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SM&CR – what is a Statement of Responsibility?

On 8th March 2019, the FCA published FG19/2 – Senior Managers and Certification Regime: Guidance on statements of responsibilities and Responsibilities Maps for FCA firms. Our Risk and Compliance team take a look at what a Statement of Responsibility is and the issues brokers should be considering when drafting them for their Senior Managers.

By way of a reminder, Senior Management Functions replace Controlled Functions under the current Approved Person system.

Statements of Responsibility (SoR) apply to all Senior Management Functions (SMFs) and are a single document setting out the roles and responsibilities of the individual. They must be in an FCA-prescribed form and be self-contained. Their purpose is to make clear what a Senior Manager is responsible and accountable for, under the ultimate accountability of the firm’s governing body.  The FCA will refer to Statements of Responsibilities when things go wrong to pinpoint the individual(s) in charge.

It should be obvious and easy for the FCA and everyone in the firm to understand a SoR, which should contain enough information to clearly describe the Senior Manager’s actual responsibilities and accountabilities, but without unnecessary detail. An SoR is not the same as a job profile, so it should not describe the competencies and skills required for the role or how the responsibilities should be discharged. It should focus on what the role holder is accountable for.

The examples provided by the FCA suggest that a Statement of Responsibility will be divided into four main headings:

1. Senior Management Functions

This covers details of the Senior Management Function(s) held by the individual and the type of firm (e.g. Core).

Example:

Senior management function

 

Description of senior management function

 

Tick SMF applied for or held Effective Date

 

Core firms Enhanced SMCR firms
Limited scope SMCR firms UK core SMCR firms EEA core SMCR firms Third country branches
SHF 3 Executive Director 09/12/2019

2. Prescribed Responsibilities

This section is used to allocate one or more “Prescribed Responsibilities”, but note that a Senior Manager may not necessarily have any Prescribed Responsibilities. If shared or divided, it should be made clear that this is appropriate to their role and why it is necessary.

Example:

Ref Prescribed Responsibility (Applicable to UK Core SMCR firms)

 

Does this Prescribed Responsibilityapply? Is this Prescribed Responsibilityshared?
a Responsibility for the firm’s performance of its obligations under the senior managers regime Yes No
b Responsibility for the firm’s performance of its obligations under the certification regime Yes No

3. Other Responsibilities

This part of the SoR is used to describe the Senior Manager’s other responsibilities carried out as part of the designated Senior Management Function for which they are approved. This could be anything not covered by their Prescribed Responsibilities, or elsewhere in the statement, and will usually cover business functions and activities for which they are accountable such as sales, customer service, information technology etc.

The FCA would not expect the description of each responsibility to exceed 300 words.

Example

Please provide a title for this other responsibility

 

Please provide further details of this other responsibility

 

 

Is this other responsibility shared? If ‘Yes’ please provide, the name(s), IRN(s) and/or job title(s) of the individual(s) you are sharing this responsibility with (where known)

 

Debt collecting

 

I am responsible for all the recovery activity relating to credit agreements undertaken by the firm.

 

No
Debt administration

 

I am responsible for all debt administration activities in the firm.

 

No

4. Supplementary Information

This section provides space for additional information.

Individuals with multiple Senior Management Functions (SMFs) only need one statement, unless they go across multiple firms within a group.

If you hire a new SMF, they must be approved / checked prior to commencement of their role and SoRs will have to be submitted to the FCA. Whilst it will be necessary for SoRs to be prepared for individuals currently authorised by the FCA that will be automatically mapped to the new Senior Management Functions, it is as yet unclear whether they will have to be sent to the regulator or simply made available for possible inspection.

You will need to consider past versions of SoRs as an important part of your regulatory record keeping and in addition to notifying significant changes to the FCA, ensure that a copy of all previous versions are retained.

SMCR does not apply to Appointed Representatives, so SoRs are not relevant and the existing Approved Persons regime continues.

FG19/2 is ‘general guidance’ and is not binding on firms but you are expected to apply it in a proportionate manner. The regulator will not presume that a firm’s departure from its guidance indicates that it has breached the FCA rules.

Things to consider before you draft SoRs for your firm:

  • Be clear about the firm’s governance structure. Who is responsible for what at the most senior levels of the business? Do job descriptions match this or do they need updating?
  • Employment contracts should be clear in terms of SMF responsibilities and the firm’s obligation to obtain and provide regulatory references
  • Job descriptions may need to be reviewed to ensure that the requirements align to SMF responsibilities and that clear expectations are set for competency and conduct rules
  • Decide who the “prescribed responsibilities” will be given to. Reporting lines and structures may need to be amended to support SMF Prescribed Responsibilities
  • Consider matters, such as how Statements of Responsibility, assessment of fitness/propriety and regulatory references, are built into the employee lifecycle, taking into consideration recruitment, training, promotion, appraisal and dismissal.
  • Make Senior Managers aware of what is on the horizon and ensure they understand that the new regime involves taking personal responsibility for compliance
  • Review recording and reporting systems to ensure that when managers address disciplinary issues that relevant records are kept and in the format expected by the FCA
  • Look at regulatory breach reporting mechanisms. There is a seven day notification rule in respect of Senior Manager Functions

Here are a few tips when preparing and managing your Statement of Responsibilities:    

  • Stick to the facts and make sure the SoR is relevant to the individual’s role
  • Avoid unnecessary detail. The SoR should be succinct, jargon free and easily understood by the regulator
  • Include clear descriptions of each responsibility and don’t cluster responsibilities in the wording
  • Make sure it is self-contained and does not refer to other documents
  • If any prescribed responsibilities are shared, give a clear explanation of the rational for this
  • Remember to keep the Statement of Responsibility up-to-date at all times and inform the FCA of any changes when re-submitting a SoR

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