The FCA and PRA have published final rules on the regime to strengthen the accountability of individuals within banks, building societies and credit unions, which incorporate

1. the Senior Managers’ Regime,
2. the Certification Regime and
3. a new set of Conduct Rules.

Minor changes have been made in response to feedback received and the FCA’s consultation paper also includes additional information to aid firms in their preparation for the new regime, which comes in to force on 7^th March 2016.

 Senior Managers Regime

1. The Senior Managers Regime (SMR) replaces the regime for individuals holding a Significant Influence Function (SIF) and those individuals will require prior authorisation from the regulators in order to perform those duties.
   1. firms have a legal duty to put ADEQUATE PROCEDURES in place to assess and review the suitability and propriety of their Senior Managers.
   2. Firms will be expected to create and maintain A ‘STATEMENT OF RESPONSIBILITIES’ for each Senior Manager, and a company-wide ‘Responsibilities Map’ which outlines a firm’s oversight and governance arrangements.

2. Both of these documents will be used by the regulatory to determine whether a firm has any gaps in the accountability framework and whether the governance arrangements are sufficiently robust.

Certification Regime

1. The Certification Regime will apply to all individuals outside of the SMR whose actions could still cause material damage to the firm.
2. Firms will be required to assess the fitness and propriety of all members of staff who fall under the Certification Regime, which they will be required to review at least annually.
3. Therefore, preparations will need to focus on the procedures for conducting these assessments and demonstrating compliance to the regulator.

Conduct Rules

1. These high-level principles are expected of all employees and will be the benchmark used to assess individual conduct.
2. The Conduct Rules will be applicable to
   1. all Senior Managers and certified individuals from 7^th March 2016,
   2. with all other individuals, except ancillary staff, coming under the regime from 7^th March 2017.

Widening the Certification Regime to Wholesale Individuals

The FCA is consulting on proposals to widen the Certification Regime to individuals within the wholesale markets, including:

1. Individuals performing Significant Management Functions;
2. Propriety Traders;
3. Material Risk Takers;
4. Managers of Certified Persons; and
5. Individuals in customer-facing roles who are subject to qualification requirements.

To achieve this, the regulator is proposing to add two additional categories into the Certification Regime, covering

1. client-facing individuals
   1. The first category will be based on the elements of the current CF30 who are currently not captured in the Certification Regime and extended to any position where dealing with clients (both retail and professional) is a core part of their activities.

and

1. those involved in algorithmic trading.
2. Those involved in algorithmic trading have been included because of the extensive use of algorithms in the UK and the potential harm poorly managed algorithms could cause.

CLOSING COMMENTS

2. “With the final confirmation of the rules, the FCA has maintained the key requirement for firms to be accountable for the fitness and propriety of staff who could pose ‘harm’ to either the firm itself or its customers, not just at the outset but confirming this on an annual basis.
3. They need to be mindful of overlap with other requirements that will still apply (e.g. statements of professional standing for investment advisers) alongside their obligation to validate staff annually.
4. Firms will need to review their current processes in place to deal with approved persons and confirm that they will meet the requirements of the new rules, with appropriate management information and controls in place to demonstrate compliance.

 The full consultation paper can be found here.