With the Jubilee bank holiday just around the corner we wanted to get our latest instalment of SMCR+ View across to you before we start getting the inevitable deluge of out of offices! It's a large update given we had a fallow month in April, so brace yourself for this edition. As always, your feedback is welcome and appreciated.

1. Form A Fees from 27 May - FCA

This update was not very easy to find so we want to bring it to your attention given its immediacy. Earlier this month the FCA confirmed that on 27 May 2022 it is introducing a £250 fee for standalone Long Form As (SMF application forms). The fee is per form submitted and payments will be made online (i.e. invoices will not be issued). Any draft applications created before 27 May 2022, but not submitted by this date will incur the fee.

There are some important caveats - the following will not incur fees: submission of a Short Form A (this can be used for existing Senior Managers taking on an additional SMF role, for example), and Long Form As submitted as part of a new authorisation, variation of permission or the notification for registration of an appointed representative. Note, applications made as part of change in control arrangements will incur fees.

For more information please see the FCA's Handbook Notice here or don't hesitate to contact us.

2. FCA FOI data - April 2022

It's the podcast you didn't know you needed on the way to work (or making your morning coffee) - a 10 minute download on the Freedom of Information Act data published by the FCA and our analysis of the data. We have also synthesised the data into these lovely slides (if you don't mind us saying so ourselves). There's a lot in there, including information on SMF applications and withdrawals, enforcement cases, whistleblowing and more. If you would like any further information please contact Emma Sutcliffe (Partner).

3. D&I View

Diversity & Inclusion is at the top of the regulatory agenda with the much anticipated consultation paper due later this year. We have done a significant amount of work on this topic and recently launched our D&I Toolkit. Excitingly, we are also launching a specific D&I View dedicated to D&I updates. The first edition includes further information on the FCA's final proposals to boost diversity on listed company boards and executive committees, amongst other things. Sign up to our new D&I View updates here.  

4. Financial crime controls - SMF 17 / Senior Managers holding PR(d) - FCA

You may have seen the FCA's latest Multi-firm review on financial crime controls at challenger banks. The FCA are focussed on financial crime and they are keen that new businesses entering the financial services industry have robust controls in place. It is an interesting read for firms in their early stages or experiencing rapid growth, but it also has some helpful insights that others more generally (and particularly SMF 17s / those holding prescribed responsibility (d) relating to financial crime) will be interested in. Specifically it contains examples of good practices / areas for improvement that are generally applicable.

We have worked on a significant number of financial crime related investigations / enforcement actions and would be delighted to share our own additional observations - to discuss further please contact Emma Sutcliffe (Partner) or Richard Sims (Partner).

5. Final notices - FCA

• Upper Tribunal: An Upper Tribunal decision upheld final notices from December 2018 in respect of three pension advisory firms and five individuals.  It was found that the individuals breached Statement Principle 1 (integrity) and each were lacking in fitness and propriety on the basis of (and this is very high-level) mis-selling and acting dishonestly and recklessly. The time periods for these matters were pre-SMCR but seeing what amounted to a lack of integrity is helpful and may assist those thinking about matters under the SMCR (i.e. it notes that integrity is wider than the concept of dishonesty and doesn't necessarily involve deliberate behaviour - e.g. turning a blind eye may amount to a lack of integrity).  The Upper Tribunal also confirmed that applicants performing CF1 and CF3 functions are expected to adhere to higher standards of integrity than the general public. The Upper Tribunal also did not accept that absence of resource was relevant. 

• There were also  a number of Final Notices relating to individuals whereby it was found that they lacked fitness and propriety (honesty and integrity) after being convicted of various offences including conspiracy to defraud, handling stolen goods, money laundering, amongst others. Note these relate to a pre-SMCR period: Mr. C Sandhu; Ms. J Lewis; Mr. H Edwards; Mr. S Rea; Mr. M Nascimento.

6. Wind-down planning - FCA

Perhaps unsurprisingly the FCA have conducted a Thematic Review (TR 22/1) covering Observations on wind-down planning in light of COVID-19 and on the ongoing impact of it on businesses (amongst other things). Generally, they found that where they existed, most wind-down plans, processes and risk management frameworks (RMFs) remained at an early stage of maturity. Many had substantial gaps and did not reflect the minimum expectations highlighted in the FCA's Wind-Down Planning Guidance and FG20/1. In TR 22/1 the FCA outline that Senior managers should have clear lines of responsibility for adequate systems and controls, including winddown planning which might be food for thought for some firms.

7. Market Watch 69 - FCA

It can be challenging balancing the employment, regulatory and broader legal obligations on the firm when dealing of instances of misconduct. However, in its latest Market Watch the FCA have talked about instances of potential misconduct / market abuse of firms' own employees and have said that they understand firms will likely want to conduct detailed investigations. The FCA specifically remind firms of Article 16 of UK MAR and their obligation to submit a STOR without delay, once the firm has a reasonable suspicion that the relevant conduct could constitute market abuse (which may be before the full internal investigation is concluded and any information not available can be communicated at a later date). We have assisted many firms with navigating tricky misconduct issues, please do reach out if you would like any assistance.

To discuss the interlock of different requirements, please contact Richard Sims (Partner) and/or Andrea Finn (Partner).

8. Removal of regulatory permissions - FCA

Back in 2021 the FCA started its 'lose it or use it' initiative reminding firms to regularly review their regulatory permissions and asking firms who had not used a permission for 12 months to apply for cancellation. The SMCR angle? Well back in 2021 the FCA said expressly that reviewing firm permissions (and only keeping those needed) would help demonstrate effective oversight of the business and meet relevant obligations under the Senior Managers Regime. The FCA now has new powers to cancel or change regulatory permissions more swiftly which is something for Senior Managers to be aware of more generally and there are a number of references to senior managers and certified staff in the detail of the paper. For more information see the FCA's Policy Statement here.

9. Operational resilience - speech - PRA

At the end of April, David Bailey gave a speech on the next steps on the PRA's operational resilience supervisory roadmap. We won't go into much detail here, but he highlighted this area is one of the highest supervisory priorities. In his speech he outlines the key requirements and expectations of firms, initial assessments of firms' progress based on supervisory work conducted and what is next on the "OpRes" roadmap. There's a lot of interesting material but one to point out is that he highlights the interaction of the PRA's outsourcing / 3rd party risk management policy with the operational resilience policy. In particular, he reiterates that "whilst firms can outsource services, Boards and senior management cannot outsource their ultimate accountability and responsibility for their resilience". To discuss operational resilience, outsourcing or third party risk further please contact Rosali Pretorius (Partner).

10. Trading activity wind-down - SS1/22 - PRA

SS1/22 isn't effective until 3 March 2025, but it outlines the PRA's expectations for certain firms engaged in trading activities which may affect the financial stability of the UK. Where relevant the PRA expects firms to be able to execute full or partial wind down of their trading activities in an orderly fashion. We are not going to delve into the detail, but we want to highlight that responsibility for developing and maintaining the firm's recovery plan and resolution pack is a prescribed responsibility under the SMCR and the maintenance of trading activity wind-down (TWD) capabilities and of the TWD option will fall under this PR.

11. Skilled Persons Review Q4 21-22 - FCA

In Q4 21-22 the FCA commissioned 3 skilled person reviews into governance and individual accountability matters. These related to portfolio supervision firms, rather than those falling under the dedicated supervision firm bracket.

12. Consumer Duty - FCA

By way of reminder, we know that firms are working on their implementation of the Consumer Duty. Don't forget about the SMCR implications that we flagged previously, including that no single SM is to be responsible for compliance with all aspects of the Duty - each SM must take responsibility for the role that they play in delivering compliance with it.  Read more details in our December 2021 SMCR+ View.

Read our new Consumer Duty View here for more information, or please contact Alex Ainley (Partner) or Caroline Hunter-Yeats (Partner).

13. Senior Executive Accountability Regime (SEAR) - January 2023

Our Irish regulatory team continues to advise clients on preparations for the new individual accountability framework, expected to be in place by January 2023. The framework will include the SEAR, which will apply initially to banks and certain investment firms, and new conduct standards which will apply to all regulated financial services providers.

Let Derek Lawlor (Partner) know if you'd like to find out more about our SEAR toolkit, based on the SMCR toolkit, to assist Irish entities in complying with the new requirements.