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Volume X, Number 221

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FCA Statement on Expectations of Dual-Regulated Firms

On April 6, the UK’s Financial Conduct Authority (FCA) updated its joint statement with the UK’s Prudential Regulation Authority (PRA) on its expectations of dual-regulated firms applying the Senior Managers and Certification Regime (SM&CR) during the COVID-19 pandemic (the Statement).

The FCA and PRA intend that the measures set out in the Statement would provide flexibility for firms to comply with their obligations under the SM&CR. The measures include:

  • the FCA and PRA expect firms to resubmit their statement of responsibilities as soon as reasonably practicable taking into account the current circumstances. The FCA and PRA understand that firms may take longer than usual to submit such statements;

  • the FCA and PRA are currently collating evidence on whether the 12-week rule is likely to give dual-regulated firms enough flexibility to deal with temporary absences of senior management functions (SMFs);

  • if an SMF becomes temporarily vacant, firms should reallocate those SMFs’ prescribed responsibilities (PRs) among their remaining SMFs until a permanent replacement is in place. If a firm cannot reallocate an absent SMF’s PRs to a remaining SMF, then such firm is permitted to temporarily allocate them to the individual acting as interim SMF under the 12-week rule, even if they are, at the time, unapproved as an SMF. The Statement notes that firms should record any temporary allocation of PRs to unapproved individuals and notify the FCA and/or PRA of such allocation;

  • firms are not required to have a single senior manager responsible for their COVID-19 pandemic response (as had previously been reported), but instead the responsibility of identifying ‘key workers’ should be allocated to the CEO (SMF1). Where firms have an SMF24 (enhanced firms only), this individual would naturally be expected to oversee business continuity, information security and outsourcing during the COVID-19 pandemic;

  • relevant firms with such functions must ensure that those individuals performing SMF1 (CEO), 2 (CFO), 19 (head of overseas branch), 25 (small insurer senior management function), 26 (head of small run-off firms) and other SMFs required by the FCA are only furloughed as a last resort;

  • if a senior manager is furloughed, they will retain their FCA approval during their absence, unless they permanently leave their post; and

  • firms should continue to take reasonable steps to complete any annual certifications of employees that are due to expire during the COVID-19 pandemic.

The Statement is available here.

©2020 Katten Muchin Rosenman LLPNational Law Review, Volume X, Number 101


About this Author

John Ahern, Financial Attorney, London, Katten Law Firm

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...

+44 (0) 20 7770 5253
Carolyn H. Jackson, International Attorney, Katten Muchin law firm

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. 

+44 0 20 7776 7625
Nathaniel Lalone, Katten Muchin Law Firm, Financial Institutions Attorney
Senior Associate

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...

+44 0 20 7776 7629
Neil Robson, private equity fund managers counselor, Katten Law Firm, London

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...