FCA has at last published its final rules on extending the SMCR to solo-regulated firms, including CMCs. It has, in the main, implemented the changes it consulted on in its consultation on “optimising” the regime and has, in particular:
- confirmed that the Head of Legal function is not an SMF: this is mainly because legal privilege laws would make it impossible for FCA properly to supervise the function. Of course, heads of legal may also be in other SMFs and will require appropriate approval for those. Also, despite some views to the contrary, FCA believes and has confirmed that the Certification and Conduct Rules regimes must apply to the role;
- extended SM Conduct rule 4 (the rule generally applicable to NEDs) to all non-approved directors at Limited Scope firms;
- confirmed the basis for intermediary firms being in the Enhanced Regime to include all non-retail mediation activity “B” firms, (that have over £35m in regulated revenue over a 3 year rolling average relating to a list of permitted activities including home finance, insurance mediation and retail investment activities), some of whom had unintentionally been excluded. These firms must notify FCA annually as to whether they exceed the threshold and, if they do, will then have a year to apply the Enhanced Regime to their activities; and
- clarified the scope and certain aspects of the Certification Regime, in particular to exclude individuals from the scope of the client dealing function where they have no authority to choose, decide or reach a judgement on what should be done, and whose tasks to not require a significant level of skill.
The changes are relevant not only to solo-regulated firms and CMCs but also to dual-regulated firms and EEA and third country branches. The Policy Statement includes the text of the final rules instruments,