FCA actions mean busy times for regulated firms


The first half of 2019 has been an extraordinarily busy time for the FCA. So far we have seen, amongst other ‘business as usual’ outputs, consultations on mortgage advice and selling standards (CP19/17) and new responsible lending rules (CP19/14), a policy statement on ‘overdrafts’ (PS19/16 following CP18/42), the on-boarding and regulation of Claims Management Companies (including a very early ‘warning shot across CMCs bows in the form of a ‘Dear CEO’ letter) and the recent announcement in respect of final rules for loan based (‘peer to peer’) and investment backed crowdfunding platforms (PS19/14 following CP18/20).  While each of these activities will require significant management attention and corporate responses, including new policies and procedures it is the ongoing focus on transforming culture in financial services that will have most impact on individual behaviours.

This focus is not unique to the UK and culture change with an objective of better consumer outcomes is receiving global attention. For example, the Banking Executive Accountability Regime [‘BEAR’] in Australia is not dissimilar to our Senior Manager and Certification Regime [‘SMCR’] and encompasses small and medium banks from 1 July 2019 (having applied to large banks from 1 July 2018).  Like SMCR in the UK, BEAR is a conduct focused accountability regime.

This focus is not unique to the UK and culture change with an objective of better consumer outcomes is receiving global attention

While SMCR already applies to banks and insurers, it should not have escaped anyone’s notice that it will apply to almost all the firms the FCA regulates from December 2019. The greatest change will be for FCA solo-regulated firms who are currently regulated under the FCA’s Approved Persons Regime [‘APR’], which will be replaced by SMCR from the December date and with that cohort the most effected are likely to be ‘limited scope’ firms primarily due to the fact that this group includes limited permission consumer credit firms and sole traders; often this type of business has limited resources, no access to dedicated compliance departments and often one individual carries out more than one Senior Manager Function [‘SMF’] .  While the FCA acknowledges that SMCR responses are not intended to be ‘one size fits all’ and that there is flexibility as to how SMCR is applied, including the fact that limited scope firms will be exempt from some baseline requirements and have fewer SMF’s, firms should plan for and implement SMCR.

While many limited scope solo-regulated firms will have a small number of owners/senior managers they may employ a number of staff and the certification element of SMCR will apply to nearly all staff (the exceptions being employees with no or limited customer contact such as janitorial and reception staff), because most customer facing staff can have a significant impact on customers and the firms market integrity. Although the FCA does not approve ‘certificated’ staff, firms will need to check and confirm (‘certify’) at least annually that these people are suitable to do their job and this check must include an assessment that they are ‘fit and proper’.  This annual test will need to focus on three key areas; 1) honesty, integrity and reputation, 2) competence and capability and 3) financial soundness.  Depending on certain circumstances firms may also be required to carry out criminal record checks and regulatory referencing.

So although the transition from the APR regime to SMCR may be an evolution rather than a revolution, firms, especially limited scope solo-regulated firms, need to make timely progress on a number of issues in order to meet the deadline for compliance in six months time.



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Partner - Baxters Business Consultants - a business consultancy undertaking marketing, training, freelance journalism and expert witness services to the residential mortgage lending, building society and financial service industry (April 1993 to date) - www.baxtersbc.co.uk.

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