Rules for insurers and FCA solo-regulated firms

On 4 July 2018, the FCA and PRA published a number of policy statements, near-final rules and final rules, together with supporting materials, relating to the extension of the Senior Managers and Certification Regime (SMCR) to insurers and FCA solo-regulated firms. The SMCR currently applies to banks, building societies, credit unions and PRA-designated investment firms. However, the upcoming extension will bring all Financial Services and Markets Act authorised firms within scope, including asset managers, investment firms, insurers and consumer credit firms.

PS18/14 contains the highly anticipated near-final rules on the extension of the SMCR regime to FCA solo-regulated firms, who will move to the new regime as of 9 December 2019. As envisaged, the FCA is implementing the rules largely as set out in its consultations last year (CP17/25 and CP17/40). Although the FCA has indicated that these near-final rules could be amended by subsequent changes to the Handbook (for example, as required by Brexit), given the extensive organisational and operational changes which the regime is likely to require, firms should start preparing now for implementation.

For more information on the FCA's consultation on transitioning firms and individuals to the SMCR, see our detailed update here.

PS18/15, also published on 4 July 2018, is concerned with the extension of the regime to insurers. As for FCA solo-regulated firms, the rules contain few substantive changes to the FCA's earlier proposals, set out in CP17/26 and CP17/41. Insurers will be subject to the SMCR from 10 December 2018.

With its policy statements, the FCA has also published two guides which explain the main features of the SMCR as it applies to solo-regulated firms and to insurers. The guides provide an overview of how the SMCR works, what firms need to do under the new regime, and how the FCA will move firms and individuals from the existing Approved Persons Regime to the new SMCR. Affected firms may wish to use the applicable guide as a practical starting point when preparing for the new regime – although the FCA is keen to emphasise that the guides themselves are no substitute for reading the relevant rules.

New financial services Directory

The FCA has also published a consultation paper (CP18/19) on its proposed Directory of financial services workers. Following implementation of the SMCR, the current financial services register, which provides a public record of regulated firms and individuals who have been approved, will continue. However, the register will contain fewer individuals; only specified senior manager roles will be approved, and so appear on the register.

Therefore, the FCA has proposed a new online Directory, which is intended to function as a public register and user interface. The Directory would make public information about individuals carrying out a wide range of roles – including those the FCA does not approve, such as financial advisers, traders and portfolio managers. The Directory would present in a single location information on these individuals, as well as those who hold Senior Management positions requiring FCA approval, in a format that is easily accessible to the public.

However, in order to deliver the FCA's proposals, firms would need to be responsible for providing the FCA with additional information on all relevant individuals who work on their behalf, and keeping that information up to date. The FCA proposes that this would include information about the individual's role, workplace location and the types of business they are qualified to undertake. Firms will also remain responsible for ensuring the suitability of Directory persons who are not subject to regulatory approval.

The consultation is open until 5 October 2018, and the FCA aims to publish final rules in winter 2018.