The Financial Conduct Authority (FCA) has now set out their expectations to help solo-regulated firms apply the SMCR in relation to the COVID-19 crisis.
They say that they do not require firms to have a single Senior Manager (SM) responsible for their coronavirus response. Instead, they expect firms to allocate these responsibilities in the way that best enables them to manage the risks they face.
1. Senior Management responsibilities
SM’s have always been responsible for risks in their areas of responsibility. As such they should already be considering where the current COVID-19 situation might lead to emerging risks for the firm and indeed how it may affect existing identified risks. SMs should also consider whether their existing controls can be used to manage these risks or whether new controls should be introduced.
2. Statements of Responsibilities (SoRs) and ‘significant changes’ to Senior Manager Responsibilities
The FCA recognises that some firms may need to make temporary arrangements to cover staff absences or change SM responsibilities as a direct result of the pandemic. This may include for example reduced reporting of updated Statements of Responsibilities (SoRs) etc during the period of the pandemic. Similarly, the FCA does not expect firms to notify them of temporary arrangements however they do still expect any changes to be clearly documented internally during this period and they may review these later. Firms should still supply the FCA with changes that would normally be included in updated SoRs. They should also update their FCA supervisors of any furloughing of one or more SM by e-mail or phone.
3. Temporary arrangements for SM Functions
The FCA intends to issue a Modification by Consent to the 12-week rule to support firms using temporary arrangements during the crisis (this allows an individual to cover for a SM without being approved, where the absence is temporary or reasonably unforeseen).
If these temporary arrangements last longer than 12 weeks firms can ask for a further extension of up to 36 weeks. The FCA do however still expect firms to clearly document the responsibilities involved including relevant SoRs and Responsibilities Maps (where relevant).
4. Notifications about temporary arrangements
In order to reduce the burden on firms, the FCA does not expect firms to submit the updated SoRs of the absent SMs or of SMs who take on the responsibilities of the absent manager. However, it should be clearly documented internally, including the management responsibilities map (if required).
5. Furloughed staff
The FCA consider those caught by the SM regime to be key workers but they do recognise there may be circumstances where some need to be furloughed. They will not need to be re-approved upon their return to the firm unless they permanently leave the post. The firm remains responsible for ensuring such persons remain fit and proper.
6. Reallocating Prescribed Responsibilities (PRs)
Firms should reallocate PRs of furloughed SM staff to another SM. However, under the temporary 12 week rule this may be to someone else temporarily during this period. The FCA also state that those performing Compliance Oversight, the MLRO function and the Limited Scope Function, should only be furloughed as a last resort. When these roles apply, if they are furloughed they should be temporarily replaced.
