In the Feedback Statement FS15/3 the FCA report on the main issues arising from Consultation Paper 15/10 ('Strengthening accountability in banking: UK branches of foreign banks') and publish the near final rules.
Highlights include:
Legislation extending the regimes (SMR and CR) to incoming branches went to parliament on 20 July 2015 and subject to approval will come into force on 9 November 2015.
Allocation of SMFs are not geographically restricted i.e. the individual could operate from another country but still have local responsibility.
Senior Managers Regime Non-EEA Branches
The policy intention is for the concept of ‘local responsibility’ to be the same as ‘overall responsibility’ in the regime for UK firms.
Overseas Branch Senior Manager (SMF20) has been removed and either or both the Executive Director (SMF3) function will be used (in relation to the branch only) or the new function Other Local Responsibility (SMF22) that will be similar to Significant Responsibility SMF (SMF18).
Other Local Responsibility (SMF22) will cover local responsibilities not covered by other SMFs but if all SMFs are already covered then SMF22 will not be required.
The Chief Finance function (SMF2), Chief Risk function (SMF4), Head of Internal Audit (SMF5) and Compliance Oversight (SMF16) are not required if nobody is currently performing the function however the local responsibility must be allocated to a senior manager.
Other branch responsibilities not covered by SMFs, such as individuals that report to the directly to the branch’s governing body, e.g. Head of IT, should approved as Other Local Responsibility (SMF22).
If there is an approved Control Function for CASS operational oversight (CF10A) this should be grandfathered to Other Local Responsibility (SMF22) if not allocated to another senior manager.
Senior Managers Regime EEA Branches
EEA Branch Senior Manager (EBSM) (SMF22) has been clarified to include individuals with ‘significant responsibility’ for a business unit (sometimes referred to as ‘significant business responsibility’) e.g. ‘Head of’ or member of a committee that takes decision for that business unit. Note this may still include the branch manager.
Responsibilities Map requirements have been amended for EEA Branches to reduce burden and duplication, e.g. the allocation of Prescribed Responsibilities. However, where such information is omitted, EEA Branches are required to provide details of where such information can be found, such as the Programme of Operations when the branch passports into the UK.
Certification Regime
Additional guidance has been provided in relation to the phrase ‘a client in the UK’.
Clarification has been provided on Significant Harm Functions.
There will be consultation on Regulatory References once feedback has been received regarding the Fair and Effective Markets Review (FEMR).
Conduct Rules
Breaches of Conduct Rules for senior manager breaches remains at seven days, this includes suspected breaches.
If (after investigation) a suspected breach did not in fact take place then a further notification should be submitted.
The Consultation Paper CP15/22 Strengthening Accountability in Banking, details the new changes to the Senior Managers and Certification Regime. These are mostly clarifications following some confusion over the rules, but there are also a few alterations and additions. Highlights are:
Certificates for people performing Certification Functions do not have to be produced until 7 March 2017 – a year after the introduction of the Certification Regime
Additional references are not required for people performing Certification Functions if they were performing the same function immediately prior to 7 March 2016
NEDs (non-executive directors) that are not performing SMFs (senior management functions) are called Notified NEDs
Fitness and Propriety checks also apply to Notified NEDs
References are also required from organisations where someone has performed a NED role (regardless of whether their new role is a NED or not)
A NED that is moving from an SMF to be a Notified NED is not subject to further Fitness and Propriety checks
To Grandfather to an SMF the person must be approved under the APER (Approved Persons Regime) for the equivalent role (see table on P41 of the Consultation Paper) immediately prior to 7 March 2016
Grandfathering to a non-equivalent role requires additional approval
Grandfathering of a parent company's APER is acceptable if the original approval extends to the subsidiary (and is an equivalent role)
The Grandfathering notification deadline is 8 February 2016 and requires a Statement of Responsibilities per person and to be signed by the person
For people commencing a SMF on or after 7 March 2016 a new form is to be used that will be issued on 1 January 2016 (old/existing forms if commencing prior to 7 March 2016)
Governance Maps seem to have returned to being named Management Responsibility Maps
Regulatory References are still under review (aligning with other policies e.g. FEMR)
Policy Statement yet to be issued for UK Branches of Foreign Banks and UK Branches of non-EEA Firms (Incoming Branches).
And in case you missed last month's updates:
- The Senior Managers Regime now applies to all bank workers, asset managers, hedge fund managers and interdealer brokers, as well as thousands in the fixed income, commodity and currency markets, leaving little room for error – essentially the point of the SMR
- Prison sentences for market abuse will match other fraud penalties and increase from seven to 10 years
- The BoE is in the process of creating a new statutory civil and criminal market abuse regime to prevent future foreign exchange rigging
- "To address areas of uncertainty in trading practices and promote adherence to standards" a fixed income, commodities and currencies Market Standards Board will also be created
- Finance workers moving jobs will require a reference from their previous employer, helping to ensure those who break the rules are caught out.
Catch up with the latest news coverage surrounding the SMR here.
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