On 12 October 2018, the FCA published a Guidance Consultation (GC 18/4) on the Senior Managers and Certification Regime on statements of responsibilities (SoRs) and responsibilities maps (which apply to enhanced firms).
The FCA's aim is to give FCA solo-regulated firms practical assistance and information on preparing SoRs and responsibilities maps by providing some questions for firms to ask and giving examples of good and poor practice.
If you're a core firm, here are five key things you need to think about:
- A balance needs to be struck between the SoR containing enough information to clearly describe the Senior Manager's (SM) actual responsibilities and accountabilities and not including unnecessary detail (e.g. competencies and skills required for the role).
- The SoR should be detailed and clear enough to allow a person, who understands the type of business that a firm does but does not know how the firm is organised, to understand what the SM is accountable for.
- For enhanced firms' SoRs, the FCA gives examples of lack of clarity. The main principles (which are likely to apply to core firms) include:
- Do not provide information on responsibilities in other entities unless it is necessary to understand how the SM's functions in the firm fit with their group responsibilities.
- Avoid using generic terms (like "customer service") without more information ("treating customers fairly" should also be avoided because one person alone cannot be responsible for this conduct rule as it applies to everyone performing regulated activities at the firm).
- Firms should avoid confusing "sharing" of prescribed responsibilities (PRs) with "dividing" them because this is likely to impact the clarity of the SoRs. Sharing a PR between two SMs means that both are responsible and accountable for performing it while dividing means one SM is responsible and accountable for certain aspects of the PR and the other is responsible and accountable for the other aspects. When a PR is divided, the aspects of the PR the SMs are each respectively responsible and accountable for need to be clearly set out, ensuring that all aspects of the PR are allocated (so nothing falls between the cracks). The division of a PR between individuals who report to each other should be avoided.
- The FCA expects SoRs to include a rationale for both sharing and dividing PRs. This may include job shares and handover periods between SMs. Division could be appropriate where certain parts of a PR sit better with an SM other than the one to whom the PR is mainly allocated. For example, it is possible for a Chief Operating Officer to take responsibility for aspects of financial crime related to IT security, while other aspects sit with another individual.
The Guidance relating to enhanced and limited firms is different. The consultation will end on 10 December 2018.
Contributor: Mila Pencheva
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at November 2018. Specific advice should be sought for specific cases. For more information see our terms & conditions