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FCA reveals how brokers must handle senior managers regime


The FCA has revealed how it will apply its senior managers regime to all financial services firms, including mortgage brokers and lenders.

The Senior Managers and Certification Regime already applies to banks, and the FCA said in October it would consult on rolling this out to the wider market.

The regulator wants to bring in new rules for all FCA-regulated firms, to make sure individuals and their conduct can be held accountable.

The new rules say companies must clearly explain all the areas of responsibility their senior managers have.

A named individual must be in charge of areas including financial crime prevention.

These managers will get FCA approval and be listed on the FCA register.

The FCA has also proposed five conduct rules that all staff at firms will fall under, which are equivalent to those it imposed on banks.

They are:

  1. You must act with integrity
  2. You must act with due care, skill and diligence
  3. You must be open and cooperative with the FCA, the PRA and other regulators
  4. You must pay due regard to the interests of customers and treat them fairly
  5. You must observe proper standards of market conduct

There are an additional four conduct rules for the senior managers within a firm:

  1. You must take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively
  2. You must take reasonable steps to ensure that the business of the firm for which you are responsible complies with the relevant requirements and standards of the regulatory system
  3. You must take reasonable steps to ensure that any delegation of your responsibilities is to an appropriate person and that you oversee the discharge of the delegated responsibility effectively
  4. You must disclose appropriately any information of which the FCA or PRA would reasonably expect notice

The final key piece of the proposed rules says firms must “certify” each year that staff below senior manager level are fit and proper to carry out those jobs that are not covered by the SMR but “significantly impact customers or firms.”

The FCA gives the example that “if a firm employs a customer‑facing financial adviser, every manager above them in the same chain of responsibility will have to be certified (until the Senior Manager approved under the SMR is reached).”

Limited scope firms

Sole trading financial advisers, however, will be classified as “limited scope” firms.

These firms will not have to prescribe the FCA’s necessary responsibilities to individual senior managers, but will only need to have the compliance oversight function in place.

Extra rules

The regulator is also proposing extra rules for what it calls ‘enhanced firms’.

These firms include mortgage lenders, that are not banks, with 10,000 or more regulated mortgages outstanding.

The FCA says there are 25 of these firms.

The extra rules will also apply to firms with total intermediary regulated business revenue of £35m or more a year.

The regulator originally drew up the rules to prevent a repeat of the fallout from the financial crisis. At the time, leaders of failed banks pleaded ignorance of their firms’ wrongdoings and so escaped responsibility.



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