However, where an existing CF will not have an equivalent SMF role under the extended SMCR, individuals in those CF roles will have their FCA approval lapse, unless the firm lodges a Form A to appoint the individual to SMF under the extended SMCR – e.g. a firm decides an individual with existing CF30 Customer Function approval will be designated as an SMF3 Executive Director under the extended SMCR. CF individuals will otherwise likely be captured by one or more of the Certification Functions. Larger, more complex firms (Enhanced SMCR firms) will need to lodge conversion notifications and accompanying documents with the FCA.
While Treasury is yet to confirm the final timeframe for the new rules to commence, for the purposes of this consultation, the FCA assumed that the rules will apply to insurers in late 2018, and to solo-regulated firms in mid-to-late 2019. The FCA has also confirmed that the Treasury intends to commence the requirement for firms to certify relevant employees as fit and proper for the first time 12 months after the start of the main SMCR (according to this timeframe, in mid-to-late 2020). However, firms would still need to have identified their certified staff from commencement, as those employees must meet the Conduct Rules from day one of the regime. For all other staff who are not senior managers or certified staff, the FCA is proposing to apply the conduct rules 12 months after commencement, to enable sufficient time for firms to roll out training.
In AIMA‘s response, AIMA expressed broad support for the FCA’s proposed approach. However, AIMA has highlighted a number of specific areas for the FCA to consider further in finalising the transitional arrangements. In particular, AIMA has raised the need to ensure clarity in the treatment of existing CF4 partners in the transition to the extended SMCR, in circumstances where certain partners will not meet the definition of a ‘senior manager’ under the extended SMCR (s59ZA of the Financial Services and Markets Act 2000). In those circumstances, it appears that firms will need to act to ensure the approval for those individuals lapses upon commencement of the extended regime, rather than the individuals being automatically converted to the equivalent SMF. Instead, those partners will likely be captured by one or more of the Certification Functions, requiring the firm, rather than the FCA, to approve the fitness and propriety of those partners. AIMA has asked the FCA to ensure clarity and consistency in the treatment of these individuals.
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FCA_consultation paper
© AIMA - Alternative Investment Management Association
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