SMCR+ View – June 2025

Summer is here, but the FCA and PRA's Consultation Paper reviewing the SMCR is not, and neither is the non-financial conduct ("NFM") update. However, as you may have seen in the recent financial press, the FCA has spent some of June consulting with certain firms on its draft final rules in relation to NFM. Whether we see these by the end of June is yet to be seen, but it would be a quick turnaround by the FCA if we did, so it looks like 'next steps' may be another announcement saying that they will be published soon...

Watch this space and do get in touch if you have any immediate questions. In line with our new format, this issue also covers:

• The FCA proposing to scrap the requirement to submit nil returns for the REP008 form, which details Conduct Rule breaches by Conduct Rules staff (excluding Senior Managers), and other proposals to streamline reporting requirements for firms.  

• Findings from the FCA's review of smaller asset managers and alternative business models, with interesting observations around identifying conflicts of interest arising from Senior Managers holding multiple roles with overlapping responsibilities, and findings in relation to the creation, review and approval of the Consumer Duty Board reports.

• Updates to the FCA's Enforcement Guide following the removal of the 'name and shame' proposals.

• The PRA's updates to its Supervisory Statement SS 3/19 on managing climate-related risks, including additional details in relation to the governance expectations around climate-related risks, particularly in relation to the role of the Board and the Senior Manager responsible for identifying and managing financial risks from climate change. 

• A summary of the latest FCA enforcement actions, relating to "regulated people".

• Other updates, including an FCA speech relating to market abuse, proposed changes to whistleblowing legislation (sanctions related), updates to the FCA's supervisory correspondence webpage, and FCA complaints data for 2024 H2.

As always, if you have any questions or feedback, please do let us know.

1. FCA - REP008 form nil returns (and other FCA streamlining)

The FCA has issued a number of proposals to streamline current reporting requirements for firms. Is it crowds cheering that we can hear?

In the FCA's Quarterly Consultation Paper (CP 25/16) the FCA proposes to remove the requirement for around 36,000 firms to submit nil returns for the annual REP008 form; the form which details reportable Conduct Rule breaches by Conduct Rule staff (other than Senior Managers) for firms. The FCA's consultation closes on 30 June 2025 and, if the FCA's proposals are made final, firms will only need to submit this form if they have reportable Conduct Rule breaches covering the relevant period, or if they have follow-up notifications relating to previous submissions. If made final, these changes will come into force by October 2025 meaning firms will not have to submit nil returns this year (although it's worth noting the form will still appear on RegData). The FCA does drop in a little warning to say that if firms do fail to submit forms when they should have, it may bring the 'nil return' back. If this approach is successful the FCA will consider rolling this approach out to other nil return submissions. For limited permission consumer credit firms, the FCA is also consulting on changing the reporting period to align with the calendar year, rather than relevant firms' accounting reference date.

These changes are part of the FCA's drive to be a "smarter regulator" and there have been many similar changes proposed or introduced by the FCA since SMCR+ View's last issue, including this consultation (CP 25/13), closing on 24 July 2025, applicable to regulated firms that report complaints data which proposes to consolidate and streamline existing complaints related returns (among other things). There's also this FCA update confirming that it will be reviewing and updating around 11,000 requirements, limitations and directions applied to over 9,000 firms, in order to check the data that it holds is still accurate, and reflect any changes to legislation and firms' business models since they were imposed. And finally, the FCA has also introduced in PS 25/3 new regulatory returns to collect data from consumer credit firms with permission to carry out credit broking, debt adjusting, debt counselling and providing credit information services.

This effort to be a "smarter regulator" comes as the Financial Services Regulation Committee issued its report "Growing Pains: clarity and culture change required" (an interesting, if not particularly glowing, read - the summary of regulatory barriers to growth on page 7 is particularly noteworthy), and the FCA published its own statement highlighting its ongoing work to achieve its secondary objective, which includes stripping out data requests, retiring outdated supervisory documents, and working on redress reforms to give consumers and firms greater certainty.

If you have any questions, please reach out to Penny Miller (Partner) and Amy Sumaria (Managing Associate).

2. FCA - Findings from smaller asset managers and alternatives business model review

The FCA has published its findings from its review of smaller asset managers and alternative business models, which focus on three main areas: high-risk investments, conflicts of interest, and the Consumer Duty.

The most relevant findings from a SMCR+ View perspective are those relating to conflicts of interest. The FCA found that some firms had ineffective conflict management systems and gave the example of some firms failing to identify conflicts arising from senior staff holding multiple roles which resulted in overlapping responsibilities. The FCA said that where one individual holds all SMFs, the firm should assess whether it complies with the FCA's 'Appropriate resources' threshold condition to avoid governance and control weaknesses. The FCA gives clear examples of good practice when it comes to conflicts of interest and states that good governance involves senior management and compliance teams regularly reviewing and discussing conflicts management.

From the perspective of the Consumer Duty (the "Duty"), the FCA observed that some firms hadn't fully considered its application, and emphasised that the firm's Board and senior management are responsible for ensuring the Duty is properly embedded. Regarding Board reports, the FCA noted a general lack of formality in their creation, review, and approval, which could prevent management from effectively assessing, understanding, and responding to the outcomes experienced by retail customers. Additionally, the FCA found that some firms were unable to provide evidence of effective scrutiny of the Board reports by governing bodies and senior management. This emphasises the importance of having good quality Board reports and appropriate minutes to effectively demonstrate the role of senior management and governing bodies in embedding the Duty internally.

You can find further details on the FCA's findings in our Insights article here. We provide a lot of support to clients on their Consumer Duty Board reports - if it would be helpful to discuss how we might support you, please contact Amy Sumaria (Managing Associate), Rosie MacArthur (Managing Associate) and Penny Miller (Partner).

3. FCA - Updated Enforcement Guide

The FCA published its much awaited (and long debated!) update to its Enforcement Guide, with the changes coming into force on 3 June 2025. There's been much discussion on the FCA's removal of the 'name and shame' proposals (as discussed in our Flash SMCR+ View). What remains is the ability for the FCA to announce certain details of their investigations in 'exceptional circumstances', which will be supplemented by the ability of the FCA to:

• announce where there is suspected unauthorised or criminal activity;

• reactively confirm an investigation; and

• share information on an anonymous basis where it is desirable for education or to encourage compliance with FCA Rules.

Further details on other points that caught our eye can be found in our Financial Markets Disputes View. Please do reach out to Emma Sutcliffe (Partner) and Thomas Makin (Managing Associate) for further details.

4. PRA and FSB - Climate-related risk and sustainability linked products

We have a number of ESG-related governance updates, including the PRA's Consultation Paper (CP 10/25) which will update Supervisory Statement 3/19 on enhancing banks' and insurers' approaches to managing climate-related risks. The PRA states that the proposals add detail and clarity to the existing governance arrangements enabling firms to make further progress. There is a significant amount of detail in here around governance expectations, the role of the Board, and the role of the Senior Manager responsible for identifying and managing financial risks from climate change.

By way of brief summary, the proposals emphasise the need for Boards to set and own their firms' climate risk appetite. The PRA says that it has observed that climate-related risk analysis presented to Boards is often unclear and insufficiently specific or targeted, which can limit the ability of the Board in assessing the risks and providing effective challenge, which results in climate-related risks being inappropriately assessed and managed. The PRA therefore suggests improved information being provided to Boards by management bodies, and that Boards receive training on climate-related risks and the tools to manage them. This speech was published around the same time as CP 10/25, where the PRA reiterated the need for senior management to ensure they have appropriate analysis to enable them to understand the climate-related risks they are accepting before signing off their firm's climate risk appetite.

The PRA also suggests that the Board ensures there's a periodic review of the firms' risk appetite, climate-related risk management practices and strategy; the Senior Manager responsible for identifying and managing financial risks from climate change will be responsible for implementing this review. The PRA also states that it has generally not observed firms establishing climate-related risk appetites that are cascaded from the Board to the business lines; supported by an appropriate framework of risk metrics and limits. The FCA is proposing that the Board agrees climate-specific risk appetite statements for material climate-related risks identified in the firm risk register, and that risk appetite and risk metrics/limits should be defined at both firm and business line level. The PRA goes as far as to propose that Boards should include risk appetite and tolerance levels for outsourced and third-party arrangements that may be exposed to climate-related risks or introduce climate-related risks to the firm through their activities. The consultation closes on 30 July 2025.

Because we're talking about ESG, the Financial Markets Standards Board ("FMSB") has published a Statement of Good Practice on the governance of sustainability-linked products. This may be helpful for relevant firms when considering the governance frameworks in place around such products.

For more ESG-related updates, you can sign up to our ESG View here, or reach out to Sonali Siriwardena (Partner). We've assisted a lot of firms with various governance-related queries, including around the governance of ESG-related matters - please do reach out to Penny Miller (Partner) and Amy Sumaria (Managing Associate) for any questions on this.

5. Enforcements

• FCA - Insider dealing prosecution: The FCA published a press release indicating that the two brothers have pleaded guilty to insider dealing. Mr. West had obtained the inside information from brokers that contacted him legitimately, but he then traded using this information, and disclosed this information to his brother who also traded using this information. The total profits from the dealing were £42,948.

• FCA - Final Notice: Another "tuna bonds" related Final Notice (the first was mentioned in March 2025 SMCR+ View). This relates to Ms. Subeva's conviction in the US for arranging corrupt loans to the Republic of Mozambique. The FCA found Ms. Subeva to lack integrity and fitness and propriety, and banned her from performing any function in relation to any regulated activity. The FCA states this sanction is meant to be a deterrent message that those who engage in conspiracies to launder money will be prohibited by the FCA from working in financial services in the future.

• FCA - Final Notice: Following the Decision Notices for Mr. Fox and Mr. Price, referenced in September 2023's SMCR+ View, and the subsequent Upper Tribunal hearings, the FCA has now published Final Notices for Mr. Fox and Mr. Price relating to failings in their pension transfer advice. The FCA fined Mr, Fox £567,584 and Mr. Price £465,415 and has banned them from working in financial services.

• FCA - Final Notice: Mr. Olver has been prohibited from working in financial services after committing fraud whilst a certified person (Significant Management Function) working as Head of Finance. Like many FCA Final Notices, it's not particularly insightful for firms as Mr. Olver was criminally convicted of certain fraud offences, so his lack of integrity and honesty was deemed clear.

Please reach out to Amy Sumaria (Managing Associate) with any questions you may have.

6. Some Other Interesting Updates

• FCA - Market Abuse speech: In this speech, the FCA emphasised its "three Ps" approach to tackling market abuse - being predictable, proportionate, and purposeful. The FCA underscored the value of its MarketWatch newsletters and Primary Market Bulletins in identifying high-risk areas. The FCA stress the importance of good governance and data in market abuse surveillance. Additionally, the FCA shared insights on Suspicious Transaction & Order Reports ("STORs"), noting that it had received 4,528 STORs in 2024, with 3,495 related to insider dealing and 581 to market manipulation. This continues the increasing trend over previous years.

• Government - Whistleblower protections for reporting sanction breaches: The Government has confirmed that it intends to make changes to whistleblowing legislation to facilitate the enforcement of UK sanctions. In particular, it is proposed that HM Treasury is added as a new prescribed person for disclosures relating to breaches of UK sanctions. Changes will also prescribe additional sanctions-related matters that can be disclosed to the Secretary of State for Business and Trade and Secretary State for Transport. No timing has been given for these changes. You can find further details in our Article here. Please reach out to Alexandra Webster (Managing Associate) if you have any further questions.

• FCA - Update to supervisory correspondence webpage: As teased in April's SMCR+ View, the FCA has now updated its supervisory correspondence webpage. The FCA has also now marked most (but not all) supervisory correspondence published before April 2022 as "historic", stating that it does not expect firms to refer to these historical letters when interpreting the FCA's current supervisory expectation, but they remain available for reference. There are some pre-April 2022 Dear CEO letters that the FCA specifically references as still being relevant.

• FCA - Complaints Data: This may be of interest for certain Senior Managers within your firm. The new FCA page provides an overview of financial services firms' complaints reported to the FCA during 2024 H2 (1 July to 31 December 2024), including the latest trends and analysis by product groups. Most products saw a decrease in their complaint numbers, with the two products with the largest percentage increases being investment and protection packaged multi products.

• FCA - PICES: PS 25/6 introduces the final rules for the PICES ("Private Intermittent Securities and Capital Exchange System") sandbox; a new type of share trading platform that allows buyers and sellers of shares in private companies to trade those shares during intermittent trading periods. We previously referenced this in March 2024's Markets View. The final rules require PICES companies (as defined) to disclose "core disclosure information", including a management overview which must include a summary of the management structure, the identity of the directors and senior management, their previous experience and qualifications, and their role for the PICES company, potential conflicts of interest involving these individuals between their duties to the PICES company and their private interests/duties, and certain fitness and propriety type disclosures (e.g., convictions in relation to fraud offences for at least the previous 5 years).