SMCR+ View – March 2025

It feels like a turbulent time for the UK’s financial services regulators, with the Government’s new “Action Plan for Growth” published this week outlining a “radical” plan to “cut red tape and kickstart growth”, and a number of measures introduced against which the FCA and PRA will be measured over the next 12 months (further details are available in our article here). A number of the updates included in this SMCR+ View perhaps indicate that the FCA and PRA are already taking on board the government’s instructions regarding UK competitiveness and proportionate regulation, saying it will not take any further action on its Diversity & Inclusion (“D&I”) proposals (other (probably) than those on non-financial misconduct (“NFM”)), removal of the Consumer Duty Champion, and rowing back on their ‘name and shame’ proposals.

This SMCR+ View also covers updates to the Senior Manager application webpages, a Dear CEO letter for Asset Managers and various Consumer Duty updates.

1. FCA and PRA - Letters to the Treasury Select Committee

As you will have seen in our Flash SMCR+ View last week, the FCA and PRA announced via their letters to the Treasury Select Committee that they will not be taking forward their proposals on D&I, and the FCA confirmed that the NFM final rules are delayed, with the publication of the FCA’s “next steps” expected by the end of June this year. As we said before, we think it is potentially meaningful that the FCA refer to “next steps” and not the “final rules”.

We’ve now had a chance to review these letters in more detail, and whilst they are fairly concise, one point to mention in relation to the D&I proposals is that the PRA do not intend to return to the proposals until after the substantive implementation of new legislation in this area (which the FCA describe as a very active policy and legislative agenda). This includes legislation relating to employment rights, gender action plans, and disability and ethnicity pay gap reporting. Both regulators took the opportunity to reiterate their continued belief of the importance of D&I, particularly in relation to the culture, governance, decision making and risk management of firms; and the PRA confirmed that, in the meantime, it will continue to support voluntary industry initiatives and stay alert to group-think via its existing supervisory work.

Regarding the PRA and FCA’s work to review the impact of removing the bonus cap, the PRA have said this work will likely begin in the 2026/2027 financial year.

The FCA also used their letter to confirm that we can expect the FCA’s final policy on their approach to transparency of enforcement investigations by the end of June this year. This will not include the extremely controversial proposal to proactively name firms under investigation using a new public interest test – you can find a further deep-dive on this update in our Financial Markets Dispute View.

Please reach out to Penny Miller (Partner), Andrea Finn (Partner) and Amy Sumaria (Managing Associate) for further details.

2. FCA – new webpages for Senior Manager applications

The FCA have released two new webpages to guide firms in applying for senior management functions. This follows the publication of the FCA’s latest operating service metrics for Q3 2024/2025, which indicate that the FCA are determining approved person applications in an average of 42 days (the range being 31-59 days).

The first webpage outlines the application process, including the evidence needed to support the application - a lot of the content on this webpage confirms what we already know, but the FCA do provide some helpful guidance on the common reasons for delays in the application process, which, in addition to incomplete applications, include a lack of detail and/or full disclosures, insufficient detail about the capacity of the candidate, insufficient detail on skills gap analysis documents, and certain checks not being complete prior to submission (e.g. criminal record and regulatory reference checks).

The FCA also include details on “what a good application looks like” – no surprises here either… make sure the application is tailored to the candidate and, if relevant, explain why there are any gaps in the application.

The second webpage outlines case study applications, based on common scenarios, and what evidence the FCA would expect from firms.

We have a lot of experience supporting firms with successful Senior Manager applications – please do reach out to Penny Miller (Partner) or Amy Sumaria (Managing Associate) for any assistance with these.

3. FCA - Dear CEO Letter – Asset Management and Alternative Firms

Following the deluge of Dear CEO letters published last month (covered in February’s edition of SMCR+ View), there’s one more for those in the Asset Management or Alternatives sector, outlining the FCA’s supervisory priorities.

There is a distinct focus on private markets. Of a particular interest for SMCR+ View is the focus on conflicts of interest, and the FCA confirming that they will undertake a multi-firm review focusing on the oversight of conflicts of interest frameworks through governance bodies, amongst other things. These topics are also mentioned in the FCA’s findings from their multi-firm review of valuation processes for private market assets, with an action for firms to consider whether their governance arrangements ensure there is clear accountability for valuation, amongst other things.

Other areas of focus include surveillance on prudent risk management, liquidity management and operational resilience, engagement with firms with sustainability-related products, a multi-firm review of model portfolio services considering how these firms are applying the Consumer Duty, and the FCA pushing firms to be alert for financial crime risks, particularly in relation to ensuring firms’ due diligence and KYC systems and controls are appropriate.

If you have any questions on the content of the letter, please reach out to Catherine Weeks (Partner), James Wallace (Partner) or Amy Sumaria (Managing Associate).

If you want to be kept in the loop in relation to all things private funds, please reach out to James Wallace (Partner) to subscribe to our Private Funds View.

4. FCA – Consumer Duty updates

There have been a few recent updates in relation to the Consumer Duty, including confirmation from the FCA here and here that it no longer requires firms to have a Consumer Duty Champion (although firms can voluntarily retain this role).

The FCA also published findings of their review on firms’ approaches to the ‘consumer support’ outcome and examples of good and poor practice. This includes a section on culture, governance and accountability, with a number of areas for improvement identified, including:

• ensuring firms can demonstrate substantive steps to drive cultural change, including firms’ Boards and senior management ensuring that they are embedding a culture where good outcomes for consumers is at its core;
• firms’ should be able to evidence appropriate training to ensure staff understand their role in delivering good outcomes, particularly in relation to characteristics of vulnerability; and
• ensuring firms’ statements of purpose align with their obligations under the Duty.
  We have also published an article outlining the other good and poor practices identified – you can read more here.

The FCA also published its findings from its review of firms’ treatment of customers in vulnerable circumstances - please take a look at our article for a summary of these key findings.

Please reach out to Penny Miller (Partner) or Amy Sumaria (Managing Associate) for further details and sign up to Consumer Duty View for more timely updates on the Consumer Duty.

5. Other updates

• European Supervisory Authority (“ESA”) guidelines on the exchange of information system for assessing fitness & propriety (“F&P”): One for those operating in the EU - ESMA published a new webpage with the ESAs joint guidelines on the system established for the exchange of information relevant to the assessment of the F&P of holders of qualifying holdings, directors and key function holders of financial institutions and financial market participants by competent authorities.

• FCA findings from review of financial advisers: The FCA have published its findings from their review of whether financial advisers are delivering the ongoing advice services that consumers have paid for. This sets out good and poor practices, including in relation to systems, controls, monitoring and resources around suitability reviews, as well as management information, policies and record-keeping.

• FCA Quarterly Consultation 47 – Amendments to the Training & Competence (“TC”) Sourcebook: The FCA have published their proposals for annual amendments to the TC Sourcebook, which updates the list of accredited bodies and appropriate qualifications table. This includes the removal of the CBI and the CFA from the list of accredited bodies.

• Wholesale trading firms - FCA multi-firm review of liquidity risk management: The FCA published their findings following its review of sell-side wholesale firms trading on their own behalf or offering client access to primary and secondary markets. The FCA includes examples of good and poor practice relating to governance and risk culture, with a particular focus on non-commensurate approaches to liquidity risk management and weaknesses in respect of liquidity stress testing. The FCA warns that firms that provide inaccurate or incomplete regulatory data may be in breach of their responsibilities under Principle 11.

6. FCA – Freedom of Information Data

We’ve come across some FOI data that may be of interest, although first a health warning: FOI data is notoriously hard to unpick and we also do not have all the details of the original requests.

• Whistleblowing: In this FOI response, the FCA confirms that they have received 1,143 whistleblowing complaints in 2024, with 629 of these relating to compliance, 407 relating to F&P, 348 relating to consumer detriment, 352 relating to the culture of the organisation, and 41 relating to the Senior Managers Regime (amongst other categories such as systems and controls, fraud, the Consumer Duty, AML). Interestingly, this is the highest number of whistleblowing complaints that the FCA have received since 2019, with a significant increase in those relating to compliance, culture, and consumer detriment, for example. The FCA have also published their Whistleblowing quarterly data for 2024 Q4, noting that 292 reports were received in this period, the majority of those in relation to compliance and F&P.

• Investigations/enforcement: Here, the FCA disclose that from 1 March 2024 to 31 October 2024, 29 enforcement investigations were opened and 124 were closed (the average time taken to close those cases was 3.2 years). In total, as of 31 October 2024 there were 406 open investigations, 271 into individuals and 135 into firms. 199 of these relate to unauthorised business, 56 relate to insider dealing, 39 relate to financial crime, 39 relate to retail conduct, 24 relate to misleading statements (amongst other categories). As of 31 October 2024, there were 21 open cases into Senior Managers and 2 open into certified staff. There’s a breakdown of which SMF functions have been the subject of these investigations between Q1 2019 to Q4 2024 (note SMCR only came into force in Q4 2019, so the data is strange in this respect). However, this data shows that 20 of the 52 cases opened in relation to SMFs relate to SMF 1s (CEOs) (who may also hold other SMFs) and 18 of 52 relate to SMF 16s (3 of which are also SMF 1s (amongst other SMF roles) which suggests they are SMFs for very small firms). There are also a number against governing body members (i.e. SMF 3s and SMF 27s).

• In this FOI request (note, we are not clear of the data parameters the FCA is responding to) the FCA states that in relation to the 26 open investigations into individuals (c. Q2/Q3 2024, we think) they reference the primary issue for these investigations was as follows: (i) honesty, integrity and reputation (7 cases), (ii) NFM (1 case), (iii) misleading statements (3 cases) (some of you may have been following the financial press in relation to one matter that has been taken to the Upper Tribunal recently, which we expect fell in this bucket), (iv) systems and controls (3 cases), and (v) individual Senior Manager failings (3 cases). Other categories including non-disclosure, CASS, fraud against consumers, and the FCA’s Suitability Threshold Condition. Three NFM cases were closed in 2023 with no enforcement action being taken.

• The FCA also published the number of Skilled Persons Reports commissioned in 2024/2025 Q3, confirming that 13 were commissioned in this period, the majority of which were in relation to firms in the Consumer Investments market (6), and the majority in relation to financial crime (5).

7. FCA – Final Notices and Decision Notices

A. FCA Decision Notice - Mr. Crispen Odey: The FCA have proposed fining Mr. Odey £1.8 million and banning him from UK financial services for a lack of integrity. The FCA have found him to lack integrity for (i) deliberately frustrating OAM’s ongoing disciplinary process into his conduct to protect his own interests (i.e. the FCA state that he dismissed OAM’s Executive Committee (“ExCo”) members on two occasions in order to remove the risk of ExCo terminating his OAM position), and (ii) for showing a “reckless disregard for OAM’s governance”, which caused OAM to breach its own regulatory requirements. For example, after dismissing OAM’s ExCo, Mr. Odey was the only decision maker for OAM and thus was in breach of SYSC 4.2.2R which requires firms to be managed by at least two persons, and FUND 3.7.2R, which requires the functional and hierarchal separation of risk management and portfolio management). Mr. Odey has referred the decision to the Upper Tribunal (“UT”) meaning the Decision Notice will have no effect pending determination of the case by the UT.

B. FCA Final Notice – Mr. Andrew Pearse and Mr. Surjan Singh: The FCA has banned Mr. Pearse and Mr. Singh from financial services (both former Credit Suisse managing directors) for lacking honesty and integrity following their convictions in the US for arranging corrupt loans to the Republic of Mozambique (the so called “tuna bonds” case). The FCA was clear in the Final Notices that bribery and corruption are not acceptable within UK financial markets.

C. Supreme Court – FCA vs Mr. Markos Markou: Could this be the start of an FCA inspired soap opera? First, a recap: in 2021 the FCA published a Decision Notice against Mr. Markou which proposed a fine of £25,000 and banning him from performing a role within financial services. This was because of Mr. Markou’s allegedly reckless failure to provide appropriate oversight over the mortgage business he was an approved person for, and, even after multiple communications from the FCA, he allegedly failed to implement satisfactory systems and controls. Mr. Markou referred this to the Upper Tribunal who disagreed with the FCA and asked it to reconsider the proposed ban and directed that a fine should not be imposed. The FCA (rather remarkably) said that this was “incorrect and irrational” and referred the matter to the Court of Appeal. In February 2025’s SMCR+ View we noted that the Court of Appeal had upheld the FCA’s decision (albeit the value of the fine had been reduced) on the basis that Mr. Markou had been reckless and that amounted to a lack of integrity. In the latest twist, Mr. Markou has lodged permission to appeal the Court of Appeal decision at the Supreme Court. Whilst relating to actions taken/inaction during the pre-SMCR era, it will still be interesting to see if this gets heard by the Supreme Court and, if it does, any analysis as to recklessness and when it does, or does not, amount to a lack of integrity…

D. Others of interest: The FCA has started criminal proceedings against two individuals for alleged fraud, forgery and money laundering. The FCA banned Mr. David Cooke due to his clear and serious lack of honesty and integrity through his caution for fraud by dishonestly making false representations. The FCA also issued a Final Notice against Mako Financial Markets Partnership LLP (“Mako”) in relation to financial crime failings and imposed a fine of £1,662,700 for breaches of the FCA’s Principle 2 and Principle 3. In particular, Mako had inadequate policies and procedures for identifying, assessing and mitigating the risk of financial crime, and failed to exercise due care, skill and diligence in assessing, monitoring and managing the risk of financial crime. Poor governance is referenced as reason for the failings, amongst other things.

If you have any questions on any of the above enforcement actions, please reach out to Emma Sutcliffe (Partner) and Thomas Makin (Managing Associate).