HM Treasury proposes to extend Senior Managers and Certification Regime to all FCA firms
HM Treasury published a policy paper on 15 October 2015, in which it proposes to extend the senior managers and certification regime (SM&CR), which is currently applicable only to senior managers in the banking sector, to all firms authorised by the FCA or PRA under the Financial Services and Markets Act 2000 (FSMA). The extended SM&CR would replace the current FCA approved persons regime.
The key features of the extended SM&CR are:
An approval regime focused on senior management, with requirements on firms to submit robust documentation on the scope of these individuals' responsibilities.
A statutory requirement for senior managers to take reasonable steps to prevent regulatory breaches in their areas of responsibility. (This supersedes the "reverse burden of proof" in the existing SM&CR proposals for the banking sector.)
A requirement on firms to certify as fit and proper any individual who performs a function that could cause significant harm to the firm or its customers, both on recruitment and annually thereafter.
A power for the regulators to apply enforceable rules of conduct to any individual who can impact their respective statutory objectives.
The paper outlines the measures in the Bank of England and Financial Services Bill that would extend and reform the SM&CR.
The HM Treasury proposes to implement the extended SM&CR during 2018.
AIMA Publishes Updated Side Letter Guidance
AIMA published updated guidance on side letters on 22 September 2015, including to reflect the requirements under the Alternative Investment Fund Managers Directive (AIFMD) that no investor in an alternative investment fund (AIF) may be accorded preferential treatment if it results in an overall material disadvantage to other investors and that certain information concerning preferential treatment granted to one AIF investor be disclosed to the other AIF investors. The AIFMD disclosure requirement is wider in scope than the position reflected in AIMA’s pre-AIFMD guidance in 2006, in that the AIFMD requirement applies to side letters according ‘any’ preferential treatment to an AIF investor, whereas the earlier guidance applied just to side letters containing material terms. The AIFMD disclosure requirement also applies to non-EU AIFs marketed in the EU and is irrespective of whether it is granted by the fund or the manager (AIFM). The AIFM must ‘make available’ a long list of specific disclosures to potential investors and disclose any preferential treatment with the type of investor to whom it is granted. These disclosures are not typically included in an AIFs prospectus in order to avoid the need to make frequent updates.
FCA Proposes to Eliminate Short Reports for UCITS Schemes and NURS, and Certain Other Disclosure Requirements
Following the FCA’s June 2015 discussion paper outlining its intention to remove certain requirements for disclosures to consumers which have not proved to be as effective as hoped, the regulator issued a consultation paper on 22 October 2015 proposing to remove a number of specific disclosure requirements aimed at reducing the regulatory burden on firms.
Significantly, one of the reports which the FCA proposes no longer to require is the Short Report, a half-yearly and annual post-sale document for investors in FCA authorised UCITS Schemes and NURSs.
Other disclosure document requirements that are proposed to be eliminated include those for: the Initial Disclosure Document (IDD)/ Combined Initial Disclosure Document (CIDD) and the Combined Initial Disclosure Document (CIDD)/ Services and Costs Disclosure Document (SCDD).
The deadline for submitting comments is 18 December 2015.