers Regular training Breach reporting requirements 2

3 FCA SOLO REGULATED FIRMS The FCA recognised that it is not appropriate to apply SM&CR in the same way to all firms, as it did for banks. Instead, it will be applied in a proportionate and flexible way to the wider industry; considering different business models and governance structures. The FCA s Policy Statement (PS 18/14) outlines how SM&CR will apply to different types of solo-regulated firms and includes a Firm Checker, which will help firms to determine whether they are a Limited Scope, Core or Enhanced SM&CR firm. Limited Scope Reduced set of requirements to firms undertaking fewer regulated activities. Applies to firms currently subject to limited application of Approved Persons Regime. Core Regime Standard set of requirements including 6 core Senior Manager Functions and 5 Prescribed Responsibilities. Applies to most regulated firms. Enhanced Regime Additional requirements, including 17 Senior Management Functions and 12 Prescribed Responsibilities. Applies to larger more complex firms. INSURERS Insurers, reinsurers and managing agents will come into the SM&CR regime in December 2018, having previously been subject to the less stringent Senior Insurance Managers Regime (SIMR). The regulators have chosen a tiered approach to SM&CR for insurers, with some elements of the regime applying only to Solvency II firms and large Non-Directive Firms and more streamlined requirements for small NDF or small run-off firms. The three components, the Senior Managers Regime, Certification Regime and the Conduct Rules will apply as appropriate. 3

4 Timeline of SM&CR Developments The regime has been developed over a period of over 5 years, enabling the regulators to engage with the industry, developing what they consider to be a pragmatic, proportionate approach which will soon apply to over 50,000 regulated entities of varying scale and complexity. 9 December 2020 Certified staff must be certified. Conduct rules apply to other staff 9 December 2019 SM&CR commences for FCA solo regulated firms Conduct rules apply to SMFs and certified staff 10 December 2018 Insurers transition from SIMR to SM&CR July 2018 Near-final rules announced FCA Consultation Paper on the Directory A commencement date of 9 December 2019 announced for all other firms December 2017 Treasury announce 10 December 2018 commencement date for insurers. FCA indicate H likely for other firms July 2017 FCA Consultation Papers about extension of the SM&CR regime to all FCA regulated firms May 2016 The duty of responsibility (which replaced the presumption of responsibility), came into force 7 March 2016 SM&CR commenced for dual regulated firms, SIMR for insurers October 2015 HM Treasury announced the SM&CR to be extended to all financial services firms in 2018 June 2013 The Parliamentary Commission on Banking Standards produced a report Changing Banking for Good 2012 Regulatory response was not adequate to address the problem as it was unclear who within the bank was responsible Trust in banking has fallen to a new low following the scandals of PPI and LIBOR 4

5 Phased Approach Our phased approach is underpinned by a set of design principles which are developed with management and validated by senior executive management and the Board. This approach will facilitate an informed implementation plan and mitigate the risk of material re-planning towards the later stages of implementation. Our design principles set the ground rules for implementation and ensure consistency of approach and communication. WE WILL TAILOR OUR APPROACH SO IT IS PROPORTIONATE FOR YOUR BUSINESS Phase 1 Phase 2 Phase 3 Phase 4 Training & Awareness Design & Planning Implementation Transition Quality Assurance Comprehensive Support Review and Remediation Review and Remediation Brief Board and senior executives likely to be subject to the Senior Managers Regime Raise awareness across the Group (where applicable), consider matrix reporting lines, group synergies, existing governance processes Engage with key stakeholders across business units and functions Agree programme governance, including sponsorship and steering committee membership Develop a set of SM&CR Design Principles to set the framework for implementation Design and agree Target Accountability Model, including agreeing provisional Senior Manager population and allocation of accountabilities (including Prescribed Responsibilities), and provisional Certification population Test target accountability model through scenario testing Create detailed implementation plan, including activities, timelines, resourcing requirements, dependencies and technology solutions Develop Statements of Responsibilities, Responsibilities Maps, finalise grandfathering arrangements Finalise populations for Senior Managers, Certification, Conduct Rules, including individuals based outside the UK and within other parts of the Group Ensure regular engagement with the businesses and functions throughout Update HR and Compliance processes, agree Target Operating Model for new processes; develop policies and procedures for new processes, integrating technology as appropriate Transition project activities into the businesses and functions Wind down project team Test embossing of new processes and procedures Implement ongoing monitoring processes 5

6 A New Era of Accountability NEXT STEPS Experts at can assess the needs of your firm and provide assistance with planning and strategic thinking for the implementation of SM&CR from mapping SMFs to Conduct Rules training. A non-exhaustive list of the types of assistance we can provide covers: IMPLEMENTATION AND ADVISORY S E R V I C E S Aligning accountability and authority NED expectations Stakeholder engagement Functional operating models including matrix management design or review Legal entity considerations DOCUMENTATION Responsibilities Map Statements of Responsibilities (SoRs) Annual Review Procedures Fit and Proper Assessment Joiner and leaver procedures Training materials Senior Management Coaching REGIME MAINTENANCE Outsourced Certification service Senior Managers interactive management tool Breach management and reporting CRISIS MANAGEMENT AND SUPPORT Internal investigations Preparation for FCA reviews Counselling and regulatory assistance for Senior Managers Lessons learned 6

7 Compliance and Regulatory Consulting Services As an award-winning provider of compliance and regulatory consulting services, helps financial services clients to build, manage and protect their businesses. Through our experience and strong global presence in key financial services markets, we have deep connections with key regulators, industry bodies and business leaders and provide unrivalled insight to our clients. Our multidisciplinary team operates across borders to provide seamless service, cross-jurisdictional advice and varied expertise to clients. Our team is structured around Centres of Excellence, responsible for product innovation and service delivery. OUR RECENT AWARDS BEST ADVISORY FIRM REGULATION AND COMPLIANCE 2018 HFM European Hedge Fund Services Awards COMPLIANCE CONSULTING TEAM OF THE YEAR 2017 Women in Compliance Awards BEST GLOBAL REGULATORY Due Diligence Regulator commissioned reviews AML/Financial crime ADVISORY FIRM 2017 Acquisition International M&A Awards BEST CONSULTANCY FIRM Cyber crime controls Centres of Excellence Governance, risk and compliance 2016 CTA Intelligence, European Services Markets Conduct risk CASS BEST OVERALL ADVISORY FIRM IN EUROPE 2016 HFMWeek BEST FOR REGULATORY DUE DILIGENCE 2015* Acquisition International M&A Awards BEST OVERALL ADVISORY FIRM IN THE US 2014* HFMWeek BEST SEC REGISTRATION TEAM IN HONG KONG 2014* Acquisition International BEST ASSET MANAGEMENT REGULATORY CONSULTING FIRM IN IRELAND 2014* Acquisition International BEST EUROPEAN REGULATORY ADVISORY FIRM 2013* HedgeWeek *Awarded to Kinetic Partners, which was acquired by in

8 CONTACTS Mark Turner Managing Director Ian Manson Managing Director ian.manson@duffandphelps.com Monique Melis Managing Director monique.melis@duffandphelps.com Jane Stoakes Director jane.stoakes@duffandphelps.com About is the global advisor that protects, restores and maximizes value for clients in the areas of valuation, corporate finance, investigations, disputes, cyber security, compliance and regulatory matters, and other governance-related issues. We work with clients across diverse sectors, mitigating risk to assets, operations and people. With Kroll, a division of since 2018, our firm has nearly 3,500 professionals in 28 countries around the world. For more information, visit , LLC. All rights reserved. DP M&A advisory, capital raising and secondary market advisory services in the United States are provided by Securities, LLC. Member FINRA/SIPC. Pagemill Partners is a Division of Securities, LLC. M&A advisory, capital raising and secondary market advisory services in the United Kingdom are provided by Securities Ltd. (DPSL), which is authorized and regulated by the Financial Conduct Authority. M&A advisory and capital raising services in Germany are provided by GmbH, which is a Tied Agent of DPSL. Valuation Advisory Services in India are provided by India Private Limited under a category 1 merchant banker license issued by the Securities and Exchange Board of India.