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FCA Consults on Optimizing the SM&CR and Proposes Excluding Heads of Legal From Senior Managers Regime

On January 23, the UK Financial Conduct Authority (FCA), published a consultation paper on optimizing the senior managers and certification regime (SM&CR) (for further details on the SM&CR, see the March 11, 2016 edition of the Corporate & Financial Weekly Digest). Its proposals intend to help firms adjust to the SM&CR and to identify some of the rules which need to be revised, as currently drafted in the Individual Accountability (Amendment) (No 1) Instrument 2019.

The FCA’s key proposals include:

  1. excluding the Legal Function (i.e., heads of legal) from the Overall Responsibility requirement and having to be approved as a senior manager under the Senior Managers Regime;

  2. amending the scope of the Client Dealing Function under the Certification Regime to allow firms to exclude purely administrative roles that participate in “managing” or “arranging” investment activities, as interpreted under the current draft rules;

  3. ensuring that the Certification Regime applies to individuals performing roles that were Systems and Controls Functions under the Approved Persons Regime, but that are no longer approved under the SM&CR, which will, therefore, involve the introduction of a new certification function; and

  4. applying Senior Manager Conduct Rule 4 (which requires relevant individuals to appropriately disclose any information of which the FCA would reasonably expect notice) to non-approved executive directors at limited-scope firms to ensure that executive and non-executive directors at such firms are subject to equivalent requirements.

The deadline for submitting comments on the consultation paper is April 23. The FCA will consider feedback and publish its rules and guidance in a policy statement scheduled for the third quarter of 2019.

The FCA’s consultation paper is available here.

©2019 Katten Muchin Rosenman LLP

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John Ahern, Financial Attorney, London, Katten Law Firm
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John Ahern, partner at Katten Muchin Rosenman UK LLP and head of the London Financial Services group, focuses his practice on banking, financial services, UK and European financial markets, and related regulations. His background in private practice and as in-house counsel at a global investment bank provides him with perspective on the unique regulatory issues facing the wholesale and private banking sectors. John advises multilateral trading facilities, broker-dealers and banks on trading, clearing and settlement as well as custody of securities—both physical and...

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Carolyn H. Jackson, International Attorney, Katten Muchin law firm
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Carolyn Jackson is a partner in Katten Muchin Rosenman UK LLP and is a Registered Foreign Lawyer. She provides US financial regulatory legal advice to a broad range of market participants, including commercial banks, investment banks, investment managers, broker-dealers, electronic trading platforms, clearinghouses, trade associations and over-the-counter derivatives service providers.

Carolyn guides clients in the structuring and offering of complex securities, commodities and derivatives transactions and in complying with US securities and commodities laws and regulations. 

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Nathaniel Lalone, Katten Muchin Law Firm, Financial Institutions Attorney
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Nathaniel Lalone, a partner at Katten Muchin Rosenman UK LLP, has a broad range of experience in the regulation of financial products and financial markets, and frequently provides regulatory and compliance advice to trading venues, clearing houses and buy-side firms active in the over-the-counter (OTC) derivatives, futures and securities markets. He is actively involved in advising clients on the implementation of MiFID 2 and MiFIR in the European Union as well as the international reach of US financial services regulation. He also has significant experience with structuring...

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Neil Robson, private equity fund managers counselor, Katten Law Firm, London
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Neil Robson, a regulatory and compliance partner with Katten Muchin Rosenman LLP, focuses his practice on counseling hedge and private equity fund managers and other investment advisers on operational, regulatory and compliance issues. He regularly addresses Financial Conduct Authority (FCA) and EU authorization and compliance under both the EU Alternative Investment Fund Managers Directive (AIFM Directive) and MiFID, cross-border issues in the financial services sector, market abuse, anti-money laundering and regulatory capital requirements, formations and buyouts of...

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