PS18/15: Extending the Senior Managers and Certification Regime to insurers

Policy Statement
PS18/15*
July 2018
Extending the Senior Managers & Certification Regime to insurers – Feedback to CP17/26 and CP17/41 and near-final rules

PS18/15 Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers In this Policy Statement we report on the main issues arising from Consultation Papers 17/26 Individual Accountability: Extending the Senior Managers & Certification Regime to insurers and 17/41 Individual Accountability:
Transitioning insurers and individuals to the Senior Managers & Certification Regime and publish the near-final rules. We have developed the policy in the underlying rules in the context of the existing UK and EU regulatory framework. We will keep the policy under review to assess whether any amendments will be required due to changes in the UK regulatory framework, including as a result of any negotiations following the UK’s vote to leave the EU. Please send any comments or queries to:
Governance & Professionalism Policy
Strategy & Competition
Financial Conduct Authority
12 Endeavour Square,
London E20 1JN
Email:
ps18-15@fca.org.uk
You can download this Policy Statement and all FCA publications from our website: www.fca.org.uk. If you would like to receive this paper in an alternative format, please call 020 706 0790 or email:
publications_graphics@fca.org.uk or write to: Editorial and Digital team, Financial Conduct Authority, 12 Endeavour Square, London E20 1JN. How to respond Contents 1 Overview 3
Part 1:
Feedback to CP17/26:
Extending the Senior Managers & Certification Regime to insurers 7 2 Senior Managers Regime 8 3 Certification Regime 32 4 Fit and Proper Requirements 41 5 Conduct Rules 49 6 UK Branches of Foreign Firms 57 7 Insurance Special Purpose Vehicles 59 8 Feedback to our Cost-Benefit Analysis 61
Part 2:
Feedback to CP17/41:
Transitioning insurers and individuals to the Senior Managers & Certification Regime 64 9 Transitional Arrangements 65 10 Conversion – Solvency II firms and large Non‑Directive Firms 69 11 Conversion – Small Non-Directive Firms, small run‑off firms 75 12 Conversion – Insurance Special Purpose Vehicles 78 13 Forms 80 14 Consequential amendments 90
Annex 1
List of non-confidential respondents to CP17/26 and CP17/41 92
Annex 2
Abbreviations in this document 93
Annex 3
Combined list of FCA and PRA Senior Management Functions 95
Annex 4
Combined list of FCA and PRA Prescribed Responsibilities 96
Appendix 1
Near-final Rules 100 returns you to the contents list takes you to helpful abbreviations How to navigate this document onscreen

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Extending the Senior Managers & Certification Regime to insurers 1 Overview Introduction
1.1 We have created a new regime for firms and the individuals within them – the
Senior Managers & Certification Regime (SM&CR) – to strengthen accountability in financial services.
1.2 In July 2017, our Consultation Paper 17/26 (CP17/26), ‘Individual accountability:
extending the Senior Managers and Certification Regime to insurers’ asked for views on our proposal to extend the SM&CR to insurers.
1.3 In December 2017 we published a second Consultation Paper, CP17/41, ‘Individual
accountability: Transitioning insurers and individuals to the Senior Managers & Certification Regime.’ This set out how we proposed to move insurers and individuals from the revised Approved Persons Regime (revised APR) to the SM&CR.
1.4 This Policy Statement (PS) sets out our response to the feedback received to these
two consultations.
1.5 We published a separate PS that sets out our response to the feedback received on
our consultations for the extension of SM&CR to solo-regulated firms. Please see PS18/14.
1.6 The instrument in Appendix 1 provides the near final rules, which will apply to both
Insurers and FCA solo-regulated firms.
1.7 HMT has confirmed that the SM&CR will apply to insurance firms
from 10 December 2018. This start date for the regime is reflected in the Handbook Instrument in Appendix 1.
1.8 We have provided a separate ‘Guide to the SM&CR’. This sets out the main features of
the regime and gives the details of how the move to the SM&CR will happen. If you are a firm preparing for the SM&CR, we recommend that you read the guide.
1.9 This PS should be read with the PRA’s PS15/18.
Who does this affect?
1.10 This PS will interest all insurers and reinsurers regulated by the FCA and the PRA. It will
be of specific interest to:

Solvency II firms (all firms in scope of the UK rules implementing the Solvency II
Directive). This includes the Society of Lloyd’s, managing agents, incoming branches of non-UK firms and Insurance Special Purpose Vehicles (ISPVs).

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Extending the Senior Managers & Certification Regime to insurers

All insurers outside the scope of the Solvency II Directive Non-Directive (referred to
in this PS as Non-Directive firms or NDFs). A small NDF is a firm where the value of assets for all the regulated activities it carries out is £25m or less. NDFs who exceed this threshold are ‘large’ NDFs. Both the Prudential Regulation Authority (PRA) and the FCA use these definitions.
Small run-off firms (all insurers with less than £25m technical provisions that
no longer have permission to write or acquire new business). This category also includes firms that are not treated as Solvency II firms because they have had the rules which implement the Solvency II Directive dis-applied to them (Rule 2 of the PRA’s Rulebook ‘Solvency II firms: Transitional Measures’).
1.11 This PS will not be relevant to the following:
FCA solo-regulated firms in scope of the proposals set out in CP17/25 and CP17/40
(please read PS18/14 for the relevant rules for these firms)
firms that come under the existing Banking SM&CR
incoming EEA firms providing cross-border services only – these firms do not come
under the SM&CR
Payment Services firms – these firms do not come under the SM&CR
1.12 This PS will not affect Approved Persons of Appointed Representatives of firms.
Principal firms, including the Senior Managers of principal firms, remain fully responsible for ensuring that their Appointed Representatives and networks comply with our rules. Context
1.13 This Policy Statement sets out changes to how we regulate people working in
insurance firms. The SM&CR replaces the FCA’s revised Approved Persons Regime (APR) and amends PRA’s Senior Insurance Managers Regime (SIMR) that currently apply to insurers.
1.14 The aim of the new SM&CR is to reduce harm to consumers and strengthen market
integrity by creating a system that:
encourages staff to take personal responsibility for their actions
improves conduct at all levels
makes sure firms and staff clearly understand, and can demonstrate, who does what.
1.15 In this PS we summarise changes to our rules that will apply:
The Senior Managers Regime (SMR) to all insurers. This focuses regulatory approval
on fewer senior individuals in a firm than under the current APR.

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The Certification Regime to all insurers. This requires firms to assess the fitness
and propriety of specific individuals who could harm the firm, its customers or the market.
The Conduct Rules to most staff in insurers.
1 www.fca.org.uk/news/speeches/women-finance-keeping-pressure-progress Summary of feedback and our response
1.16 We received 21 responses to CP17/26 and 10 to CP17/41, including firms and
trade associations.
1.17 We received over 300 responses to the consultations for extending SM&CR to insurers
and solo-regulated firms (CP17/26, CP17/25, CP17/41 and CP17/40).
1.18 We also engaged with various trade bodies and firms in several events, following
publication of our proposals. We considered their feedback to our proposals in this PS.
1.19 Most of these responses supported our proposals or asked for further clarification on
how the rules apply.
1.20 We will implement the proposals set out in CP17/26 and CP17/41 as proposed.
Equality and diversity considerations
1.21 We have considered the equality and diversity issues that may arise from the measures
in this PS.
1.22 Overall, we don’t consider our rules adversely impact any of the groups with protected
characteristics ie age, disability, sex, marriage or civil partnership, pregnancy and maternity, race, religion and belief, sexual orientation and gender reassignment.
1.23 A consumer body suggested that we review whether the fit and proper requirements
support the recruitment of diverse candidates into leadership positions in firms. We have responded to this feedback in Chapter 4.
1.24 The same respondent considered that the SM&CR should be used to address diversity
on boards across the industry. While we agree that diversity is an important issue for firms and industry to address, we don’t think SM&CR is the best mechanism to deal with this. There are a number of other initiatives at the UK and EU level that we believe are better placed to improve diversity. Our supervision teams will continue to impress on senior management the importance of diversity in their teams, and we may ask firms directly about gender diversity policies.1

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Extending the Senior Managers & Certification Regime to insurers Next steps and implementation dates
1.25 The legal instrument accompanying this Policy Statement contains near-final rules.
Although they are near-final in most respects, they:

may be amended by subsequent Handbook changes, for example those relating to
the UK’s exit from the European Union, or SM&CR optimisations
are subject to commencement regulations to be made by HM Treasury
1.26 Insurers will move to the new regime on 10 December 2018. Please refer to
Chapter 9 of this PS where we describe transitional arrangements for insurance firms.
1.27 Firms should check whether they have the appropriate people in the correct approved
functions before the move of approved individuals from the revised APR to the SM&CR takes place. This will help to make the transition to the new regime as effective as possible.

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Extending the Senior Managers & Certification Regime to insurers
Part 1:
Feedback to CP17/26:
Extending the Senior Managers &
Certification Regime to insurers

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Extending the Senior Managers & Certification Regime to insurers 2 Senior Managers Regime
2.1 In this chapter, we summarise the feedback we received on our proposed rules and
guidance for the Senior Managers Regime (SMR). Most respondents supported our proposals. However, some asked us to clarify aspects of our rules and guidance. Others asked for illustrative examples. Who should read this section? Solvency II firms and large NDFs should read this chapter. If you are a small NDF or a small run-off firm, paragraphs 2.61 – 2.63 will be relevant to you. Senior Management Functions for Solvency II firms and large Non‑Directive Firms Our proposals
2.2 In CP17/26, we proposed the following executive functions as FCA Senior Management
Functions, as set out in Table 1. We also proposed two Oversight roles as Senior Management Functions, which are set out in Table 2.
Table 1: Executive Senior Management Functions – Solvency II firms & large NDFs
FCA Functions Description
SMF3 – Executive Director A director of a firm, other than a NonExecutive Director. SMF16 – Compliance Oversight This is the person responsible for the compliance function in the firm and reporting to the governing body on this. SMF17 – Money Laundering Reporting Officer This is the person who has responsibility for overseeing the firm’s compliance with the FCA’s rules on systems and controls against money laundering. SMF18 – Other Overall Responsibility This function applies where a senior executive is the most senior person responsible for an area of the firm’s business but they do not perform any other Senior Management Function. Many firms won’t need this function as the people ultimately responsible for everything the business does will already be covered by other Senior Management Functions. But it gives flexibility and recognises the diversity of business structures in different types of firms. This is discussed in more detail below in the section on ‘Overall Responsibility’.

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Extending the Senior Managers & Certification Regime to insurers FCA Functions Description SMF23b – Conduct Risk Oversight Officer (Lloyd's only) The function will be responsible for overseeing the conduct of business standards required by the Society for the Managing Agents that write business at Lloyd’s. Our aim is that a Senior Manager in Lloyd’s is clearly accountable for monitoring and overseeing Managing Agents’ compliance with the Lloyd’s conduct of business standards. This accountability won’t overlap with the accountabilities that SMFs in Managing Agents must have. Senior Managers in Managing Agents have a role to play in ensuring the highest standard of conduct within their firms. They should already be accountable for mitigating conduct of business risks. This won’t change, following the introduction of this function. SMF27 – Partner Function A partner in a firm, other than a limited partner in a partnership registered under the Limited Partnership Act 1907. PRA Executive functions (for information) SMF1 – Chief Executive SMF2 – Chief Finance Function SMF4 – Chief Risk Function SMF5 – Head of Internal Audit SMF6 – Head of Key Business Area SMF7 – Group Entity Senior Manager SMF24 – Chief Operations Function SMF20 – Chief Actuary SMF21 – With-Profits Actuary SMF22 – Chief Underwriting Function SMF23 – Underwriting Risk Oversight Function (Lloyd’s only)
Table 2: Oversight Senior Management Functions – Solvency II firms & large NDFs
FCA Functions Description
SMF13 – Chair of Nominations Committee If the firm has a Nominations Committee, this is the person who chairs this committee. SMF15 – Chair of the With-Profits Committee or the person(s) responsible for the with-profits advisory arrangement If the firm has a With-Profits committee, this is the person who chairs this committee. The person(s) responsible for the With‑Profits advisory arrangement are also covered by the definition of the Chair of the With‑Profits committee. PRA Senior Management functions (for information) SMF9 – Chair SMF10 – Chair of Risk Committee

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Extending the Senior Managers & Certification Regime to insurers FCA Functions Description SMF11 – Chair of the Audit Committee SMF12 – Chair of Remuneration Committee SMF14 – Senior Independent Director Feedback received
2.3 In CP17/26, we asked the following three questions:
Q1: Does the proposed list of FCA Senior Managers cover the appropriate roles, ie the most senior decision makers within a firm? Q2: Are there any other roles that the FCA should consider specifying as SMFs? Q3: Are there any proposed Senior Managers that the FCA should consider excluding?
2.4 Most respondents supported the list of SMFs we proposed for SII firms and large NDFs.
2.5 Several respondents asked for more clarity about how our SMFs worked with the PRA’s
rules. For example, the difference between the PRA SMF 6 (Head of Business Unit) and the FCA SMF 18 (‘Other Overall Responsibility’). Some respondents thought that the ‘Overlap Rule’ (the rule that explains what happens if a person holds a specific FCA role and PRA role that ‘overlap’) could confuse firms, particularly which roles have been applied for and when, and what approvals have been granted. They felt this would increase firms’ workload. Several respondents said they were particularly concerned that differences between the FCA and PRA Senior Management Functions could cause duplicated roles and inconsistent practice for firms.
2.6 Some respondents said there could be confusion if there wasn’t an SMF assigned to
every business unit. Some suggested that the Head of HR and the Chair or members of the Product Oversight & Governance Committee should be specific SMFs.
2.7 One respondent asked whether all Executive Directors should be designated under
SMF3, and some asked us to clarify if general insurers needed to appoint a Money Laundering Reporting Officer (MLRO).
2.8 Respondents also asked us to confirm that Non-Executive Directors who were not
specified as Chairs of key committees would not be SMFs.
2.9 A few respondents suggested excluding the legal function from the SM&CR to
protect and maintain legal privilege. Some also asked for more clarity on the FCA’s expectations on the roles of the General Counsel and Heads of Legal Function under the regime.

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Extending the Senior Managers & Certification Regime to insurers Our response We are introducing our proposals as consulted on. Who should hold a Senior Management Function We expect that the people that hold Senior Management Functions (Senior Managers) will be the most senior people in a firm responsible for a business area, function or activity. Interaction with the PRA There may be cases where a Senior Manager applies to perform both a PRA and FCA Senior Management Function at the same time. In this case, we would apply an ‘Overlap Rule’. The Overlap Rule in SUP10C.9.8 applies when a firm is seeking approval from the PRA for a candidate to perform a PRA-designated SMF and also intend this candidate will perform an FCA SMF, once the PRA gives its approval. For example, if a firm is seeking approval for an SMF2 – Chief Finance Officer (CFO) who will also be appointed to the Board (SMF3 – Executive Director) at the same time, then they only need to make one application to the PRA. The Overlap Rule ensures the approval covers both roles. In this example, the Overlap Rule works by dis-applying the FCA SMF3 – Executive Director function. The function will not appear on the register. But, the Senior Manager’s SoR must clearly describe the individual’s accountabilities under both roles. The rule aims to reduce the administrative burden on firms by streamlining the approvals process. The Overlap Rule only applies if the firm’s application for PRA approval states that the person will also be performing an FCA–designated SMF. Where the Overlap Rule doesn’t apply, firms should also apply to the FCA for approval of the FCA SMF. It is important that firms and individuals understand that we (and the PRA) will still hold the individual to account for both halves of their role. The Overlap Rule is simply to avoid the need for two applications for the same person and so reduce the administrative burden. The Overlap Rule applies to FCA governing functions only. For example, if an individual is put forward for an SMF2 (a PRA function) and an SMF16 Compliance Oversight Function, which is an FCA ‘required function’, the firm will need to apply to both the FCA and PRA separately. In all cases, the individual’s SOR would need to reflect details of all the functions and roles they perform at SMF level. Removing the Overlap Rule would increase the workload and administrative burden on firms. Also, FSMA requires the FCA to minimise the circumstances in which the same person needs FCA and PRA approval for performing a controlled function in the same firm. So we will proceed with our proposals as consulted in CP17/26. We encourage firms to refer to SUP10C.9.9G, which gives some examples of how the Overlap Rule works in practice.

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Extending the Senior Managers & Certification Regime to insurers The PRA leads on looking at approval applications for PRA-designated SMFs. But the PRA need our consent before approving an application. If we don’t give this, the PRA will refuse the approval application. Duplication of roles between the FCA and PRA We have assessed respondents’ feedback and do not consider there is an overlap or duplication of roles between the PRA and FCA’s functions. We recognise that the Other Overall Responsibility Function (SMF18) may be causing confusion. We have set out additional feedback on this in the section on Overall Responsibility below. Firms take different approaches to the way they allocate Overall Responsibility for human resources, so we have not proposed a separate function for Head of Human Resources. Firms may want to consider whether this function in their firm meets the definition of an SMF18. If so, they should choose to allocate an SMF18 where appropriate. Money Laundering Reporting Officer (MLRO) We are not introducing any new requirements on firms to have a MLRO. Firms only need to have an MLRO if the Money Laundering Regulations apply to them. They still need to have appropriate systems and controls to prevent financial crime. Executive Directors Any person who meets the definition of an Executive Director will fall under the Senior Managers Regime. For example, if a firm has five Executive Directors that meet the definition, all will be Senior Managers. Non-Executive Directors We confirm that only Non-Executive Directors (NEDs) who chair a committee listed in Table 2 will be Senior Managers. We consider it is important to have a proportionate regime and focus regulatory resource on the individuals within a firm that can most directly affect our objectives, including those directors who chair important advisory Committees. This does not reduce NEDs’ responsibilities for providing appropriate oversight and independent challenge. Senior Managers Regime roles Solvency II firms must ensure that one or more persons performs each of the following Senior Insurance Management Functions on its behalf:

the Chief Executive Function
the Chief Finance Function
the Chairman
This is a PRA rule in PRA Rulebook – Solvency II firms – Insurance – Senior Management Functions 2.3. Additionally, as per the Solvency II Systems of Governance, all Solvency II firms are required to have at least four Key Function Holders, ie Chief Risk Officer, Head of Internal Audit, Chief Actuary and Compliance Officer.

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Extending the Senior Managers & Certification Regime to insurers The first three will be PRA Senior Management Functions under the new regime. With the exception of the above requirements for Solvency II firms, the Senior Managers Regime does not set a minimum number of functions that firms are required to have in place, unless required so by other legislation. If someone is performing a role that falls within the definition of a Senior Management Function, then the Senior Managers Regime applies. However, if firms do not have an individual carrying out that role, they are not required by the SMR to hire people to fill specific roles or functions. Head of the Legal Function As set out in CP17/26, under our current rules, each of the firm’s areas, activity and management function must have a Senior Manager with Overall Responsibility for it. This is the ‘Overall Responsibility’ requirement. In September 2016 we published a discussion paper about the legal function, which discussed whether the Overall Responsibility requirement applies to the legal function as currently drafted and whether as a matter of policy it should. We have not yet published definitive rules or guidance on what the position is. We will publish a further consultation paper in due course. In light of this, we recognise that firms may not be able to make a decision, with full certainty, about whether or not they need approval for the individual in charge of their legal function. In some cases, that individual may require our approval – for example, if they have responsibility for another area that clearly comes under the SMF definition, such as risk management. So any firm that decides in good faith that the individual does or does not require approval, on the basis of the published rules and guidance, does not need to change their approach until the FCA has published definitive guidance or rules settling the position. Please see our response to Q5 for more information on ‘Overall Responsibility’. The Conduct Risk Oversight Officer (Lloyd’s only) Who should read this section? This section applies only to Lloyd’s. Our proposals
2.10 In CP17/26 we proposed creating a specific FCA Conduct Risk Oversight function
for Lloyd’s. We said this function would be responsible for overseeing the conduct of business standards required by the Society for the Managing Agents that write business at Lloyd’s.

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2.11 In CP17/26, we asked the following question:
Q4: Do you agree with our proposal to introduce a Conduct Risk Oversight Officer for Lloyd’s?
2.12 Most respondents supported our proposal, but asked that we clarify our expectations
of the role holder and their responsibilities. Some respondents also asked us to clarify that the responsibility of the Lloyd’s Conduct Risk Oversight Officer should be limited to oversight of Lloyd’s conduct of business standards.
2.13 One respondent considered that the introduction of this SMF is unnecessary, as they
felt Lloyd’s already places strong emphasis on managing conduct risk. Our response Having considered the feedback we received, we are proceeding with our proposal as consulted in CP17/26. But, we agree we need to better clarify our expectation of the function’s scope. We decided to introduce a Conduct Risk Oversight Officer because of the size, scale and structurally-unique role of the Lloyd’s market. This function will be consistent with the PRA’s current Underwriting Risk Oversight Function, which is also Lloyd’s-only. The Conduct Risk Oversight Officer for Lloyd’s will be responsible for overseeing the conduct of business standards required by the Lloyd’s market for the Managing Agents that write business at Lloyd’s only. Our aim is that there is a Senior Manager in Lloyd’s who is clearly accountable for monitoring and overseeing Managing Agents’ compliance with the Lloyd’s conduct of business standards. We don’t consider that this accountability will overlap with the role of SMFs in Managing Agents. Senior Managers in Managing Agents should ensure the highest standard of conduct within their firms. They must already be accountable for mitigating conduct of business risks and we do not expect this to change after the introduction of the Conduct Risk Oversight Officer.

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Extending the Senior Managers & Certification Regime to insurers Overall Responsibility requirement and Other Overall Responsibility function (SMF18) Who should read this section? This will apply to SII firms (excluding small run-off firms and ISPVs) and large NDFs. Our proposals
2.14 In CP17/26, we proposed applying an Overall Responsibility requirement to all
Solvency II firms (excluding small run-off firms and ISPVs) and large NDFs. This means these firms will need to ensure that every activity, business area and management function in the firm has a Senior Manager with Overall Responsibility for it. Our proposal aimed to prevent unclear allocation of responsibilities that could result in issues being missed or areas not having an accountable Senior Manager.
2.15 The most senior person with Overall Responsibility for a specific business area might
already be an existing Senior Manager. If that is not the case, the most senior person with Overall Responsibility for this area would need to be approved by us as a Senior Manager under the Other Overall Responsibility function (SMF18).
2.16 We proposed that the scope of this rule should be the same as the scope of the
Conduct Rules. This means it applies to a firm’s regulated and unregulated financial services activities, including any related ancillary activities. Feedback received
2.17 In CP17/26, we asked the following question:
Q5: Do you agree with the proposed Overall Responsibility SMF?
2.18 Most respondents supported our proposals. A number of respondents asked us to
clarify how to apply the Overall Responsibility requirement. In particular, respondents asked us how to apply the requirement to individuals who are PRA Key Functions Holders or who they identify as being within the Certification Regime of the PRA or FCA.
2.19 A few respondents were concerned that SMF18s might be seen as less senior than
other Senior Managers. This is because, under our proposals, SMF18s cannot hold Prescribed Responsibilities, apart from the CASS Prescribed Responsibility. Our response Having considered the feedback we received, we are proceeding with our proposal as consulted in CP17/26. However, some respondents misunderstood the Other Overall Responsibility Function (SMF18) and we provide clarifications below. In CP17/26, we explained that the most senior person with overall responsibility for an activity, business area or management function might already be an existing Senior Manager. For example, a Chief

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Extending the Senior Managers & Certification Regime to insurers Executive, an Executive Director or any other FCA or PRA Senior Management Function. We expect that this will be the case most of the time. The Significant Management Function (CF29) and SMF18 In CP17/26, we proposed that certain roles will no longer require FCA approval and may come under the Certification Regime. The CF29 – Significant Management Function is one of these roles. We accept that someone currently approved as a CF29 will be eligible to be converted into the Other Overall Responsibility function (SMF18). However, conversion to SMF18 will only be possible if they meet the definition of an SMF18, which is covered in our Handbook in SUP10C.7. The SMF18 does not apply to someone who has been approved for any other Senior Management Function. So, conversion will not be possible, if, when the Regime starts applying to them, they already have an approval from the PRA or the FCA for another controlled function for the same firm. SMF18 and its relation to other Senior Management Functions, Key Function Holders and Certified staff SMF18 only applies when an individual with Overall Responsibility for a business area does not hold any other Senior Management Function that can be either an FCA or PRA function. For example, if an individual holds the Head of Key Business Area Function (SMF6) and has Overall Responsibility for this business area, they will not need to apply to be approved as an SMF18. Some respondents asked us to explain how the Overall Responsibility requirement will apply to individuals responsible for a business area who are already Key Function Holders under Solvency II or within the Certification Regime. Steps that firms might want to consider are:

Identify whether the firm has allocated Overall Responsibility for a
particular business area to one of its managers. If it has, continue with the following steps. If not, SMF18 will not apply.
Identify whether any of these individuals’ roles meet any of the
definitions of any of the Senior Management Functions, whether FCA or PRA, other than SMF18.
If so, they need to seek approval to perform that Senior Management
Function. Once approved, they will be Senior Managers and they will not come under the Certification Regime (see following bullet points).
If they already hold a Senior Management Function (other than
SMF18) with Overall Responsibility for a specific business area, they will not need to be approved for the Other Overall Responsibility Function (SMF18).
If they do not, and do not need to have, approval to perform another
Senior Management Function, whether FCA or PRA, then they will

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Extending the Senior Managers & Certification Regime to insurers need to be approved for the Other Overall Responsibility Function (SMF18).

A person appointed to have Overall Responsibility for a particular
business area will not be covered by the Certification Regime in that role.
The firm must record the Senior Manager’s responsibilities on
their Statement of Responsibilities (SoR).
Clarifications
SMF18s should not be seen as less senior because they don’t hold Prescribed Responsibilities, other than the CASS compliance PR. Every Senior Manager, including an SMF18, must be the most senior person responsible for managing an area overall. They must also be sufficiently senior and credible, and with sufficient resources and authority, to exercise their management and oversight responsibilities effectively. More information on this point is set out in the Guide to the SM&CR for Insurers. The Compliance Oversight Function Who should read this section? All insurers should read this section. Our proposals
2.20 In CP17/26, we proposed to broaden the Compliance Oversight Function (SMF16) to
cover all insurers for all requirements of the regulatory system for which the FCA is responsible. This included all FCA rule requirements, as well as any directly applicable UK or EU legislation where the FCA has responsibility for ensuring compliance. In CP17/26, we asked the following question:
Q6: Do you agree with our proposal to extend the scope and definition of SMF16 to cover all FCA requirements? Feedback received
2.21 Most of the respondents agreed with our proposals. Some respondents expressed
concerns about the scope of the role of the Compliance Oversight Function. They felt that broadening the scope risked creating an overlap of responsibilities between the Compliance Oversight Function and other Senior Managers.
2.22 A small number of respondents said that broadening the scope of the Compliance
Oversight Function could risk blurring the lines of defence within firms. In their view, our proposal risked undermining the Compliance Function’s second line of defence role.

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2.23 Respondents asked us to clarify our expectations on a number of points:

whether the SMF16 can be shared between individuals
whether firm Boards can collectively hold the responsibility for the Compliance
Oversight Function. This would mean that firms would not need to have what is currently a CF10 – Compliance Oversight Function. Our response Having considered respondents’ feedback, we are proceeding with our approach as consulted on in CP17/26. We note respondents’ concerns and have addressed these below. Broadening the Compliance Oversight Function’s scope vs. Compliance Function’s second line of defence role We considered the scope of the Compliance Oversight Function’s role (currently limited to our COBS, COLL and CASS sourcebooks) to be too narrow to be fully effective. So, we decided to broaden the Compliance Oversight Function’s scope for insurers. This will mean that the Compliance Oversight Function’s scope will apply in the same way to insurers as it currently applies for banking firms. We don’t consider that our rules undermine the compliance function’s second line of defence role. Under our current rules, an insurer must seek to establish and maintain effective systems and controls for complying with applicable requirements under the regulatory system. Depending on the nature, scale and complexity of its business, it may be appropriate for an insurer to have a separate compliance function. When this happens, we expect the compliance function to operate independently and report to the firm’s governing body on compliance matters. Senior Managers’ vs the Compliance Oversight Function Senior Manager’s accountabilities We expect all Senior Managers to play an active role in helping their firm to be compliant, taking reasonable steps to make sure that breaches of FCA rules don’t occur in the business areas they are accountable for. Where breaches do occur, we expect the accountable Senior Manager to take appropriate actions to address them. The Senior Manager performing the Compliance Oversight Function will not directly be accountable for every breach of FCA rules and requirements that occur in the firms’ business areas. Instead, the Senior Manager performing the Compliance Oversight Function is accountable for carrying out the compliance function’s second line of defence responsibilities appropriately and effectively. These are:
to oversee the effectiveness of the firm’s compliance with the
requirements and standards of the FCA’s regulatory system

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to report to the governing body on compliance matters, and
to monitor actions taken by the first line of defence to address any
problems in the firm’s compliance with its obligations.
Sharing an SMF16 between two individuals A firm should not normally share a Senior Management Function between two or more Senior Managers. However, it may be appropriate, for example, as part of a job-share arrangement or when outgoing and incoming Senior Managers work together temporarily as part of a handover. In general, where responsibilities for a function are shared, each Senior Manager will be jointly accountable for these and their responsibilities should be reflected in their respective SoRs. We do not require firms to restructure their compliance function. Firms who already have a CF10 will be able to map the role directly to SMF16, within current reporting lines. The Board’s role Under PRA’s Corporate governance: Board responsibilities (SS5/16), the Board and its relevant committees exercise effective oversight of risk management and controls, supported with meaningful and well-targeted management information used to inform board discussions. Also, the Board needs to ensure that it has robust arrangements for oversight of control functions, such as compliance. A firm’s Board cannot collectively hold the responsibility for the Compliance Oversight Function in a way that means that the firm would not need to appoint someone to perform the Compliance Oversight Function. Solvency II Key Function Holder Solvency II firms are required to have a Key Function Holder who is accountable for:
a compliance function that advises the governing body on compliance
with all the Solvency II rules and regulations,
the identification and assessment of compliance risk, and
an assessment of the possible impact of any changes in the legal
environment on the operations of the firm.
The Chair of the With-Profits Committee
Who should read this section?
Solvency II firms and large NDFs should read this section.

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Extending the Senior Managers & Certification Regime to insurers Our proposals
2.24 In CP17/26, we proposed making the Chair of the With-Profits Committee a Senior
Manager. We also proposed extending the Chair of the With-Profits Committee to cover any persons performing the With-Profits advisory arrangement under COBS 20.5 With-profits governance – FCA Handbook.
2.25 In CP17/26, we asked the following question:
Q7: Do you agree with our proposal to extend the Chair of the With-Profits Committee to cover any person(s) performing the With-Profits advisory arrangement? Feedback received
2.26 All respondents welcomed our proposal.
Our response
We will proceed to make near-final rules in line with our proposed approach. But, we want to clarify that the Chair of the With–Profits Committee function will only apply where firms are required to establish such a committee. If they do not have a With-Profits fund and so are not required to have such a committee or advisory arrangement, then firms do not need to seek approval for the related SMF. The 12-week rule Who should read this section? Solvency II firms and large NDFs should read this section. Our proposals
2.27 Under the revised APR, individuals are allowed to cover for an Approved Person or
a Senior Manager without being approved, where the absence is temporary or cannot be reasonably foreseen, and the appointment is for less than 12 consecutive weeks.
2.28 In CP17/26 we proposed extending this 12-week rule to apply to responsibilities under
the ‘Overall Responsibility’ requirement (which is described above in the section of this
chapter titled “Overall Responsibility requirement and Other Overall Responsibility
function (SMF18)”). The 12-week rule allows someone to cover for a Senior Manager without being approved, where the absence is temporary or reasonably unforeseen, and the appointment is for less than 12 consecutive weeks.
2.29 We proposed to allow any responsibility that the absent manager holds under the
Overall Responsibility requirement to be reallocated to someone who is not approved during their absence.

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Extending the Senior Managers & Certification Regime to insurers Feedback received
2.30 In CP17/26, we asked the following question:
Q8: Do you agree with our proposal to extend the 12-week rule to apply to responsibilities under the ‘Overall Responsibility’ requirement? If not, please explain why.
2.31 We received two responses to this question, both of which agreed with our proposal.
2.32 One respondent suggested that this approach should be applied to the Certification
Regime as well, while another suggested a longer period.
Our response
We intend to implement the 12-week rule as proposed. This rule applies whatever the reason for the Senior Manager’s absence. We recognise that recruitment processes can take longer than 12 weeks. However, we don’t believe that it would be appropriate for an individual to perform a Senior Management Function for longer than this without approval. As such, if someone is covering an absence for longer than 12 weeks, they will need to be approved for the relevant Senior Management Function they are covering, or the firm would need to apply for a waiver. We also considered whether the 12-week rule would be appropriate for Certification Functions. However, as Certification Functions do not require FCA approval, firms should be able to undertake the relevant certification processes within the specified 4-week period. Prescribed Responsibilities for SII firms and large NDFs Who should read this section? Solvency II firms and large NDFs should read this section. Our proposals
2.33 As set out in CP17/26, we proposed introducing three FCA-only Prescribed
Responsibilities (PRs):

a PR for meeting firms’ obligations under the Code of Conduct (COCON), to ensure
the firm trains its staff in the Conduct Rules and complies with the FCA notification requirements
a CASS Compliance PR, which will only apply where there is an underlying obligation
on the firm to comply with these rules

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a PR for overseeing the firm's polices and procedures for countering the risk that the
firm might be used to further financial crime
2.34 We also proposed that firms would only be able to divide or share a Prescribed
Responsibility in limited circumstances and where they can show that this is appropriate and justifiable. Feedback received
2.35 In CP17/26, we asked the following two questions:
Q9: Do you agree with our approach to Prescribed Responsibilities and our proposed list of PRs? Q10: Do you agree with our approach to dividing and sharing Prescribed Responsibilities?
2.36 Most respondents supported our approach to Prescribed Responsibilities. Some
suggested we better align our proposals with the PRA’s to ensure a common set of PRs across both solo and dual-regulated firms. A small number of respondents disagreed with our approach, citing the potential cost and complexity to firms.
2.37 Two respondents said we should:
allow firms to allocate PRs on a group basis, rather than on a legal entity basis, and
consider changing our approach and allow the SMF18 – Other Overall Responsibility
to hold any Prescribed Responsibility, not only the CASS Compliance Prescribed Responsibility.
2.38 A respondent suggested we expand the list of PRs to add the following:
‘Assess and report on alignment between strategy, governance, culture and
attitudes to consumers’.
‘Development of culture’.
2.39 All respondents supported our proposed approach for dividing and sharing Prescribed
Responsibilities, but a small number asked us to clarify whether our approach is different from the PRA’s. Our response Having considered the feedback we received, we are proceeding with our proposal as consulted in CP17/26. But, we provide our response to suggestions and clarifications requests below. Additional Prescribed Responsibilities We are proceeding with the approach that we consulted on. We consider that the list of PRs is proportionate to SII and large NDFs’ business models and complexity. Annex 4 includes the final list of PRs specified by both the FCA and the PRA.

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Extending the Senior Managers & Certification Regime to insurers The seven shared PRs are areas where both regulators have an interest in how these responsibilities are met. The three FCA PRs ensure a Senior Manager is accountable for key conduct risks. We have decided not to require additional PRs. We consider the proposed list to be sufficient to achieve the aims of the SM&CR and reinforce and clarify the expectations of individuals within different governance structures. A ‘Culture’ PR We haven’t introduced a PR for culture as we consider that every individual in a firm is accountable for the firm’s culture, from the governing body down. This reinforces our own focus on culture and governance, as this is one of our top priorities for firms.2 All Senior Managers have a role to play in driving an appropriate culture and should each take accountability for their actions, shaping the firm’s culture by taking accountability for their own behaviour and taking reasonable steps to manage the behaviour of those in their area of responsibility. Culture will also be reinforced by applying the Conduct Rules throughout every level of a firm. Conduct Rules aim to drive up standards of individual behaviour in financial services and shape the firm’s culture, standards and policies as a whole. As such, our PR for Conduct Rules will ensure that there is a Senior Manager who is accountable for making sure the firm complies with its Conduct Rule obligations. We view the responsibility for culture holistically. So, we consider that Boards should be collectively responsible for setting and monitoring firms’ cultures. Boards need to ensure culture remains high on their agenda and be able to demonstrate how they satisfy themselves that the firm’s culture does not cause harm. The PRA’s PRs on ‘overseeing the adoption of the firm’s culture’ and ‘leading the development of the firm’s culture by the governing body as a whole’ have a prudential focus. This is consistent with PRA’s objectives to promote the financial soundness of the firms they regulate. Allocation of PRs at a Group Level Vs Legal Entity Level Some respondents asked whether they could apply the PRs on a group basis, rather than at a legal entity basis. As the SM&CR applies to legal entities, rather than to groups, firms must allocate the PRs on a legal entity basis. Prescribed Responsibilities for solo and dual-regulated firms The Guide to the Regime includes the final list of Prescribed Responsibilities which are split into three distinct categories: FCA PRs, PRA PRs and those shared between the FCA and the PRA. 2 In March 2018 we published a Discussion Paper on transforming culture in financial services. This is part of our drive to promote a discussion and consensus on the essential features of a healthy culture within financial services. For more information, read DP18/2 – ‘Transforming Culture in Financial Services’.

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Extending the Senior Managers & Certification Regime to insurers We note respondents’ request for a common set of PRs for solo and dual-regulated firms. We have intentionally taken a different approach to the requirements that apply to solo firms compared to insurers. This is to clearly reflect the different risks that each type of firm poses to our objectives. For example, additional Prescribed Responsibilities apply to Solvency II firms and large NDFs to reflect the specific governance risks in these firms. So, these PRs won’t be suitable for solo-regulated firms. Also, we don’t think that this would be proportionate to some of the FCA solo-regulated firms’ business models. Dividing and Sharing Prescribed Responsibilities Dividing and sharing PRs should not be a common practice across firms. But, we do recognise that there might be limited circumstances when this can happen. Firms must show that this is appropriate and justifiable and that this doesn’t leave a gap in responsibilities. For example, it would be appropriate to share a Prescribed Responsibility or a function as part of a job share. Alternatively, where departing and incoming Senior Managers work together temporarily as part of a handover, or where a particular area of a firm is run by two Senior Managers. Firms will need to be able to clearly explain shared PRs in the relevant Statements of Responsibilities. Where responsibilities are shared, each Senior Manager will be jointly accountable for them. The PRA’s set out its approach for dividing and sharing prescribed responsibilities in their updated SS35/15. We recognise that our approach is different to the PRA’s. Under FCA rules, there might be limited circumstances when dividing and sharing PRs can happen. This reflects the wider remit of our objectives, when compared to the PRA’s. It is for firms to show that sharing a PR is appropriate and justifiable in the circumstances and doesn’t leave a gap in responsibilities. Overall Responsibility and PRs In CP17/26, we proposed applying an ‘Overall Responsibility’ requirement to all SII and large NDFs. This means that these firms will need to ensure that every activity, business area and management function has a Senior Manager with Overall Responsibility for it. This is to prevent unclear allocation of responsibilities that could result in issues being missed or areas where no Senior Manager is accountable. As set out in CP17/26, we consider that the most senior person with Overall Responsibility for an activity, business area or management function might already be an existing Senior Manager. Our proposals noted that we expected this to be the case most of the time. Feedback received hasn’t changed our opinion, so we consider that the identification and designation of a Senior Manager holding Overall Responsibility (SMF18) in firms is the exception, rather than the norm. As such, we consider it appropriate to restrict the allocation of other Prescribed Responsibilities (other than
the CASS compliance)

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Extending the Senior Managers & Certification Regime to insurers to the SMF18. This will reinforce a culture of accountability and encourage firms to identify who actually has Overall Responsibility at the most senior level, for each of its activities, business areas and management functions. Statements of Responsibilities Who should read this section? All firms should read this section. Our proposals
2.40 In CP17/26 we proposed renaming the ‘Scope of Responsibilities’ document as
a Statement of Responsibilities (SoR).
2.41 Insurers will be required to submit a SoR when applying for approval of a new Senior
Manager. They will also need to update and re-submit this document through Form J, whenever there is a significant change in Senior Managers’ responsibilities. Feedback received
2.42 In CP17/26, we asked the following question:
Q11: Do you agree with our proposals on Statements of Responsibilities?
2.43 Most respondents agreed with the proposals.
2.44 A few asked for more guidance on the appropriate level of detail required in a SoR.
2.45 Some respondents were concerned that updating Statements of Responsibilities on
a legal entity basis would need them to increase their resources significantly and run the risk that documents covering responsibilities could be inconsistent. Our response A SoR is a document that every Senior Manager will need to have, clearly setting out their role and what they are responsible and accountable for. It needs to be kept up to date. It is required under FSMA and all insurers need to submit a SoR with their application for FCA approval for a Senior Manager. They will also need to update and re-submit this document whenever there is a significant change in their responsibilities. It is important that firms and the regulator are clear who is accountable for what. The SM&CR will apply on a legal entity basis – this is a FSMA requirement. This means that every firm must prepare a SoR for each Senior Manager. This must cover every Senior Management Function for which the Senior

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Extending the Senior Managers & Certification Regime to insurers Manager has approval and clearly show what they are accountable for in each of their roles. Our rules already include guidance on what the SoR should contain. You can find the existing guidance set out in the FCA’s Handbook in the new version of SUP10C.11 in Appendix 1. To help firms meet this requirement, we are developing best practice examples of how firms can prepare their SoRs. Our experience of applying the SM&CR to banks has shown that having a SoR has been very useful for both firms and regulators. Both the process of drafting and submitting the SoR clarifies what a Senior Manager is responsible and accountable for. Responsibilities Maps Our proposals
2.46 In CP17/26 we proposed renaming the existing ‘governance map’ that insurers
currently have to maintain under the PRA’s Senior Insurance Managers Regime (SIMR) to a ‘Management Responsibilities Map’. Feedback received
2.47 In CP17/26, we asked the following question:
Q12: Do you agree with our proposal to require firms to maintain, produce and, where relevant, submit Responsibilities Maps?
2.48 Most respondents agreed with our proposal, with many suggesting that all firms should
maintain a Management Responsibilities Map.
2.49 There was some confusion on the level of detail required in the Map and whether
the information in the SoR should be repeated. Some firms asked for guidance on how to create the Map and what lessons were learned when deposit takers implemented this. A few respondents asked us whether to include details about the Prescribed Responsibilities.
2.50 Some respondents raised concerns about the resources they would require creating
the Maps and keeping them up to date.
2.51 A small number of respondents suggested that, instead of updating Responsibilities
Maps when there is a significant change, firms should update the Maps periodically.
2.52 Some respondents requested alignment with the PRA to make it simpler for groups
that have legal entities falling under both the insurance and solo regulated regimes. We were also asked to clarify how the PRA and FCA requirements work together.
2.53 A small number of respondents also asked for feedback on previously submitted
governance maps.

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Extending the Senior Managers & Certification Regime to insurers Our response Having considered the feedback we received, we are proceeding with our proposal as consulted in CP17/26. But, we provide our response to suggestions and clarifications requests below. Under Principle 3, all insurers need to take reasonable care to organise and control their affairs responsibly and effectively. All firms can use the principles and practice of the Management Responsibilities Map. But, we will only require Solvency II firms and large NDFs to create and maintain them, and to submit them to us when there is a material change. It is important that all firms document their governance arrangements as an important part of organising and controlling their affairs. However, we think it would be disproportionate to prescribe a specific way for smaller insurers to do this. We encourage respondents to refer to our rule in SYSC 25.2.3, which describes what a Management Responsibilities Map must include. This includes, for example, how the Prescribed Responsibilities have been allocated, details on who has Overall Responsibility for the firm’s activities, business areas and management functions, details of individuals’ and committees’ reporting lines, and how, if any, responsibilities are shared or divided between different people. When considering the level of detail to include, firms should remember that Maps aim to clearly describe the firm’s management and governance arrangements. They can also be helpful to give a collective view of how responsibilities have been allocated and to help highlight any issues or gaps in a firm’s governance arrangements. To help firms meet this requirement, we are developing further guidance and best practice examples of how firms can prepare Responsibilities Maps. Updating Maps We recognise respondents’ feedback on the resources required to update the Maps and Statements of Responsibilities. However, we think that the requirements are proportionate. Firms with a simple allocation of responsibilities will only need to produce simple documents. Likewise, small changes to responsibilities will create small changes to the Maps and Statements of Responsibilities. We don’t expect any need for increased resources for Solvency II firms and large NDFs. This is because these firms were previously required to prepare governance maps under the FCA’s revised Approved Persons Regime and the PRA’s Senior Insurance Managers Regime. We consider it important for both firms and regulators to be able to refer to a single document that clearly describes the firm’s management and governance arrangements. Our rules state that Maps must be up-to-date at all times, but we are not prescriptive about how a firm does this and do not require changes to be notified to us, except in specified circumstances (such as a notification of a change to a Senior Manager’s SoR or an application for approval of a

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Extending the Senior Managers & Certification Regime to insurers Senior Management Function). If there is a significant change in a firm’s management arrangements, every affected Senior Manager will need to update their SoR and re-submit them through Form J, along with an updated Responsibilities Map. Updating SoR is required by FSMA and explained in SUP10C.11, where we also give examples of what is and isn’t a ‘significant change’ in relation to the SoR. FCA-PRA Responsibilities Maps Our rules will see a change in the name of the Maps from ‘Governance Maps’ to ‘Responsibilities Maps’ but the contents will remain the same. There is no obligation on firms to create two separate Management Responsibilities Maps for the FCA and PRA. We expect that insurers will create one Management Responsibilities Map and submit it to both the FCA and the PRA. Although there are some differences in the Prescribed Responsibilities and Senior Manager Functions required by the PRA and the FCA, firms should represent these on one document that clearly describes its governance and management arrangements overall. Firms which operate within a group should note that the SM&CR applies to legal entities individually, rather than to a group as a whole. So it is not appropriate for firms to submit one Management Responsibilities Map for the entire group. However, the guidance in SYSC 25 recognises that a firm may share management or governance arrangements with other members of the group. Firms should include these details in their Maps to show how the firm’s management and governance arrangements fit together with its group. Handover Procedures Our proposals
2.54 In CP17/26, we proposed to introduce a requirement for all Solvency II firms and large
NDFs to take all reasonable steps to ensure that a person taking on a Senior Manager role has all the information and materials they could reasonably expect to have in order to do their job effectively.
2.55 We also proposed that a firm must have a policy in place explaining how it complies
with this requirement, and keep adequate records of the steps it has taken. Feedback received
2.56 In CP17/26, we asked the following question:
Q13: Do you agree with our proposal to apply handover requirements to Solvency II firms and large NDFs? If not, please explain why.

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2.57 Most respondents welcomed our proposal. A number of firms told us that they
have already developed some form of handover procedures as part of organising the business.
2.58 Some respondents felt the FCA should not prescribe or dictate handover procedures.
Other respondents were concerned that applying our proposal may cause problems when Senior Managers stop doing the role suddenly and fail to prepare handover materials. So they recommend we consider issuing the handover rule as guidance instead of a rule.
2.59 Other suggestions included that we remove the specific requirements and only
maintain the generic ‘all reasonable steps to inform’ test in our rules.
2.60 We were also asked:

for clarity about the detail that should be recorded in the handover template.
A respondent suggested we provide a template with further guidance on what we expect firms should include in the handover note.
if we expect firms to disclose in a regulatory reference (under the catch-all of ‘any
other matters’) the fact that a Senior Manager has failed to prepare and leave handover materials. Our response Having considered the feedback we received, we are proceeding with our proposal as consulted in CP17/26. However, we provide our answer to respondents’ feedback and requests for clarity below. Handover certificates We have considered respondents’ feedback, and will implement our proposals with no changes. We consider that many respondents may have misunderstood the intention of this policy, especially handover arrangements and certificates. We want to clarify that it isn’t mandatory to prepare a handover certificate. While this is one way that firms can meet the handover requirements, we expressly acknowledge that there may be cases where this is impractical. We think this is clear in our Handbook in SYSC 25.9.8 (see Appendix 1). Solvency II firms and large NDFs, however, need to take all reasonable steps to ensure that a person taking on a Senior Manager role has all the information and materials they could reasonably expect to have in order to do their job effectively. A handover certificate is one way that firms can meet these requirements. This is set out in the guidance in SYSC 25.9.8. Handover arrangements Firms should also have arrangements for an orderly transition between Senior Managers. It is for the firms to decide how to ensure this happens. We don’t want to prescribe how they do this, as every firm is structured and organised differently. What a firm chooses to include in its handover material will depend on the business model and governance structure, as well as the specific individual’s position and responsibilities.

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Extending the Senior Managers & Certification Regime to insurers A handover policy and ensuring Senior Managers are aware and trained could help firms show the reasonable steps they’ve taken to give a new Senior Manager the information and materials they need to do their job effectively, even if the previous Senior Manager leaves suddenly. Reasonable steps Respondents’ asked for clarity on how firms should be demonstrating ‘reasonable steps’. This is for every firm to decide based on their business model and governance structure. Our Decision Procedure and Penalties Manual (DEPP), list some of the main factors we consider when deciding whether a Senior Manager has taken reasonable steps for the purposes of the Duty of Responsibility. One particular factor is whether the Senior Manager took reasonable steps to ensure an orderly transition when someone else replaced them in performing their function. This reflects similar guidance in COCON 4.2.8 in Senior Management Conduct Rule 1: ‘You must take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively’. What is reasonably expected of a Senior Manager when handing over will vary from case to case, depending on the circumstances. Rules and Guidance We acknowledge the respondent’s recommendation to consider revising our Handover rule requirements and to set them out as guidance instead of a rule in the Handbook. However, we consider it proportionate to require SII firms and large NDFs to comply with our handover requirements, given the importance of robust governance in these firms in particular. This is because our proposals aim to improve the clarity and strength of the firm’s arrangements and reinforce a culture of accountability. This is consistent with the approach we have taken for FCA solo-regulated ‘enhanced’ firms and banks, described in PS18/15. Handover materials and regulatory references Under the regulatory references requirements, firms must share specific information between one another in a standard template. This information covers details of any disciplinary action taken due to breaches of the Conduct Rules and any findings that the individual wasn’t fit and proper. Our guidance on Senior Manager Conduct Rule 1 specifies what we expect of a Senior Manager when handing over. If a Senior Manager fails to provide handover material it is for the firm to consider what steps it needs to take, if any, to ensure adequate handover. It also needs to consider whether or not such a failure would result in further disciplinary action being taken by the firm. The firm should consider it under the requirement to disclose information that it reasonably considers to be relevant to the new employer’s assessment of whether the employee is fit and proper.

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Extending the Senior Managers & Certification Regime to insurers Small Non-Directive Firms and small run-off firms Our proposals
2.61 In CP17/26, we proposed a proportionate and streamlined regime for small NDFs and
small run-off firms. We summarise this as follows:

a shorter list of roles requiring approval, including no requirement for approval of the
Chairs of Nomination and With-Profits Committees
a shorter list of Prescribed Responsibilities
no requirement for a Management Responsibilities Map or Handover procedures
no ‘Overall Responsibility’ requirements
2.62 We asked the following questions:
Q14: Do you agree with our proposals for small NDFs?
Q15: Do you agree with our proposals for small run-off firms? Feedback received
2.63 All respondents agreed with our proposals. As a result, we are not making any changes
to the proposals we consulted on.

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Extending the Senior Managers & Certification Regime to insurers 3 Certification Regime Who should read this section? All insurers should read this section.
3.1 This chapter sets out the feedback received to our proposed:

Certification Functions
territorial application of the Certification Regime
approach to allocating CASS Prescribed Responsibilities
Our proposals
3.2 In CP17/26 we proposed 8 Certification Functions, building on existing functions in the
Approved Persons Regime, set out in Table 3 below.
3.3 The Certification Regime covers people whose jobs mean they can have a significant
impact on customers, the firm or market integrity. We won’t approve these people, but firms will need to check and confirm (‘certify’) at least once a year that these people are suitable to do their job. This is a requirement under FSMA.
Table 3: Certification Functions
Certification Function Overview
Significant Management Function
(based on current CF29)
These individuals perform functions that would have been Significant Influence Functions under our Approved Persons Regime. These important roles can seriously affect the way the firm conducts its business. Functions subject to qualification requirements These are set out in our Training and Competence Sourcebook. For example, life insurers should identify individuals:
advising on long-term care insurance contracts
overseeing administrative functions for insurance contracts
that are life policies and for pension schemes
giving advice or performing activities related to pension
transfers (current CF30s)
Anyone who supervises or manages a Certified Function (directly or indirectly), but isn’t a Senior Manager This will ensure that people who supervise certified employees are held to the same standard of accountability. It also ensures a clear chain of accountability between junior certified employees and the Senior Manager ultimately responsible for that area. For example, if a firm employs a customerfacing financial adviser, every manager above them in the same chain of responsibility will have to be certified (until the Senior Manager approved under the SMR is reached).

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Extending the Senior Managers & Certification Regime to insurers Certification Function Overview Material Risk Takers For dual-regulated insurers, these individuals are those that Solvency II firms already need to identify under Solvency II regulations on remuneration. Solvency II firms need to identify those individuals whose professional activities have a material impact on the firm’s risk profile. This function will not apply to firms which are not currently subject to the Solvency II requirements on remuneration. The client dealing function This function has been expanded from the current CF30 function to apply to any person dealing with clients, including retail and professional clients and eligible counterparties. This will cover people who:

advise on investments (other than a noninvestment insurance
contract) and perform other related functions, such as dealing and arranging
deal, as principal or agent, and arrange (bring about) deals in
investments
act in the capacity of an investment manager and all functions
connected with this
act as a bidder’s representative
Proprietary traders (covered by current CF29) These individuals perform functions that would have been Significant Influence Functions under our Approved Persons Regime. These important roles can seriously affect the way the firm conducts its business. These roles are unlikely to apply to most insurance firms. CASS oversight function (current CF10a) Algorithmic trading This function includes people with responsibility for:
approving the use of a trading algorithm or a material part
of one
approving the use of a material amendment to a trading
algorithm or a material part of one, or the combination of trading algorithms
monitoring or deciding whether or not the use or deployment
of a trading algorithm is or remains compliant with the firm’s obligations This role is unlikely to apply to most insurance firms.
3.4 We took account of feedback to our question about whether details of certified staff
should be included on a public register in the proposals we made in CP18/19. We do not cover it here. Certification Functions Feedback received
3.5 In this section we summarise the feedback we received to these questions in CP17/26:
Q16: Do you agree with the functions we have proposed making Certification Functions?

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Extending the Senior Managers & Certification Regime to insurers Q17: Are there any other functions that we should make a Certification Function?
3.6 Most respondents supported our proposed Certification Functions.
3.7 Several respondents were concerned that the scope of the regime could become
too wide and make it difficult to identify those accountable within firms. Another said that extending Certification to more people and several layers below Senior Managers could dilute individual accountability and transparency.
3.8 Other respondents noted the broadening of the Client Dealing Function and that this
would bring a larger group of individuals within scope of the regime.
3.9 A number of respondents suggested that we should provide a transition period to
help firms adjust to the Certification Regime. They felt we should allow groups to certify individuals at the group level, where an individual performs the same role at multiple organisations.
3.10 Some respondents asked us to clarify:

how the Certification Regime will work in practice, given the regulators’ different
proposed Certification Functions
whether certified individuals under the PRA and FCA regime will need one certificate
or two
how firms should identify business units
how firms should assess fitness and propriety in practice
Our response
Having considered the feedback we received, we are proceeding with our proposals as consulted in CP17/26. However, we provide the following clarifications as a response to the feedback received. The Certification Regime The Certification Regime is a new requirement under FSMA for all insurers. We recognise that this is one of the biggest changes for insurers compared to the current SIMR and revised APR. The Certification Regime will apply to those individuals who perform certain functions, known as ‘Significant Harm Functions’. The term ‘Significant Harm function’ comes from FSMA. It describes a person performing these functions as someone ‘involved in one or more aspects of the firm's affairs, so far as relating to a regulated activity, and those aspects involve, or might involve, a risk of significant harm to the firm or any of its customers’. A ‘specified Significant Harm Function’ is a Significant Harm Function that has been specified by the FCA in rules. The Certification Regime applies to specified Significant Harm Functions. In our Handbook, we have changed the term to ‘FCA Certification Function’ instead.

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Extending the Senior Managers & Certification Regime to insurers The regime only applies if the firm has individuals performing a Certification Function, where it relates to a regulated activity. It applies to individuals within a regulated firm who meet the definition of one or more Certification Functions. If a Senior Manager performs one of these roles and it isn’t related to their Senior Management Function, then they will also need to be certified. We think these cases will be uncommon in insurers. For example, if someone is approved as an SMF and also meets the definition of the Client Dealing Function under the Certification Regime, they must be certified for the latter function. In practice, once we have approved someone as an SMF, firms may decide to assess the individual’s fitness and propriety for both roles in one assessment on an ongoing basis or at least once a year. Certification aims to ensure that firms assess their staff as fit and proper on a regular basis. But it is for firms to decide the best way of meeting the requirements in the context of their business. Firms do not need to adopt the same criteria for fitness and propriety, regardless of an individual’s particular role or seniority – we would expect firms to act in a proportionate manner. This means, for example, that where a trainee retail investment adviser practises under supervision, they can be certified as fit and proper for the Client Dealing Function on the condition that someone appropriately supervises them. We set out the functions across all FSMA firms that we consider meet the FSMA definition and we list those in our Handbook at the new SYSC 27 (see Appendix 1). We recognise that some of the functions are less likely to apply to insurers, for example, algorithmic trading and proprietary trading. Firms need to make sure that anyone performing a Certification Function is fit and proper to do the job, and issue them with a certificate stating this. This certificate needs to be renewed at least once a year. Firms should note that the list of Certification Functions is an exhaustive one. They will need to identify those individuals performing the Certification Functions. It is possible that in some firms, there will be no one in the Certification Regime, especially if there are only a handful of senior individuals (who will be Senior Managers) supported by administrative staff. The Certification Regime does not reduce personal accountability. Ultimate responsibility and accountability sit with the Senior Manager responsible for each area of the firm’s business, but we expect all individuals caught by the SM&CR to take responsibility for their conduct and actions. FCA and PRA Certification Functions The Certification Regime is a FSMA requirement and so applies equally to all insurers. We recognise that there are differences in the Certification Functions specified by us and the PRA. But we don’t think the two

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Extending the Senior Managers & Certification Regime to insurers conflict. PRA’s Certification Functions are presented below and in PRA’s PS15/18:

all Key Function Holders (KFHs)3
for all Solvency II insurers and large
NDFs along with Insurance Special Purpose Vehicles (ISPVs)
Material Risk Takers (MRTs)4
– this will only apply to large5
Solvency II insurers and large NDFs
individuals who are managing a Material Risk Taker
The set of the Certification Functions specified by the FCA is wider than those specified by the PRA. This is to reflect the different statutory objectives of the two regulators. It also recognises that there is a wider set of functions within insurers that might pose harm to the FCA’s statutory objectives. Insurers need to:
identify their Certification Functions,
undertake one certification exercise per individual, and
issue one certificate covering an individual’s FCA and PRA functions.
Firms should determine which Certification Functions apply according to their circumstances. Our FIT Sourcebook gives guidance on the steps firms should take to ensure the Fitness and Propriety of their Certification Staff. Scope of the Client Dealing Function The scope of the new Client Dealing Function is broader than the CF30 in the current, revised APR. It covers any individuals advising or dealing for clients, including retail and professional clients and eligible counterparties. This would, for example, include any call centre staff involved in dealing, arranging or advising on investments. But it does not include advising on or arranging non-investment insurance products. Significant Business Units As we said in CP17/26, it is for firms to decide whether a business unit is significant in the context of their business. This is not limited to units which generate revenue or deal with clients. Factors to consider include:
the size and significance of the firm’s UK business
the risk profile of the business unit
3 Individuals who are responsible for a ‘key function’ at Solvency II insurers, ie risk, actuarial, Internal Audit, Compliance and Finance. 4 Those employees of an insurer whose professional activities have a material impact on the firm’s risk profile as per the Solvency II remuneration requirements. 5 The PRA define ‘large’ as a firm with premium income of more than £1bn in each of the last three years, or with assets of more than £10bn at the end of the last three years.

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the business unit’s use of the firm’s capital
its contribution to the firm’s profit and loss account
the number of employees, Certification Functions and SMFs within
the unit
the number of customers in the unit
For more guidance firms need to refer to SYSC 27.8.5 to SYSC 27.8.9 in
Appendix 1, which has our near-final rules.
Certification – Territorial Application
Our proposals
3.11 In CP17/26, we proposed that, for UK firms, the Certification Regime be limited to
people performing a Certification Function who are either based in the UK or, if based elsewhere, have contact with UK clients. We called this the ‘territorial limitation’. Feedback received
3.12 In CP17/26, we asked the following question:
Q19: Do you agree with our proposed territorial limitation for the Certification Regime? If not, please explain why.
3.13 Most respondents asked if it is necessary for overseas employees to be monitored
when they are not dealing with UK risks and UK clients.
3.14 They also asked us to clarify what we meant by ‘people who have contact with UK
clients’. Respondents asked whether this would include individuals who have direct contact with UK clients or individuals whose role can affect UK clients. Our response Having considered the feedback we received, we are proceeding with our proposals as consulted in CP17/26. We intend to apply the territorial scope of the regime as proposed. Firms must ensure that employees are certified if:
they perform a certification role and are either based in the UK,
spend more than 30 days a year in the UK, or
dealing with UK customers.
There is no territorial limitation if the person is performing the Material Risk Taker Certification Function for a UK firm.

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Extending the Senior Managers & Certification Regime to insurers In CP17/26, we provided a flow chart summarising how the Certification Regime applies to overseas staff. As our guidance states under SYSC 27.3.2 in Appendix 1, the FCA interprets the phrase ‘dealing with’ as including having contact with clients. But this extends beyond ‘dealing’ as used in the phrase ‘dealing in investments’. Firms should refer to SYSC 27.3 for more information on territoriality. CASS Responsibilities Our proposals
3.15 As set out in CP17/26, if a firm is subject to CASS, it must have a Senior Manager who
is responsible and accountable for all elements of CASS compliance under the CASS Prescribed Responsibility. A firm can allocate the Prescribed Responsibility to any Senior Manager, but this should be the most senior person responsible for this area.
3.16 We respond to feedback received below, which may be more relevant to insurance
intermediaries or investment firms subject to CASS, rather than to insurers. Insurance intermediaries and investment firms should refer to our feedback to CP17/25 in PS18/14 to understand how the SM&CR will apply to them. Feedback received
3.17 In CP17/26, we asked the following question:
Q20: Do you agree with the approach we have proposed to allocating CASS responsibilities? If not, please explain why.
3.18 Most respondents agreed with our approach of allocating CASS Prescribed
Responsibilities. Some disagreed with our proposal to include the CASS Operational Oversight Function – CF10a under the Certification Regime. They felt the CASS Oversight Function should be kept as an approved function. They felt that this would allow the CASS PR to be allocated to either the CASS Operational Oversight Function holder or the Compliance Oversight Function holder.
3.19 Some respondents asked us to clarify how we consider firms should be allocating the
CASS Prescribed Responsibility. They also wanted clarification on which types of firms will be subject to the CASS PR.
3.20 A small number of respondents felt that including the CASS Operational Oversight
Function in the Certification Regime would contradict MiFiD II rules. These rules require a single officer of sufficient skill and authority to have oversight of CASS. These respondents felt the rules suggest that firms must appoint two individuals – one internally (responsible for reporting to the firm’s governing body) and one externally (responsible for reporting to the regulator).
3.21 One respondent asked us whether we expect allocating CASS responsibilities to apply
to all firms with client money permissions or only those which hold client money.

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Extending the Senior Managers & Certification Regime to insurers Our response Having considered the feedback we received, we are proceeding with our proposals as consulted in CP17/26. However, we provide the following clarifications as a response to the feedback received. Who do the CASS PR and CASS Operational Oversight Function apply to? Firms holding client money or client assets must comply with specific requirements set out in the CASS module of our Handbook. They also owe particular duties to their clients. The SM&CR reflects and reinforces these requirements. The CASS Prescribed Responsibility applies to every firm subject to CASS and the way the CASS Operational Oversight Function is defined is by the application rules in CASS. We do not expect insurers to be subject to CASS and so they should not have the related Prescribed Responsibility or CASS Operational Oversight Function. Some insurers may have firms in their groups who are subject to CASS. These firms should see our feedback to CP17/25 in PS18/14 to understand how the SM&CR will apply to them. If a firm is subject to CASS, it must have a Senior Manager accountable for all elements of CASS compliance under the CASS Prescribed Responsibility. These are described in the FCA Prescribed Responsibilities table of our rules. A firm can allocate this Prescribed Responsibility to any Senior Manager, but this should be the most senior person accountable for this area. CASS Operational Oversight Function In CP17/26 we didn’t propose making the current CF10a CASS Operational Oversight Function a Senior Management Function. This is because firms currently allocate responsibility for overseeing client assets in a number of different ways and the person performing this role may not always meet the definition of a Senior Manager. We have made overall responsibility for compliance with CASS a Prescribed Responsibility. This is because we want to ensure that there is always a Senior Manager with ultimate responsibility for overseeing a firm’s CASS obligations in firms that hold client money or assets. However, recognising that the person with day-to-day responsibility is not always a Senior Manager, the CASS Operational Oversight Function forms part of the Certification Regime. This means that the person performing the CASS Operational Oversight Function will always be certified or a Senior Manager. Our rules in the CASS module of our Handbook do not allow firms to allocate the CASS Operational Oversight Function to more than one person. This is only allowed if it is done as part of a job-share arrangement between individuals.

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Extending the Senior Managers & Certification Regime to insurers We expect firms to maintain a permanent and effective compliance function that operates independently from the firm’s business areas. The aim of the SM&CR is not to change how firms are organised or structured. As such, it is up to firms to determine who, in the context of the firm’s business model, is the most appropriate Senior Manager to be allocated the CASS PR. MiFiD II rules and CASS PR We don’t consider that our proposal to include the CF10a under the Certification Regime contradicts MiFiD II rules. Following the implementation of MiFID II, we recognise that there is a possibility that the Senior Manager that is given the CASS Prescribed Responsibility is the same person performing the responsibilities under CASS 1A.3.1R and CASS 1A.3.1AR. The SM&CR regime allows a firm to allocate both the CASS prescribed responsibility (in SYSC 24) and the CASS Operational Oversight function (in CASS 1A) to a single Senior Manager. Following the implementation of MiFID II, the CASS rules are clear that if the firm can satisfy itself on reasonable grounds that this person will still be able to discharge their CASS oversight responsibilities effectively and that the firm’s full compliance with CASS will not be compromised, the firm can allocate additional responsibilities to that person. This is set out in CASS 1A.3.2AR. These responsibilities should not be confused with the SM&CR’s Prescribed Responsibility for complying with the CASS requirements. Dividing PRs and MiFiD II rules The introduction of MiFID II brought a new rule for CASS small, medium and large firms in CASS 1A.3.1R and CASS 1A.3.1AR. This rule requires these firms to allocate to a single director or senior manager responsibility for the oversight of the firm’s operational compliance with CASS. We recognise that sometimes, firms may allocate the Prescribed Responsibility for CASS compliance to the same person that has been given the responsibility for overseeing the firm’s operational compliance with CASS. In these cases, the introduction of the new rule under MiFiD II implies that dividing the CASS Prescribed Responsibility won’t be permitted. This is because our rule for the CASS compliance Prescribed Responsibility refers to the MiFiD II rule.

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Extending the Senior Managers & Certification Regime to insurers 4 Fit and Proper Requirements This chapter is relevant to all firms. Our proposals
4.1 In CP17/26 we proposed new rules for how firms should assess whether Senior
Managers and individuals under the Certification Regime are fit and proper to do their job. These included:

a requirement that firms must assess whether these individuals are fit and proper for
their role, at least annually
the evidence we expect firms to gather when making their assessment, including:
– a requirement to carry out criminal records checks as part of an application for approval of a Senior Manager – extending the requirement for regulatory references to all insurers and to cover Certified Staff
4.2 This chapter sets out the feedback we received on these topics and our response.
The Fit and Proper Test
Feedback received
4.3 In CP17/26, we asked the following question:
Q21: Do you agree with our proposed approach to rules and guidance on fit and proper tests? If not, please explain why.
4.4 Respondents broadly agreed with our proposals for assessing fitness and propriety.
One respondent asked us to clarify whether:
firms needed to carry out full fit and proper assessments every year, or
whether individuals can simply state that their circumstances haven’t changed for
certain aspects, such as financial soundness.
4.5 One respondent suggested that the FCA set out a complete list of requirements for
fitness and propriety that firms can then supplement with their own requirements, such as corporate governance or professional bodies’ rules.

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4.6 One respondent was concerned that our fit and proper requirements may not help in
recruiting diverse candidates. They felt these requirements could potentially cause discrimination against people with criminal convictions or older staff with experience rather than formal training.
4.7 One respondent asked us to provide guidance on the level of evidence that we expect
firms to have in place to formally document individual competence.
4.8 Some respondents felt that we should change the existing rules and guidance on
fit and proper assessments and training and competence to improve standards of individual behaviour. They also suggested making it compulsory to undertake continuous professional development of skills and knowledge. Our response Having considered the feedback we received, we are implementing the fit and proper requirements as consulted in CP17/26. However, we provide the following clarifications as a response to the feedback received. A key feature of the SM&CR is to reinforce that firms need to take more responsibility for their staff being fit and proper to do their jobs, rather than rely on an FCA assessment. This requirement stems from legislation and followed recommendations from the Parliamentary Commission on Banking Standards (PCBS). Similarly, FSMA, rather than FCA rules, requires firms to assess fitness and propriety of their Senior Managers and Certification Staff at least annually. So we don’t have discretion to change this. It is for firms to decide how best to carry out their fit and proper assessments. A firm assessing the fitness and propriety of staff should be guided by substantially the same criteria set out in FIT, as it applies to the individual firm. But these should not be seen as a definitive list of factors the firm should consider. We expect firms to supplement FCA guidance with their own fitness and propriety criteria. Firms should already have processes in place to assess the fitness and propriety of their employees and to monitor and record information about employees’ performance and suitability. They must also ensure that employees have the skills, knowledge and expertise necessary for their responsibilities, as required by the Competent Employees Rule and corresponding EU rules. We appreciate that firms must meet different regulations and requirements. These can come from different regulatory bodies and may focus on the same objective, such as ensuring employees’ fitness and propriety. However, as these requirements are often specific to a firm’s activities or business, we have not consolidated them into the SM&CR framework, which applies to all firms.

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Extending the Senior Managers & Certification Regime to insurers We don’t consider that our expectation for people to be fit and proper will discriminate against the recruitment of diverse candidates. In our view, the most important considerations that are relevant to fitness and propriety include:

honesty, integrity and reputation,
competence and capability, and
financial soundness.
We don’t think that recruiting with these considerations in mind should affect staff diversity and they provide important protections. In addition, conviction for a criminal offence will not automatically mean that someone isn’t fit and proper. We have guidance in FIT that makes it clear that this should be a case-by-case assessment. We haven’t introduced any new qualification requirements in the SM&CR or amended existing ones; these are all existing Handbook requirements. For those roles that do have specific qualification requirements, we think this is necessary and appropriate to ensure consumer protection. Overall, we consider that applying SM&CR will drive up standards of individual behaviour and accountability and the assessments of whether people working in financial services are fit and proper are important parts of making this happen. Criminal Records Checks Feedback received
4.9 In CP17/26, we asked the following question:
Q22: Do you agree with our proposed requirements on criminal records checks? If not, please explain why.
4.10 Most respondents agreed with our proposals on criminal records checks. However,
some respondents were concerned that our requirements under the SM&CR could conflict with the Insurance Distribution Directive (IDD). Several respondents suggested criminal background checks should be run on all staff in senior positions, including certified staff. They felt this was particularly important as the General Data Protection Regulation (GDPR) may limit the criminal records checks firms can conduct, where this isn’t required by the FCA.
4.11 Respondents proposed that the FCA should follow the PRA approach. The PRA does
not require criminal records checks when an individual changes role within a firm and where the individual has been in continuous employment by the same firm. They also suggested that we should consider the requirement for approved persons to declare any personal changes, including criminal issues.

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4.12 Some respondents asked whether criminal records checks are required every year, or
only on appointment. One respondent asked us to outline when we expect firms to undertake criminal records checks for Certification Functions. Our response Having considered the feedback we received, we are proceeding with our proposals as consulted in CP17/26. However, we provide the following clarifications as a response to the feedback received. IDD The type of roles that must be subject to criminal records checks under the good repute requirements of the IDD is wider than SM&CR. This is because they are driven by IDD requirements rather than FCA rules. We have considered respondents’ feedback, but don’t consider that the requirements conflict. The SM&CR imposes specific obligations on all firms to conduct criminal records checks on their Senior Managers. The IDD is complementary to this, and requires firms subject to the IDD to conduct criminal records checks for a wider range of staff than the SM&CR. GDPR We don’t think it’s appropriate for us to give detailed guidance on complying with the GDPR and the UK’s Data Protection Act 2018. However, we do want firms to be confident that they can comply with both the SM&CR and data protection laws. We don’t think these obligations conflict, as they acknowledge that employers have legal obligations to process sensitive personal data such as criminal records. Firms may find it helpful to read Article 6 of the GDPR and Schedule One of the UK’s Data Protection Act to understand more. Criminal Records Checks Carrying out criminal records checks is an important tool for firms when assessing the fitness and propriety of Senior Managers, including as part of preparing the application to us for their approval. Almost all respondents agreed with this. We will therefore require a criminal records check for every application for a Senior Management Function, even if that person already performs a role in the firm or the group. While the PRA doesn’t require that, we consider this appropriate and in line with the wider remit of our objectives. We only require criminal records checks when a candidate is applying for a Senior Management Function. There is no requirement for annual criminal records checks, although firms can choose to do this as part of their ongoing fit and proper assessments. We have made this clearer in our Handbook in SUP 10C.10.23A. If a candidate for a Senior Management Function has spent considerable time overseas in the last six years, firms should consider carrying out a criminal records check in those jurisdictions. We provide guidance in the Handbook, but it is up to the firm to decide if this is appropriate.

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Extending the Senior Managers & Certification Regime to insurers Candidates themselves are asked to disclose all related matters, whether in the United Kingdom or overseas, in our forms. Guidance in FIT makes it clear that conviction for a criminal offence will not automatically mean someone cannot be considered fit and proper – this is a case-by-case assessment. If a candidate gives false information on a form, a firm should consider this when deciding on a person’s honesty, integrity and reputation. If someone who is currently employed by the firm provides false information, this could also be a breach of the Conduct Rules. Firms need to report breaches of Conduct Rules that result in disciplinary action to us, using REP008 on GABRIEL. We have discussed our requirements in this area with the Disclosure and Barring Service (DBS), as well as the likely increase in requests for criminal records checks it will receive. We haven’t extended criminal records checks to all certified staff, as we think this would be disproportionately burdensome and costly for firms. It is for firms to decide if they want to undertake criminal records checks for these staff. Regulatory References Feedback received
4.13 In CP17/26, we asked the following question:
Q23: Do you agree with our proposals to extend the requirement for regulatory references to all insurers and to cover Certified persons? If not, why not?
4.14 Most respondents agreed with our proposals about regulatory references, but asked
for clarification on some practical issues. These included:

how firms should approach reportable matters where the relevant individual has left
the firm,
how firms should approach circumstances where an individual’s current or previous
employer will not provide a regulatory reference,
whether regulatory references would need to be requested before an individual has
handed in their notice,
the procedures an employer should follow if a prospective employee has acted in
breach of regulatory requirements in a previous role, and
the actual content of references and what are reasonable steps.
4.15 A few respondents suggested that Certified persons shouldn’t be subject to
regulatory references as they aren’t subject to regulatory approval.

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4.16 One respondent suggested that the FCA should require all firms to make public the
name of the relevant individual or department that deals with processing regulatory reference requests.
4.17 A few respondents noted that providing and getting regulatory references would lead
to increased costs and workloads for firms.
4.18 Another respondent suggested getting a six year reference from non-financial
employers would be burdensome and would not deliver benefit to consumers.
4.19 One respondent suggested adding to the template to include the requirement
to provide competency-based information such as competent adviser status, persistency, debt and complaints information. Our response Having considered the feedback we received, we are implementing our rules on regulatory references as consulted on. However, we provide the following clarifications below. New information after an employee has left the firm If new information about someone’s conduct comes to light after they have left a firm, the rules require the firm to update their new employer. However, to ensure fairness, these rules are limited. The standards that apply to an updated reference are the same as apply to the original reference based on what firms reasonably consider to be relevant. The test is whether the new information arising would have caused the providing firm to have written the original reference differently had the information been known at the time, and the new information would change an assessment of the fitness and propriety of the individual. Secondly, firms only need to update the individual’s new employer if these are regulated under FSMA, and the individual still works there. In practice this will need to be checked with the firms that were last sent references. The updating requirement applies:

to any notice period served between providing a reference and the
individual leaving a firm
for ex-employers, six years from the date the individual left the firm
Also, misconduct that occurred more than six years ago, but which came to light within six years from the date the individual left the firm, may require disclosure if that misconduct is serious. This avoids data protection concerns about sharing personal information with firms that may not have a legitimate reason for receiving this information. We think this requirement is a valuable tool to encourage good conduct. In practice, such updated disclosures are likely to be

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Extending the Senior Managers & Certification Regime to insurers infrequent. Nonetheless, on the occasions that they are necessary, they are likely to provide important information to the current employer. Timing of references We recognise that there may be situations where a candidate has not told their current employer that they are leaving. However, a Fit & Proper assessment can’t be made until the new firm can confirm that its due diligence is complete. This includes getting a reference from the candidate's previous employer. For Senior Managers, firms should ideally get references before they submit an application for approval. However, we know there will inevitably be circumstances where this may not be possible. In these cases, firms can get references no later than one month before the end of the application process. For Certified Staff, the firm must receive the reference before they issue the certificate. Scope of individuals who need regulatory references The FCA and the PRA applied the Fair and Effective Markets Review (FEMR) recommendations and made new rules on regulatory references that came into force in March 2017. FEMR found that there was little benefit in creating an FCA portal of references. Under the SM&CR, firms will be directly responsible and accountable for ensuring the fitness and propriety of the people working for them. So we think it’s important that firms have access to a minimum set of information from a candidate’s previous employers. There is a risk to the financial system if individuals with a record of poor conduct move from firm to firm without future employers having relevant information about them. This is just as important for the controlled functions that we approve, as for the Certification Functions under the Certification Regime. So we are maintaining the scope of individuals who need regulatory references. Cooperation between firms Any FCA-authorised firm is already required to respond appropriately to reference requests. Our Handbook guidance states that we expect regulated firms to do so within six weeks. While references from nonfinancial services firms are likely to be general employment references, they can still provide important information to the hiring firm. In cases where it is difficult to get references, such as when the firm providing the reference is overseas, firms requesting the references should take all reasonable steps to obtain them. Clarifications Firms may choose to give the name of the person dealing with regulatory references but we think it would be disproportionate for us to make this a requirement. We have not expanded the information that must be disclosed in a regulatory reference. This is because we think questions around training and qualifications are better addressed to candidates directly or to third parties such as professional bodies, rather than former employers. A firm is only required to respond to a request for a regulatory reference that it receives from
another FCA-regulated firm. Firms don’t need to respond to speculative references submitted before an individual has

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Extending the Senior Managers & Certification Regime to insurers been proposed for a function. For example, a recruitment agency vetting a candidate before a firm has considered appointing that person to a specific function. Mandatory template We consider that using a mandatory standard template will make references from different firms more consistent. In addition, our Handbook in SYSC 22 gives guidance on how firms should complete references, including examples of factors to take into account when deciding whether old misconduct is sufficiently serious to disclose. Disciplinary actions When and how a firm decides to undertake disciplinary action is a matter for individual firms to decide. We have not imposed a wider duty on firms to investigate all potential breaches or disclose information that has not been properly verified. It is a requirement under SYSC 22 that firms must disclose in the reference, all information they are aware of that could reasonably be considered relevant to the hiring firm's assessment of the candidate’s fitness and propriety. If a firm fails to disclose all information that could be relevant in deciding fitness and propriety, then this is likely to be a breach of our rules. In these cases, we will consider what regulatory action should be taken and in certain circumstances this may include enforcement action. If a former employer is not willing to provide a regulatory reference and is an authorised firm, you should:

explain you are requesting the reference under chapter 22 of the FCA
Senior Management Arrangements, Systems and Controls Manual
inform your FCA case officer (if you have one), call our helpline on
0300 500 0597 or email us at firm.queries@fca.org.uk

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Extending the Senior Managers & Certification Regime to insurers 5 Conduct Rules This chapter is relevant to all insurers.
5.1 In this chapter, we summarise the feedback we received to the proposed:

scope and content of the Conduct Rules
training and notification requirements that are linked to the Conduct Rules
5.2 We also set out our response.
Our proposals
5.3 In CP17/26, we proposed to apply the Conduct Rules in our Code of Conduct
Sourcebook (COCON) to the following types of role:
all Senior Managers
all Certification staff
all Directors, whether or not they are Senior Managers
all other employees, except ancillary staff (ie people who don’t perform a role
specific to financial services, such as receptionists, catering staff, etc)
5.4 The first tier is a general set of rules that applies to most employees in a firm. The
second tier is rules that only apply to Senior Managers.
Table 4: Conduct Rules
First Tier – Individual Conduct Rules

You must act with integrity
You must act with due care, skill and diligence
You must be open and cooperative with the FCA, the PRA and other regulators
You must pay due regard to the interests of customers and treat them fairly
You must observe proper standards of market conduct
SC1. You must take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively SC2. You must take reasonable steps to ensure that the business of the firm for which you are responsible complies with the relevant requirements and standards of the regulatory system

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Extending the Senior Managers & Certification Regime to insurers Second Tier – Senior Manager Conduct Rules SC3. You must take reasonable steps to ensure that any delegation of your responsibilities is to an appropriate person and that you oversee the discharge of the delegated responsibility effectively SC4. You must disclose appropriately any information of which the FCA or PRA would reasonably expect notice
5.5 We proposed to apply the Conduct Rules to a firm’s regulated and unregulated
financial services activities. This includes any related ancillary activities carried on in connection with a regulated activity. We also proposed certain training and notification requirements. These included:

for Senior Managers, the requirement for firms to notify us of breaches leading to
a disciplinary action, within seven business days of the firm concluding disciplinary action, through Form D on Connect. Disciplinary action in this context means:
– issuing a formal written warning
– suspending or dismissing the individual – reducing or recovering any of the person’s remuneration
for all other staff that come under the Conduct Rules, the firm should make a report
every year using REP008 on our electronic reporting system, GABRIEL
5.6 CP17/26 also set out a list of ‘ancillary’ roles that fall outside the scope of the Conduct
Rules (the same complete list as used in the banking regime). Scope of the Conduct Rules Feedback received
5.7 In CP17/26, we asked two questions:
Q24: Do you agree with our proposal to apply the Conduct Rules to all employees, except ancillary staff? If not, why not? Q25: Do you agree with our proposed scope of the Conduct Rules to financial services activities whether regulated or unregulated? If not, why not?
5.8 A number of respondents asked us to clarify the scope of activities the Conduct Rules
apply to.
5.9 We were also asked how the Conduct Rules relate to the fitness and propriety
requirements and Senior Managers’ obligations regarding culture.
5.10 A small number of respondents disagreed with our proposals. They said that most
staff employed in UK financial services are already subject to their employers’ codes of conduct or similar regulation.

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5.11 A couple of firms queried whether employment status is relevant when considering
who is in scope of the Conduct Rules.
5.12 Some respondents suggested additional roles for the ancillary staff list or that the list
should not be exhaustive. Other respondents argued that certain roles on the ancillary staff list shouldn’t be excluded, or that all staff should be in scope.
5.13 Respondents asked us to clarify:

the scope of the Conduct Rules where individuals who are not on the ancillary staff
list do not undertake any financial services activities
whether the Conduct Rules apply to trustees
how the Conduct Rules apply where firms carry out a mixture of financial services
and non-financial services
whether the Conduct Rules apply to employees of retailers who pass insurance or
credit transactions to colleagues
what the narrower application of the Conduct Rules means compared to that for
banking firms
5.14 A number of respondents suggested that the scope of application of the Conduct
Rules should be the same as the banking regime. Some also asked us whether anything prevented a firm from applying the Conduct Rules to all of their staff. Our response Having considered the feedback we received, we are proceeding with our proposals as consulted in CP17/26. However, we provide the following clarifications below.
Section 64A of FSMA allows the FCA to make rules about the conduct of
individuals working for firms. These requirements apply to every firm that is a separate legal entity and apply identically to all insurers. Our Conduct Rules are intended to drive up standards of behaviour in financial services. They provide a meaningful change in the standards of behaviour we expect from people working in the industry. Scope of application The scope of activities covered by the Conduct Rules, for firms other than banking firms, is set out in COCON 1.1.7A. Generally, this covers:
a firm’s regulated activities
an activity carried on in connection with a regulated
activity, or held out as being for the purposes of a regulated activity, or an activity listed in points 2 to 15 of
Annex 1 to the CRD (List of activities subject to mutual recognition

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any activities (whether or not regulated activities) that:
– could affect the integrity of the UK financial system, – may impair the ability of a firm to meet the fit and proper threshold conditions, or – can affect the ability of the firm to meet requirements relating to the firm’s financial resources. This is the same for all firms whether they are Solvency II firms, small NDFs, small run-off firms or ISPVs. The Conduct Rules don’t apply to people who only perform an ‘ancillary role’. We have provided a list of ancillary roles the Conduct Rules don’t apply to. This is set out in COCON 1.1.2 R (6). These are roles which would be the same whether or not they are performed at a financial services firm or a non-financial services firm. This means that individuals performing a role on the ancillary roles list and also undertaking other activities would be in scope of the Conduct Rules for any part of their role that falls into COCON 1.1.7A (ie the financial services part of their role), but not a part of their activities that falls outside COCON 1.1.7A. Equally, individuals at firms who are in no way involved in financial services activities would not fall within scope of the Conduct Rules. Ultimately, it is for firms to decide where individuals performing ancillary roles need to be trained on the Conduct Rules. Trustees The Conduct Rules only apply to SMFs, non-SMF directors and employees of firms. FSMA defines ‘employees’ as including contractors, temps and secondees. On this basis, whether a trustee is in scope will depend on whether they meet the definition of an ‘employee’. Senior Managers and Culture Senior Managers in firms play a crucial role when it comes to preventing and dealing with cases of misconduct. Senior Manager Conduct Rules alongside our requirements in the FIT, SYSC and other relevant sourcebooks set out the minimum standards we expect of firms when it comes to managing their people. Senior Managers are responsible for setting the culture and conduct in their organisation. They are also responsible for establishing appropriate systems and controls to ensure that misconduct does not happen and, if it does happen, that the firm detects it and takes appropriate action. Relationship between the conduct rules and FIT FIT 2.1.1G states that in determining a person’s honesty, integrity and reputation, the FCA will consider all relevant matters including, but not limited to, those set out in FIT 2.1.3G. These include whether the person has breached any of the requirements or standards of the regulatory

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Extending the Senior Managers & Certification Regime to insurers system (FIT 2.1.3G(5)). So we will consider the full circumstances of each case when deciding whether or not to take enforcement action for a breach of the FCA rules, including the conduct rules. Employment status If someone is working for an SM&CR firm as an employee, the Conduct Rules apply to them – even if they don’t have a contract of employment. FSMA provides a specific definition of ‘employee’ for the purpose of the SM&CR, which differs from the usual meaning in law and defines an employee as including ‘… a person who:
(a) personally provides, or is under an obligation personally to provide, services to A under an arrangement made between A and the person providing the services or another person, and (b) is subject to (or to the right of) supervision, direction or control by A as to the manner in which those services are provided.’ The Conduct Rules also apply to those approved to perform a Senior Management Function and Board Directors, whether or not they come within this definition of ‘employee’. Wider application of Conduct Rules Firms can apply the Conduct Rules to all of their staff if they want to. However, the training obligations, the requirement to report breaches and the FCA’s enforcement powers in relation to the Conduct Rules only apply to individuals in the scope of our Handbook rules. In short, firms can choose to have a single standard for all employees if they want to, but our rules (including the mandatory training and reporting obligations) only apply to the population of staff described above. Firms may wish to consider whether there are any impacts on contracts of employment where they intend to apply the Conduct Rules to staff who are not within scope of our rules. Clarifications Some firms conduct a mix of financial and non-financial activities. For them, whether something is in scope of the Conduct Rules depends on whether it meets the definition of activities covered by the Conduct Rules. Generally, this will only be the case where there is a connection between the financial activity and non-financial activity. We don’t expect that this will be common for insurers, as it is unlikely that insurers will do many activities with no connection to financial services. This approach is narrower than the one we took for banking firms, because everything that a bank does will be captured by the Conduct Rules. For solo-regulated firms and insurers, activity will only come under the Conduct Rules if it meets the definition set out in COCON 1.1.7A.

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Extending the Senior Managers & Certification Regime to insurers Conduct Rule Breach Reporting Our proposals
5.15 In CP17/26, we proposed to require that firms notify us of disciplinary action they have
taken against individuals who breach the Conduct Rules. Our proposal was that:

for breaches by Senior Managers, firms will notify us within seven business days of
the firm concluding disciplinary action
for breaches by all other staff, firms will notify us once a year during a designated
reporting period
Feedback received
5.16 In CP17/26, we asked three questions:
Q26: Do you agree with our proposals about notifications under the Conduct Rules? If not, please explain why. Q27: Do you agree with our proposal to link notification requirements for disciplinary action to breaches of the Conduct Rules? Q28: Do you agree with our proposed frequency of Conduct Rules notifications? If not, please explain why.
5.17 All respondents agreed with our proposals.
5.18 Two respondents noted that there are existing obligations on firms to report concerns
about an individual and questioned whether additional reporting for the Conduct Rules was needed.
5.19 Some respondents asked us:
to ensure that Conduct Rules notification requirements are the same as those of
the PRA,
whether the breach reporting requirements could be met on a group basis, and
for further detail on the timing of notification requirements for Senior Managers.
Our response
Having considered the feedback we received, we are proceeding with our proposals as consulted in CP17/26. However, we provide the following clarifications.
Section 64C of FSMA requires firms to notify the FCA of disciplinary
action taken against relevant individuals because of breaches of the Conduct Rules. Under FSMA, disciplinary action covers:
issuing a formal written warning

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suspending or dismissing an individual
reducing or recovering any of the person’s remuneration
So unless the report is required under another rule (see below) firms should only report Conduct Rule breaches to us where they result in one of these courses of action, and once the relevant disciplinary process has been completed. This means that if an individual leaves the firm during the disciplinary process and so the process cannot be completed, the firm should not submit a report. We consider that the requirement that only completed disciplinary proceedings should be reported should be enough to prevent malicious reporting. It will also mean only proven Conduct Rule breaches will be reported to us. For all Conduct Rules staff other than Senior Managers, firms are required to notify the FCA of any breaches on an annual basis, during the designated reporting period. Where a firm has no breaches to report, they must complete a nil return. The PRA’s approach is different, as they require notification within seven business days. This notification rule would apply to PRA’s Senior Managers, Conduct Rules Non-Executive Directors and other employees under the PRA’s conduct rules. This includes those holding a ‘Certification Function’ and Key Function Holders. For Senior Managers, notifications made due to breaches of the Conduct Rules should be reported to the FCA within 7 business days using Form D on our Connect system. The 7-day period begins once disciplinary action has been concluded. This is the same as the equivalent PRA rule for Senior Managers. We have considered whether it would be appropriate to extend the notification period for Senior Managers to one month, but have decided not to do so. The potentially serious nature of breaches by Senior Managers means that swift notification will often be important in ensuring we can supervise effectively. If a firm takes disciplinary action for a Conduct Rule breach but the employee appeals, or plans to, this should still be reported to us. In some circumstances, individuals will appeal the outcome of a concluded disciplinary process and the decision will be overturned. Where an appeal is successful, firms should update us in the following REP008 submission. We believe that these instances will be rare given the annual submission cycle. This should only usually occur where a disciplinary process is concluded shortly before the due date for REP008 and there is not time to assess the appeal before submission. In the case of a Senior Manager, a firm should report the result of a successful appeal as soon as reasonably practicable after the appeal.

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Extending the Senior Managers & Certification Regime to insurers The Conduct Rule notification requirements do not change or remove firms’ obligations to report concerns about an individual’s conduct under existing rules or principles, such as Principle 11. As with the wider regime, the notification and reporting requirements apply on a legal entity basis and should not be reported at a group level.

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Extending the Senior Managers & Certification Regime to insurers 6 UK Branches of Foreign Firms
6.1 In this chapter we summarise the feedback we received to our proposed approach
for applying the SM&CR to UK branches of European Economic Area firms (EEA branches) and third-country branches (non-EEA branches). EEA branches are branches of insurance firms that are headquartered in the EEA and subject to the Solvency II Directive. Our proposals
6.2 In CP17/26 we proposed that EEA branches would have two executive Senior
Management Functions. These would be the SMF17 – Money Laundering Reporting Officer and SMF21 – EEA Branch Senior Manager. These Senior Managers would have responsibility for the management and conduct of the business of the branch.
6.3 It would be for the home member state to decide whether a Senior Manager is Fit
& Proper and allocate responsibilities, but branches would still be required to provide and maintain a Management Responsibilities Map.
6.4 For third country (non-EEA) branches, we proposed five Senior Management
Functions. The requirement for the Actuarial Conduct Function (CF51) would be removed, as this responsibility is covered by COCON and by the PRA’s rules on the management of the Third-Country Branch.
6.5 Unlike EEA branches, third-country branches will be required to allocate Prescribed
Responsibilities and should also submit a Management Responsibilities Map.
6.6 The Certification Regime and the Conduct Rules would apply in the same way they do
for Solvency II firms.
Feedback received
6.7 We received a small number of responses to our proposals. There was a request for
clarity about whether general insurers in EEA branches should apply the SMF21 – EEA Branch Senior Manager, as SUP 10C.8.4R does not list this activity (see below).
6.8 A minority of respondents were concerned about removing the Actuarial Conduct
Function from the list of approved functions in non-EEA branches. They asked how this is compatible with Solvency II requirements. They stated that an external assessment of actuarial qualifications helps ensure that role holders meet the COCON standards.

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Extending the Senior Managers & Certification Regime to insurers Our response Having considered the feedback we received, we are proceeding with our proposals as consulted in CP17/26. The SMF21 - EEA Branch Senior Manager Function applies to the activities set out in SUP 10C.8.4R. This means that unless they also do designated investment business or activities subject to CASS, per SUP 10C.8.4R(d), general insurers are unlikely to need to apply this function. We think that keeping the requirement for an Actuarial Conduct Function (CF51) would not be proportionate. We have worked with the PRA to simplify rules which duplicate or overlap with other parts of the FCA or PRA’s Handbook. In this case, we consider that the PRA’s rules for Head of Third-Country Branch function and our rules in COCON already provide appropriate protection for consumers. Territorial Scope Most respondents agreed with the proposed territorial application of the regime for branches, so we have maintained this approach in our rules. We believe this reflects the different regulatory requirements that apply to incoming branches. This includes rules on fitness and propriety, and conduct, which apply to staff under their home state regulations.

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Extending the Senior Managers & Certification Regime to insurers 7 Insurance Special Purpose Vehicles
7.1 In this chapter we summarise the feedback we received to our proposed approach for
applying the SM&CR to Insurance Special Purpose Vehicles (ISPVs). Our proposals
7.2 In CP17/26, we proposed applying the three pillars of the SM&CR to ISPVs. This
included the Senior Managers Regime, Certification Regime and Conduct Rules.
7.3 As firms with simple governance structures wouldn’t actually have many other SMFs,
we proposed applying only the following Senior Management Functions:

SMF 3 – Executive Director
SMF16 – Compliance Oversight
7.4 We also proposed that:
the requirements for Overall Responsibility, SMF18 and Management
Responsibilities Map wouldn’t apply
a SoR would be required (as well as the six-year record keeping obligation as per
small NDFs proposals)
a short list of Prescribed Responsibilities would be applied to reflect the limited risk
that ISPVs pose to our objectives
7.5 We proposed to apply the Certification Regime and the Conduct Rules as for
Solvency II firms.
Feedback Received
7.6 Most respondents supported our proposed approach. One respondent disagreed with
it. In their view, the governance structure of ISPVs made it inappropriate to apply the SM&CR to them. Our response We are introducing these proposals as consulted on. ISPVs are authorised and regulated by the FCA and the PRA. As with all other FSMA authorised firms, the SM&CR will apply to ISPVs. But, the SM&CR has been tailored in order to apply to ISPVs in a proportionate way, taking into consideration the size, structure and

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Extending the Senior Managers & Certification Regime to insurers relative risk profile of the firm type. For example, the list of Senior Management Functions and Prescribed Responsibilities is shorter than other Solvency II firms. Also, the requirements for Other Overall Responsibility (SMF18) and for Management Responsibilities Maps won’t apply to these firms.

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Extending the Senior Managers & Certification Regime to insurers 8 Feedback to our Cost-Benefit Analysis
8.1 When proposing rules, we must publish a cost benefit analysis (CBA) under
Section 138I(2)(a) of FSMA. The CBA must include an analysis and estimate of the
costs arising from, and the benefits brought about by, our proposed rules. We published a CBA for our proposals in July alongside CP17/26.
8.2 This chapter sets out our response to the feedback we received on our CBA. We have
separately published an updated CBA alongside this Policy Statement. Feedback received
8.3 In CP17/26, we asked the following question:
Q39: Based on the summary above and the full analysis6 , do you agree with our findings and conclusions to the cost‑benefit analysis? If not, please explain why.
8.4 Some respondents agreed with the core benefits identified from the regime,
particularly that a reduction in harm of between 1-2% would be needed to exceed the cost of compliance. They also called for a post-implementation review to understand whether the costs and benefits set out were accurate.
8.5 A number of respondents were concerned that both the one-off costs of
implementation and the ongoing costs were underestimated in the Consultation Paper. Some also felt that the incremental additional costs for firms would be disproportionate to the overall benefits for consumers.
8.6 A respondent was unable to endorse the expectation that the SM&CR will deliver
a net benefit because the CBA was based on a small number of survey responses from insurers.
8.7 A small number of respondents asked us to clarify how we can conclusively state that
our proposals are proportionate, given that we don’t justify in detail our statement that the additional non-quantifiable benefits will outweigh the indirect costs to insurers.
8.8 One respondent suggested that the approach taken within the CBA doesn’t
adequately reflect existing business structures. In their view, this may lead to greater compliance costs which are not reflected in the CBA. They suggested that we review business structures firm by firm as a way to address this.
8.9 One respondent noted that the numbers used in the CBA to reflect average numbers
of employees in certain types of firm varied both within the document and compared to reality. In their view, this will impact on the likely regime costs for a specific firm type, likely bringing it down. 6 www.fca.org.uk/publication/research/cba-extensionsenior-managers-certification-regime.pdf

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Extending the Senior Managers & Certification Regime to insurers Our response We note that some insurers agree with our findings of the original CBA (published alongside CP17/25 and CP17/26) which suggests that insurers will face non-negligible compliance costs, but also that the expected benefits will far outweigh these. Generally we carry out post-implementation reviews after significant policy changes; we are considering if and when to do a postimplementation review for the SM&CR extension. Our per firm estimates are based on weighted averages of the firms in our sample so some firms will incur higher costs than the average and others will incur lower costs. It is likely that insurers who suggested that our analysis underestimates the compliance costs are firms which are larger or have a more complex governance structure than most other insurers. We note that none of the respondents has provided us with any additional evidence that would allow us to amend our estimates, or demonstrate that the compliance costs would be disproportionate to the benefits. We are satisfied with our position because we surveyed a large number of firms (ca. 2020 of which 330 insurers) and see no reason to believe that the number of 37 responses by insurers is too small for reliable conclusions. We have consulted on the CBA and have not received evidence that we reached a wrong conclusion. Since we weighted the survey responses to ensure that these cost estimates are as representative as possible for the industry, the estimates reflect the existing business structures of insurance firms. Recognising that the number of responses is much smaller than for solo-regulated firms, we have used the cost estimates for insurers with some caution. Considering that only a very small reduction in the total estimated harm in the insurance sector is required for the SM&CR to be net beneficial, we see no reasons to doubt our conclusion that the reduction in harm in the insurance sector is likely to outweigh the implementation costs for insurers, and hence that the SM&CR will be net beneficial for the sector. We noted in the original CBA that the benefits and the indirect costs could neither be reasonably estimated nor that it was reasonably practicable to estimate them. In light of the fairly extensive discussion of those costs and benefits in chapter 4 and 5 of the CBA, and that we have not had further evidence on this from respondents, we remain of the view that benefits such as improved conduct and trust in financial services, though unquantifiable, are likely to outweigh the indirect costs. The indirect costs cannot be included in the break-even calculation but we consider that the net benefit from that calculation justify those additional costs.

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Extending the Senior Managers & Certification Regime to insurers We note that we refer to the number of employees in the different tiers only at table 4 of the original CBA. These figures were estimated based on survey responses. We have not used the number of employees to derive the compliance costs. The original CBA notes that the estimated compliance costs might overestimate the actual costs (albeit for reasons unrelated to the number of employees; see in particular paragraphs 3.19 to 3.21). To the extent that the original CBA over-estimates compliance costs, we have greater confidence in our assessment that the benefits will outweigh the costs.

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Part 2:
Feedback to CP17/41:
Transitioning insurers and individuals to the Senior Managers & Certification Regime

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Extending the Senior Managers & Certification Regime to insurers 9 Transitional Arrangements Conversion In CP17/26 and CP17/41, we set out our intention for Approved Persons who will be performing a corresponding Senior Management Function in a relevant firm to be eligible for conversion into the new function without needing to reapply.
9.1 This chapter contains our response to feedback on the transitional arrangements we
consulted on in CP17/41, including:

the phased implementation of the Certification Regime
the phased implementation of the Conduct Rules
the requirement to check that the firm’s information is correct on the Financial
Services Register after automatic conversion SM&CR Commencement The Treasury announced that the Senior Managers and Certification Regime (SM&CR) will apply to insurers from 10 December 2018. Our proposals Conversion
9.2 In CP17/41, we proposed that if someone is currently approved by us for their role,
and the equivalent role exists in the SMR, they would not need to apply for reapproval. Instead, Solvency II firms and large NDFs would need to submit a conversion notification form (Form K) on our Connect system. This would enable us to convert the individual’s controlled function from the revised Approved Persons Regime (revised APR) to a Senior Management Function (SMF).
9.3 Small Non-Directive firms (small NDFs), small run-off firms and Insurance Special
Purpose Vehicles (ISPVs) will have their existing controlled functions converted automatically. This is explained in Chapters 10 and 11. Notification deadline
9.4 In CP17/41, we said that we would tell firms the date by which all Solvency II firms and
large NDFs would need to have submitted the appropriate conversion documentation to move their relevant approved individuals into the new regime.
9.5 We proposed that firms should submit all Form K conversion notifications no later than
one week prior to the start of the new regime. So Solvency II firms and large NDFs will need to submit their Form K conversion notifications by 3 December 2018. If a

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Extending the Senior Managers & Certification Regime to insurers Solvency II firm or large NDF doesn’t submit a Form K conversion notification, it will be in breach of regulatory requirements. Please refer to ‘our response’ section below for more information.
9.6 We proposed that firms would be required to check the updated Financial Services
Register after the start of the new regime, to ensure that they hold the correct approval, after automatic conversion has taken place. Certified Staff
9.7 We proposed that firms should identify all their Certified staff and ensure they
meet the Conduct Rules when the Regime starts on 10 December 2018. Firms will have 12 months to complete their fitness and propriety assessments and to get the certification paperwork in place.
9.8 We proposed that firms would not have to get regulatory references for existing
employees who will be performing the same role after the start of the new regime. Other Conduct Rules staff
9.9 We proposed that the Conduct Rules would apply to firms’ Other Conduct Rules staff
after 12 months from the Regime’s start on 10 December. Other Conduct Rules staff includes staff who come under the Conduct Rules in COCON, but who do not hold a Senior Management Function or Certification Function.
Figure 1: Summary of transitional arrangements
Feedback received
9.10 In CP17/41, we asked the following question:
Q1: Do you have any comments on our proposed transitional arrangements?
9.11 Most respondents agreed with our proposed transitional arrangements.

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9.12 Some respondents asked us to clarify the deadline by which all Solvency II and large
NDFs must submit conversion documentation.
9.13 A respondent asked us to clarify why a conversion form is required by Solvency II firms
and large NDFs.
Our response
Having considered the feedback we received, we are proceeding with our proposals as consulted in CP17/26. However, we provide the following clarifications as a response to the feedback received. In CP17/41, we proposed that the cut-off date for Form K conversion notifications will be one week before the start of the new regime. So the deadline by which all Solvency II firms and large NDFs must submit their conversion documentation to us is 3 December 2018. If a Solvency II firm or large NDF doesn’t submit a Form K, it will be in breach of regulatory requirements. APR approvals will lapse and a firm will not have any FCA approvals under the new Regime. This means that a firm will no longer have an approved person holding a FCA Senior Management Function and so will be in breach of our rules. We are considering what further regulatory action we will need to take, including possible enforcement action, if the firm cannot resolve any such breaches. All Solvency II firms and large NDFs must tell us who they want to assign to the new Senior Management Function. This is why we require Solvency II firms and large NDFs to submit the following documentation:

Form K, detailing all the approved persons to be converted to SMFs on
10 December 2018
Statements of Responsibilities (SoRs) for all of the Senior Managers
listed in Form K
a Management Responsibilities Map
Firms will need to submit Form A when seeking approval for a new individual. They will need to submit Form E, when an approved individual is going to give up an existing controlled function and take up another controlled function before 10 December, with the intention that this will be converted to a relevant Senior Management Function. Firms won’t have to re-apply for approval of an Approved Person if the proposed Senior Management Function can be mapped directly from the controlled function for which the approved person has approval under the revised APR. Firms won’t need to do extra checks, for example mandatory criminal records checks and regulatory references, on the individuals that are being automatically converted or on individuals whose approvals are converted under the Form K process.

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Extending the Senior Managers & Certification Regime to insurers As flagged in the Introduction, the actual time firms have to complete their fitness and propriety assessments is subject to commencement regulations to be made by HM Treasury.

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Extending the Senior Managers & Certification Regime to insurers 10 Conversion – Solvency II firms and large Non‑Directive Firms Who should read this section? Solvency II and large NDFs should read this chapter. If you are a small NDF or a small run-off firm,
Chapter 11 is relevant to you.
ISPVs should read Chapter 12.
Our proposals
10.1 This chapter contains our response to the feedback we received on the conversion
approach we consulted on in CP17/41, including:

mapping of revised APR controlled functions to SMFs
the conversion of individuals at Solvency II firms and large NDFs
our approach to new and in-flight applications for Solvency II firms and large NDFs
our approach to firms applying for authorisation before the new Regime starts
Function mapping for SII firms and large NDFs
10.2 In CP17/41, we asked the following question:
Q2: Do you have any comments on our proposed mapping of functions for Solvency II firms and large NDFs? Feedback received
10.3 All respondents agreed with our proposed mapping of functions for Solvency II firms
and large NDFs.
10.4 One respondent asked us to clarify the steps firms should follow to convert the CF29 –
Significant Management Function.
10.5 We set out the mapping of revised APR to SM&CR controlled function at Solvency II
firms and large NDFs, in table 5, below.

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Table 5: Function mapping for Solvency II firms and large NDFs
Current controlled function Possible corresponding Senior Management Function(s) CF1 – Director SMF3 – Executive Director SMF23b – Conduct Risk Oversight Officer CF2a – Chair of the Nominations Committee SMF13 – Chair of the Nomination Committee CF2b – Chair of the With-Profits Committee SMF15 – Chair of the With-Profits Committee CF5 – Director of Unincorporated Association SMF3 – Executive Director CF6 – Small Friendly Society Function SMF3 – Executive Director CF10 – Compliance Oversight SMF16 – Compliance Oversight CF10a – CASS Operational Oversight Function As stated in Chapter 3, this function is unlikely to apply to insurers. However, if insurers have a firm in their group that has to comply with CASS, they need to ensure that the conversion arrangements required for this type of firm are followed. SMF18 – Other Overall Responsibility SMF22 – Other Local Responsibility Function (third-country branches only) CF11 – Money Laundering Reporting Officer (MLRO) SMF17 – MLRO CF28 – Systems and Controls Function This currently only applies to non-EEA branches and ISPVs. Please refer to paragraph 7.19 in CP17/26. SMF22 – Other Local Responsibility Function (third-country branches only) CF29 – Significant Management Function SMF18 – Other Overall Responsibility SMF21 – EEA Branch Senior Manager Function SMF22 – Other Local Responsibility Function (third-country branches only) Our response We are introducing the proposed mapping as consulted on. In CP17/26, we proposed that the CF29 – Significant Management Function applies to someone with ‘significant responsibility for a significant business unit’. This means people below Senior Managers who are responsible for business units that, because of their size, nature or impact, the firm considers ‘significant’. We included the CF29 – Significant Management Function in the list of the Certification Functions. This means that this role will no longer require FCA approval and may come under the Certification Regime. However, there will be some limited instances where the CF29 – Significant Management Function will be able to be converted to one or more of the SMFs set out in Table 5.

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Extending the Senior Managers & Certification Regime to insurers Please see Chapter 2 in the section ‘Overall Responsibility requirement and Other Overall Responsibility function (SMF18)’ which helps firms decide whether the SMF18 – Other Overall Responsibility function applies. Firms should follow the steps set out below to identify whether any current CF29s can map to SMF18 or SMF22 as set out in Table 5, or if they will fall into the Certification Regime. The following list of steps apply in relation to conversion to SMF18 and SMF22:

identify whether individuals currently performing the CF29 –
Significant Management Function are among the most senior people in the firm
assess whether they meet any of the definitions of any of the Senior
Management Functions listed in Table 5 (SMF18, SMF22)
if they don’t meet any of these definitions, they will not need to
submit the conversion notification form (Form K) and accompanying documents and they will fall into the Certification Regime
if firms decide these individuals meet any of the definitions of the
Senior Management Functions listed in Table 5 (relating to SMF18 or SMF22), they will convert to one of the corresponding SMFs:
– SMF18 – Other Overall Responsibility
– SMF22 – Other Local Responsibility Function
firms will need to submit Form K, detailing all the approved persons
to be converted to any of these corresponding functions on 10 December 2018; SoRs for all of the Senior Managers listed in Form K, and a Responsibilities Map will need to be submitted with Form K. Conversion for Solvency II and large NDFs and applicant firms Feedback received
10.6 In CP17/41, we asked the following question:
Q3: Do you have any comments on our approach to conversion for Solvency II firms and large NDFs?
10.7 Most respondents agreed with the proposed approach to conversion for Solvency II
firms and large NDFs.
10.8 One respondent asked us to explain how the conversion process will work for
individuals that hold SMFs for both insurance and solo-regulated entities within a group.
10.9 One respondent asked how we expect firms to demonstrate they have robust
decision-making processes.

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Chapter 10
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers Our response Having considered the feedback we received, we are proceeding with our proposals as consulted in CP17/26. However, we provide the following clarifications as a response to the feedback received. We recognise that some individuals currently hold controlled functions (CFs) for both insurance and solo regulated entities within the same group. SM&CR applies at a legal entity basis, so firms must submit the conversion notifications on the specific dates that apply to the different types of firm. For example, Solvency II firms and large NDFs must tell us who they want to assign to the new Senior Management Function by 3 December 2018. On 10 December 2018, the designation for these individuals on our Financial Services Register will change from CF to SMF. There might be cases where individuals hold CFs at both a Solvency II entity and a solo-regulated firm within the same group, such as an Enhanced firm. In this case, these firms will not need to do anything for the non-insurance entities until the relevant commencement dates. Their approval status for these firms will stay the same and they will still appear on our register as CFs. Our rules do not require firms to change how they organise themselves. It is for firms to decide how best to structure and demonstrate their decision-making process, taking into account factors such as size, complexity, best practice, and legal and regulatory requirements. New and in-flight applications for SII firms and large NDFs Feedback received
10.10 In CP17/41, we asked the following question:
Q4: Do you agree with our approach to new and in-flight applications approved before Commencement?
10.11 All respondents agreed with our proposals for new and in-flight applications by
Solvency II firms and large NDFs.
10.12 One respondent asked whether we would allow firms to seek approval for individuals in
more than one Senior Manager role. They felt this would provide flexibility for changes in firms’ operating model and minimise the need for re-approvals.

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Chapter 10
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers Our response Having considered the feedback we received, we are proceeding with our proposals as consulted in CP17/26. However, we provide the following clarifications as a response to the feedback received. A firm may want someone who does not hold a mapped APR function to perform a Senior Management Function after the start of the new Regime (10 December 2018), but not before. In these cases, the firm will need to submit the new SM&CR Form A to apply for the individual’s approval. Firms are allowed to seek approval for individuals that need to perform multiple roles, but individuals’ SoRs should reflect their accountabilities under the different roles they will be performing. Additionally, applications submitted to take effect on or after 10 December 2018 (using the SM&CR versions of the forms) must meet the majority of the SM&CR application requirements, even if they are submitted before the start of the new regime. This includes criminal records checks, but will not include regulatory references. Applicant firms Feedback received
10.13 In CP17/41, we asked the following question:
Q5: Do you agree with our approach to Solvency II and large NDF applicant firms?
10.14 All respondents agreed with our proposed approach to Solvency II and large NDF
applicant firms.
10.15 One respondent was concerned that requiring firms to seek approval for CF29 –
Significant Management Function and CF30 – Customer Function was against the SM&CR requirements for those functions under the new regime. This is because we proposed that these functions may fall into the Certification Regime. Our response Having considered the feedback we received, we are proceeding with our proposals as consulted in CP17/26. We recognise that firms might need to seek approval, in the period between our near-final rules and Commencement, for current controlled functions that do not map across to the new Senior Management Functions, such as CF29 and CF30. Conversion to the SMR only applies for the controlled functions and corresponding Senior Management Functions listed in Table 5. All

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Chapter 10
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers other current controlled functions will not require regulatory approval and existing approvals will lapse when the SM&CR begins. People who currently hold the CF30 – Customer Function will fall into the Certification Regime and will no longer require FCA approval. People who currently hold the CF29 – Significant Management Function will most likely fall into the Certification Regime and will no longer require FCA approval. We have explained above the steps that firms should follow when considering whether the CF29 – Significant Management Function maps to one of the functions in Table 5. This is set out in the section ‘function mapping for Solvency II firms and large NDFs’. We want to clarify that if individuals are actively performing controlled functions for a firm, then approval is required, regardless of how close we are to the start of the Regime. A firm must take reasonable steps to ensure that no person performs a controlled function unless that person has been given approval by the appropriate regulator. Firms who allow individuals to perform controlled functions without prior approval will be in breach of our rules.

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Chapter 11
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers 11 Conversion – Small Non-Directive Firms, small run‑off firms Automatic conversion In CP17/41 we proposed that individuals at small NDFs and small run-off firms will be automatically converted to their corresponding Senior Management Functions by the FCA, with no action required by firms. Who should read this section? Small NDFs and small run-off firms should read this chapter. ISPVs should read Chapter 12. Solvency II firms or large NDFs should read Chapter 10. Our proposals
11.1 This chapter contains our response to feedback on the conversion approach we
consulted on in CP17/41, including:

the mapping of the revised APR controlled functions to SMFs
our proposal to automatically convert relevant approvals at small NDFs and small
run-off firms
our approach to new and in-flight applications for small NDFs and small run-off firms
our approach to small NDFs or small run-off firms that apply for authorisation before
the new Regime starts
Function mapping for Small NDFs, small run-off firms Feedback received
11.2 In CP17/41, we asked the following two questions:
Q6: Do you have any comments on our proposed mapping of functions for small NDFs and small run-off firms? Q7: Do you have any comments on our conversion approach for small NDFs and small run-off firms?

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Chapter 11
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers
11.3 We set out the final mapping of the revised APR to SM&CR controlled functions at
small NDFs and small run-off firms below:
Table 6: Function mapping for small NDFs and small run-off firms
Current controlled function Corresponding Senior Management Function(s) CF1 – Director SMF3 – Executive Director CF2a – Chair of the Nominations Committee N/A CF2b – Chair of the With-Profits Committee Function N/A CF3 – Chief Executive Function (applies only to small NDFs) SMF3 – Executive Director (applies only to small NDFs) CF5 – Director of Unincorporated Association SMF3 – Executive Director CF6 – Small Friendly Society Function SMF3 – Executive Director CF10 – Compliance Oversight SMF16 – Compliance Oversight CF11 – Money Laundering Reporting Officer (MLRO) SMF17 – MLRO
11.4 Respondents agreed to the proposed mapping of functions for small NDFs and small
run-off firms.
11.5 No respondents commented on our approach to conversion for small NDFs and small
run-off firms.
Our response
We are implementing our proposals as consulted upon.
New and in-flight applications for Small NDFs, small run-off firms Feedback received
11.6 In CP17/26, we asked the following question:
Q8: Do you agree with our approach to new and in-flight applications by small NDFs and small run-off firms?
11.7 Respondents agreed with the approach to new and in-flight applications by small NDFs
and small run-off firms.

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Chapter 11
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers Our response We are implementing our proposals as consulted upon. Applicant firms Feedback received
11.8 In CP17/26, we asked the following question:
Q9: Do you agree with our approach to small NDF and small run-off applicant firms? Our response We are implementing our proposals as consulted upon.

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Chapter 12
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers 12 Conversion – Insurance Special Purpose Vehicles Automatic conversion In CP17/41 we proposed that individuals at Insurance Special Purpose Vehicles (ISPVs) will be automatically converted to their corresponding Senior Management Functions by the FCA, with no action required by firms Who should read this section? ISPVs only should read this Chapter. If you are a Solvency II firm or a large NDF, Chapter 10 will be relevant to you. Small NDFs and small run-off firms should read Chapter11. Our proposals
12.1 This chapter contains our response to the feedback we received on the conversion
approach we consulted on in CP17/41, including:

the mapping of the revised APR controlled functions to SMFs
our proposal to automatically convert relevant approvals at ISPVs
our approach to applicant firms
Function mapping for Small NDFs, small run-off firms and ISPVs
12.2 In CP17/41, we asked the following question:
Q10: Do you have any comments on our proposed mapping of functions for ISPVs? Feedback received
12.3 We set out the final mapping of the revised APR to SM&CR controlled functions at
ISPVs below:
Table 7: Function mapping for ISPVs
Current controlled function Corresponding Senior Management Function(s) CF1 – Director SMF3 – Executive Director CF2a – Chair of the Nominations Committee N/A

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Chapter 12
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers Current controlled function Corresponding Senior Management Function(s) CF2b – Chair of the With-Profits committee function N/A CF5 – Director of Unincorporated Association SMF3 – Executive Director CF10 – Compliance Oversight SMF16 – Compliance Oversight CF10a – CASS operational oversight function N/A CF11 – Money Laundering Reporting Officer (MLRO) N/A CF29 – Significant management function N/A
12.4 Respondents agreed with the proposed mapping of functions for ISPVs.
Our response
We are implementing our proposals as consulted upon.
Applicant firms
12.5 In CP17/41, we asked the following question:
Q11: Do you agree with our approach to ISPVs applicant firms? Feedback received
12.6 The majority of respondents agree with the approach to ISPV applicant firms.
12.7 One respondent asked us to confirm that the proposals for ISPVs also apply to Multiarrangement Insurance Special Purpose Vehicles (MISPVs).
Our response
We are implementing our proposals as consulted upon.
Under Solvency II, multi-arrangement Insurance Special Purpose Vehicles (MISPVs) have the same definition as ISPVs and so have the same requirements. These requirements are mirrored in the FCA’s Handbook and so, for the purposes of SM&CR, MISPVs and ISPVs will be treated the same under our rules.

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Chapter 13
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers 13 Forms This chapter applies to all insurers. Changes to forms In CP17/41 we outlined some changes to forms to extend the SM&CR to Insurers. We simplified and combined a number of forms to make it easier for firms to understand which forms they need to complete under different circumstances. We also moved the APR application sections for Appointed Representatives into the new versions of forms to reduce the overall number of forms.
13.1 This chapter contains our response to the feedback we received on the changes to
forms we consulted on in CP17/41.
Our proposals
13.2 We have simplified and combined a number of forms to make things easier for firms,
and they can be submitted via our Connect system. For example, there is now only one version of Long and Short Forms A for Solvency II firms, large NDFs and small NDFs, rather than three separate versions.
13.3 For Appointed Representatives (ARs), we have moved the APR application sections for
ARs into these new versions to reduce the number of forms.
13.4 We give a summary of the forms and their use within the Senior Managers and
Certification Regime in SUP 10C Annex 2G of the legal instrument. The forms and the significant changes are set out in the table below:
Table 8: List of amended/amalgamated forms for insurers
Form Name Affected Firms Purpose
Form A (Long) – Application to perform controlled functions including Senior Management Functions All An application for an individual to perform a specified Senior Management Function (or, for Appointed Representatives only, controlled function) at the firm(s). Form A (Short) – Application to perform controlled functions including Senior Management Functions All An application for an individual to perform a specified Senior Management Function (or, for Appointed Representatives only, controlled function) at the firm(s).

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Chapter 13
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers Form Name Affected Firms Purpose Long Form A – UK and Overseas Firms (not Incoming EEA) for MiFID authorisation applications An application for unauthorised firm to apply for permission to carry out MiFID activities and where an authorised firm which does not have permission to carry out MiFID activities applies for permission to carry out those activities. Form C – Notice of ceasing to perform controlled functions including senior management functions All An application form used to cancel an individual approval. Form D – Changes to personal information/ application details and conduct breaches/disciplinary action related to conduct All Used to notify the FCA of Conduct Rule breaches by Senior Managers, disciplinary action taken against Senior Managers and changes to personal information. Form E – Internal transfer of a person performing a controlled function for dual regulated firms All An application for an individual to change the approved function being performed. Form I – Application for the variation of a conditional approval of a Senior Management Function All An application for changes to the conditions associated with a conditional approval to perform a Senior Management Function. Form J – Notification of Significant Changes in Responsibilities of a person performing a Senior Management Function All A notification submitted to inform the FCA of significant changes to a Senior Manager’s SoR. Form K – Conversion Notification Form Solvency II and large NDFs Solvency II and large NDFs An application to convert the firm’s approved individuals from the Approved Persons regime to new functions under the SM&CR. This form can also be used to submit updates to a previous Form K. Solvency II firms and large NDFs will be required to submit a Form K setting out how they propose to allocate SMFs when the Regime commences. REP008 – Notification of Conduct Rule Breaches and Disciplinary Action All Used to notify the FCA of Conduct Rule breaches by Certification and Conduct Rules Staff but not SMFs, or to submit a nil return. SoR All A firm must use this template to create a Senior Manager’s SoR. At approval it should be attached to a Form A, Form E or Form K submission. A firm must also use this template when preparing an updated SoR and it should be attached to a Form I (application for the variation of a conditional approval) or Form J (notification of a significant change to a SoR) application.

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Chapter 13
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers New Forms for insurers
13.5 In CP17/41, we asked the following question:
Q12: Do you have any comments on our proposed changes to forms? Feedback received
13.6 The majority of respondents supported our proposals to make these changes
to forms.
13.7 Some respondents said that the declarations in the forms referred only to the FCA’s
COCON and the PRA’s Conduct Rules and did not explicitly refer to APER – Statements of Principle and Code of Practice for Approved Persons. Respondents also asked whether Appointed Representatives are in scope of Question 5.05.2. in Long Form A, because the title of this section in the instrument referred to Solvency II firms.
13.8 Respondents asked whether we would be making any amendments to forms
in the light of the Ministry of Justice’s current consultation on default county court judgments.
13.9 Some respondents asked whether they should submit Short Form A, or Form E,
if a Senior Manager was transferring between entities in a group.
13.10 A small number of respondents gave feedback on the formatting of the forms,
and asked:

if the PRA’s address had been removed in error
if we can ensure templates can be edited
for the Handbook form to be more aligned with Connect, particularly in terms of
formatting. This included aligning the numbering of sections and the formatting of the date
13.11 Some respondents gave feedback on user experience with Connect. These included
the ability to print one document rather than printing in sections and changes to users’ permissions.
13.12 A number of respondents made suggestions as to how we might further improve the
forms. Suggestions included:
ensuring the offline and online forms are entirely consistent
updating the forms to refer to the GDPR and Data Protection Act 2018 rather than
the Data Protection Act 1998
addressing the difference between the Long Form A, which asks for a five year
employment history, and the regulatory references requirements in our Handbook, which ask for a six year employment history

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Chapter 13
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers Clarifications
13.13 Respondents asked us to clarify a number of points:

which forms or sections Appointed Representatives should use
whether they should submit forms electronically or by post
whether Groups would be able to submit a report via GABRIEL that covers a number
of legal entities rather than on an individual basis Our response Forms and Appointed Representatives (ARs) As part of our proposals for the extension of the SM&CR, we sought to streamline and reduce the number of regulatory forms. As part of this, we worked with the PRA to remove the APR forms and relocate the sections that remain relevant to ARs into the new SM&CR versions. So ARs should use the same forms as firms that come under the SM&CR. There are some sections of forms that only apply to ARs and these are clearly signposted. We think that incorporating these sections into the new forms is a better solution than having a separate form specifically for ARs. To make it clear that ARs must adhere to the Approved Persons Regime, we have amended the declarations on forms to refer explicitly to the Statements of Principle and Code of Practice for Approved Persons (APER). We confirm that Question 5.05.2 is not relevant for ARs. Form A We recognise that our requirements for employment history between Form A and the regulatory reference requirements may not appear consistent. When firms apply for Senior Managers to be authorised, we ask for information on their employment history for the last five years. Our regulatory reference requirements require firms to obtain six years of employment history for Senior Managers and Certified Persons. This was introduced with the banking regime and is mirrored in the extension of the SM&CR. For firms subject to MiFID, European regulations require that we ask for ten years employment history. While the requirements differ, they are not contradictory. We therefore don’t intend to change these rules at this time, as we don’t consider it would be proportionate for all firms not subject to MiFID to provide 10 years’ employment history. Long Form A should always be used for a Senior Manager or Appointed Representative application, unless the individual meets the criteria for the submission of a Short Form A.

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Chapter 13
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers Short Form A should be used where there has been no change to an individual’s fitness and propriety since their last approval and:
a) a currently approved individual is applying for an additional controlled function at the same firm b) an individual has stopped holding a controlled function at one firm and now needs approval to perform a controlled function at another firm within six months c) an individual is applying to hold a controlled function and is already approved for a corresponding controlled function in the same group of functions (ie governing and/or required functions) Our Handbook gives specific detail on the use of forms in SUP 10C
Annex 2G.
Our rules give guidance on what should be included in handover material in SYSC 25.9 and SUP 10C.10. This is only required for Solvency II firms and large NDFs. APR Form E Where an individual cannot be mapped to a Senior Management Function and takes up a new function before the start of the new regime (possibly so as to facilitate automatic mapping), firms must submit a transfer application using APR Form E. They should then be included on the firm’s Form K. We will reject applications to move people to non-mapped Senior Management Functions using Form K alone. If the individual will continue to hold their existing APR function until 10 December 2018 and also take up the new mapped function prior to this date, then Form A should be used instead of Form E. Online formatting of forms Firms told us that they use the Handbook forms to collect and review information with their stakeholders, before submitting the information though Connect. We agree that it would be helpful for firms if they could download and complete them before entering them into on Connect. We have reviewed the forms to ensure this is the case. Including the PRA address on dual regulated forms The PRA’s address is included on all the shared forms for dual-regulated firms. The PRA’s address has been removed from the forms for firms that are only regulated by the FCA. Consistency between the Handbook and Connect We reviewed the forms to ensure consistency during the drafting of our rules. We have addressed feedback on inconsistencies in forms for our rules and will ensure there is consistency between the Handbook and our systems when these go live on Connect.

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Chapter 13
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers Some of the responses we received on regulatory forms were about users’ experience with Connect, such as the ability to print forms in one document rather than in sections. We separately intend to make some changes to Connect to make it easier for firms to use the system. Consistency We undertook an exercise to review the forms and ensure consistency during the policy development for CP17/40 and CP17/41. Some respondents highlighted a number of further inconsistencies, including the numbering of sections, the format of the date and the ordering of the sections. We have addressed this feedback in our rules and will ensure consistency when the final forms are available on Connect. Some responses about regulatory forms related to user experience with Connect, such as requests for the ability to print forms in one document, rather than printing in sections. If you are experiencing issues using Connect, please contact our Customer Contact Centre for assistance. Clarifications Firms should use our Connect system to submit forms. In the event that FCA systems are unavailable for a prolonged period there may be circumstances in which firms can submit using paper versions of the forms. The SM&CR applies on a legal entity basis, which means that Management Responsibilities Maps should be drafted at the firm, rather than group, level. Forms will be available three months before the start of the regime. Conversion forms
13.14 In CP17/41, we asked the following question:
Q13: Do you have any comments on our proposed approach to conversion documentation? Feedback received
13.15 The majority of respondents agreed with our proposed approach to
conversion documentation.
13.16 One respondent thought that our proposed requirement for conversion notifications
contradicts the PRA’s proposal to automatically amend the Senior Managers designation from Senior Insurance Management Functions (SIMFs) to Senior Management Functions (SMFs).
13.17 Respondents requested we provide examples of Statements of Responsibilities and
Management Responsibilities Maps.

PS18/15
Chapter 13
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers Our response In CP28/17, the PRA proposed that individuals that were SIMFs under PRA’s SIMR will be renamed SMFs. This is to reflect the extension of the SM&CR to insurers. Our systems and forms will reflect that. But, as we proposed in CP17/41, Solvency II firms and large NDFs will have to submit a conversion notification form (Form K) to convert these two controlled functions from the revised Approved Persons Regime to Senior Management Functions on 10 December 2018. This doesn’t contradict the PRA’s proposal for an automatic re-naming of SIMFs to SMFs, as these individuals have already been approved as part of PRA’s SIMR. We have provided feedback on Statements of Responsibilities and Management Responsibilities Maps in Part 1 of this document. Firms should refer to the relevant sections in Part 1 for more information. Amendments to Fitness & Propriety Questions
13.18 In CP17/41, we asked the following question:
Q14: Do you have any feedback on our proposed amendments to the Fitness & Propriety questions?
13.19 We, along with the PRA, are also making a number of changes to the Fitness and
Propriety questions that are repeated in several solo and dual-regulated forms. The
table below summarises these:
Table 9: List of final amendments to fitness and propriety questions
Form Section Specific Reference Explanation of change Civil Proceedings 5.02.3(c) This question asks whether the candidate is aware of any potential or current proceedings that may lead to a County Court Judgment (CCJ) or judgment debt against them. We have deleted the previous reference to claims over £1000. Civil Proceedings 5.02.8 We have added text to include whether the candidate has ever been found by a judge or tribunal to have lied under oath and/or that their evidence should be disbelieved.

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Chapter 13
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers Form Section Specific Reference Explanation of change Civil Proceedings 5.02.10 We have added a 10 year time limit to the period in which an individual has to declare if a firm in which the individual has held a position of influence has been:

judged by a court to be civilly liable for any
fraud, malfeasance, wrongful trading or other misconduct
the subject of a judgement debt or award against
the firm
party to any other civil proceedings which resulted
in an order against the firm other than the two bullets above Feedback received
13.20 Most respondents agreed with our proposed amendments.
13.21 One respondent was concerned that our proposed addition in the Civil Proceedings
section (5.02.8) which asks whether the candidate[s]… ‘evidence was to be disbelieved’
could be seen as unintentionally harsh. In their view, a person could give evidence in good faith, which they believed to be truthful even if they were not believed. The respondent suggested that we reconsider the proposed amendment.
13.22 Two respondents asked us to explain the rationale behind the proposed requirement to
disclose involvement in arbitration proceedings. Respondents stated that participating in arbitration proceedings does not provide evidence for Fitness or Propriety. Our response The addition to the Civil Proceedings section 5.02.8 clarifies that someone:
a court or tribunal has judged for any fraud, negligence or misconduct
should both declare this on the form, and
they should also declare whether they have been found by a judge
or tribunal to have lied on oath and/or that their evidence was to be disbelieved. As this element still requires a legal judgement and/or decision, we consider that the amendment remains appropriate. As such, we will proceed with the change as proposed. The requirement for a question about the candidate’s participation in arbitration proceedings is required by Solvency II.

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Chapter 13
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers Application of REP008 – Notification of Conduct Rules Breaches and the late returns fee
13.23 In CP17/41, we asked the following two questions:
Q15: Do you have any comments on our proposal to extend the use of REP008 to insurers? Q16: Do you have any comments on our proposal to require a nil return to be submitted where no Conduct Rules breaches have occurred, and to apply the late returns fee to late or non-submitters of REP008? Feedback received
13.24 Most respondents supported our proposed extension of REP008 to insurers.
Respondents generally supported our proposal to require a nil return and extend the late returns fee for late or non-submission.
13.25 One respondent suggested that we should issue reminders to firms ahead of the
REP008 due submission date. Another respondent suggested we should allow firms to set a timetable that aligns with other relevant regulatory reporting dates.
13.26 One respondent suggested that for groups where employees have roles at multiple
subsidiaries, it would be difficult to identify which legal entity should submit the report and a group return would be more suitable.
13.27 Some respondents suggested that it is unnecessary to file a nil return because firms
should already have Conduct Rule breach reporting processes in place. Our response Our Conduct Rules are intended to drive up standards of behaviour in financial services. They represent a meaningful change in the standards of behaviour we expect from people working in the industry. For this reason they will apply to all insurers. Group submissions The SM&CR applies on a legal entity basis and our Conduct Rule reporting requirements are consistent with this. Where an individual works across more than one entity within a group, breaches should be reported under the firm:

in which the individual meets the definition of an employee, and
was undertaking the activity involving the breach.

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Chapter 13
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers Under FSMA s.63E(9), an employee in this context is defined as:

a person who personally provides, or is under an obligation personally
to provide, services to [a firm] under an arrangement made between [a firm] and the person providing the services or another person, and
is subject to (or to the right of) supervision, direction or control by
[a firm] as to the manner in which those services are provided. Reporting schedules and reminders We have considered whether aligning the annual reporting requirement to a firm’s existing regulatory reporting schedule would be appropriate. While we understand this could be helpful to some firms, the requirement is designed to align with the banking regime and provide a consistent industry reporting date. For firms with mixed groups (eg banking groups that contain asset managers) we have received feedback that making a change would create a complex and inconsistent set of requirements. It would mean different entities would have to report the same information for different periods. As explained earlier in this Policy Statement, we want to be able to compare the same period of data across the whole industry. So we intend to keep the proposed reporting period of 1 September to 31 August each year for the majority of firms. As with all of our regulatory reporting, firms will receive three email reminders from our GABRIEL reporting system ahead of the REP008 due date. Nil returns and the late returns fee As the Conduct Rules are designed to raise standards of conduct across the industry, we think that it is appropriate and proportionate to ask firms to confirm whether or not there have been any Conduct Rule breaches during the year. Where there have been no such breaches we will make it quick and easy to confirm this through a nil return on GABRIEL. It will clarify whether a firm has had no Conduct Rule breaches during the period, or has simply failed to report those that have occurred. This will help us assess trends across the industry.

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Chapter 14
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers 14 Consequential amendments
14.1 This chapter contains our response to the feedback we received on the consequential
amendments proposed in CP17/41.
Our proposals
14.2 Our proposals mainly included:

a series of consequential amendments to reflect that the Approved Persons Regime
for Appointed Representatives is being kept
amendments to glossary definitions
using gender-neutral language
changes to SYSC to reflect the extension of SM&CR to insurers
Consequential amendments
Feedback received
14.3 In CP17/41, we asked the following question:
Q17: Do you have any comments on our proposed consequential amendments?
14.4 Respondents broadly agreed with the proposals.
14.5 A respondent suggested that we re-structure our Handbook into different sections
covering each type of firm or business, eg asset managers, intermediaries, credit firms, insurers. Our response Structure of the Handbook We recognise that there are different sections in our Handbook that firms need to navigate to understand the SM&CR. However, most elements of the SM&CR apply to all insurers. For example, the Certification Regime, the Conduct Rules and Fit & Proper requirements are the same for almost every firm. SYSC 23 summarises the whole of the SMCR and explains where the relevant Handbook material can be found for each element.

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Chapter 14
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers The main differences are in how the Senior Managers Regime applies to insurers. In particular, the Senior Management Functions and Prescribed Responsibilities that apply, and the rules around overall responsibility, responsibilities maps and handover procedures. We have tried to clearly mark these differences in the Handbook, for example using tables showing how the requirements apply to different firms. We also flagged in Our Mission that we would review our Handbook after the work on the outcome on EU withdrawal is clear. Until then, we don’t intend to do further work on changing the structure of our Handbook.

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Annex 1
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers
Annex 1
List of non-confidential respondents to
CP17/26 and CP17/41
This Policy Statement incorporates feedback to two SM&CR Consultation Papers for insurers – CP17/26 and CP17/41. Where relevant, we have also considered feedback from the equivalent CPs for solo-regulated firms (CP17/25 and CP17/40). We also engaged with over 2000 individuals as part of our regional and industry engagement. The following respondents provided non-confidential feedback to our consultations:
CP17/26
Aegon UK Group
Association of British Insurers
Association of Financial Mutuals
Aviva
AXA UK Group
Board Strategy
Chartered Insurance Institute
Direct line Group
Financial Services Consumer Panel
Institute and Faculty of Actuaries
International Underwriting Association
Legal and General Group
Lloyd’s Market Association
MGAA
MS Amlin
RJ Martin
RSA
Simmons and Simmons
SJP
Society of Lloyd’s
CP17/41
Association of British Insurers (ABI)
Aviva
International Underwriting Association (IUA) Investment and Life Assurance Group (ILAG) Legal & General Group Limehouse Consulting Zurich

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Annex 2
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers
Annex 2
Abbreviations in this document
APER Statements of Principle and Code of Practice for Approved Persons (Handbook) APR Approved Persons Regime Banking firms Banks, Building Societies, Credit Unions and PRA-designated Investment Firms CASS Client Assets Sourcebook (Handbook) CBA Cost Benefit Analysis CCJ Country Court Judgement COBS Conduct of Business Sourcebook (Handbook) CF Controlled Function COCON Code of Conduct Sourcebook (Handbook) COLL Collective Investment Schemes Sourcebook (Handbook) CP Consultation Paper CR Certification Regime CRD Capital Requirements Directive DBS Disclosure and Barring Service DEPP Decision Procedure and Penalties Manual (Handbook) EEA European Economic Area EU European Union FCA Financial Conduct Authority F&P Fitness and Propriety FCA Financial Conduct Authority FEMR Fair and Effective Markets Review FIT The Fit and Proper Test for Approved Persons (Handbook) FSMA Financial Services and Markets Act 2000 ILS Insurance Linked Securities ISPVs Insurance Special Purpose Vehicles HR Human Resources MiFID Markets in Financial Instruments Directive MRT Material Risk Taker NDFs Non-Directive Firms NED Non-Executive Director PCBS Parliamentary Commission on Banking Standards

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Annex 2
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers PRs Prescribed Responsibilities PS Policy Statement PRA Prudential Regulation Authority Revised APR Revised Approved Persons Regime RMAR Retail Mediation Activities Return SIFs Significant Influence Functions SIMF Senior Insurance Management Function SIMR Senior Insurance Managers Regime SHF Significant Harm Function SMF Senior Management Function SMR Senior Managers Regime SLA Service Level Agreement SOR Statement of Responsibilities SM&CR Senior Managers and Certification Regime SMF Senior Management Function SMR Senior Managers Regime SUP Supervision Manual (Handbook) SYSC Senior Management Arrangements, Systems and Controls (Handbook) TC Training and Competence Sourcebook (Handbook) UCITS Undertakings for Collective Investment in Transferable Securities UK United Kingdom Disclaimer We have developed the policy in this Consultation Paper in the context of the existing UK and EU regulatory framework. The Government has made clear that it will continue to implement and apply EU law until the UK has left the EU. We will keep the proposals under review to assess whether any amendments may be required in the event of changes in the UK regulatory framework in the future. We make all responses to formal consultation available for public inspection unless the respondent requests otherwise. We will not regard a standard confidentiality statement in an email message as a request for non‑disclosure. Despite this, we may be asked to disclose a confidential response under the Freedom of Information Act 2000. We may consult you if we receive such a request. Any decision we make not to disclose the response is reviewable by the Information Commissioner and the Information Rights Tribunal. You can download this Consultation Paper from our website: www.fca.org.uk. All our publications are available to download from www.fca.org.uk. If you would like to receive this paper in an alternative format, please call 020 706 0790 or email: publications_graphics@fca.org.uk or write to: Editorial and Digital team, Financial Conduct Authority, 12 Endeavour Square, London E20 1JN

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Annex 3
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers
Annex 3
Combined list of FCA and PRA Senior
Management Functions
SMF Description FCA function PRA Function SMF1 Chief Executive ✓ SMF2 Chief Finance function ✓ SMF3 Executive Director ✓ SMF4 Chief Risk function ✓ SMF5 Head of Internal Audit function ✓ SMF6 Head of Key Business Area function ✓ SMF7 Group Entity Senior Manager function ✓ SMF9 Chairman function ✓ SMF10 Chair of the Risk Committee ✓ SMF11 Chair of the Audit Committee ✓ SMF12 Chair of the Remuneration Committee ✓ SMF13 Chair of the Nominations Committee ✓ SMF14 Senior Independent Director ✓ SMF151 Chair of the With-Profits Committee ✓ SMF16 Compliance Oversight function ✓ SMF17 Money Laundering Reporting function ✓ SMF18 Other Overall Responsibility function ✓ SMF19 Head of Third-Country Branch ✓ SMF20 Chief Actuary function ✓ SMF20a With-Profits Actuary function ✓ SMF21 EEA Branch Senior Manager ✓ SMF22 Other Local Responsibility ✓ SMF23 Chief Underwriting Officer ✓ SMF23a Underwriting Risk Oversight function (Lloyd’s) ✓ SMF23b Lloyd’s Conduct Risk Oversight function (Lloyd’s) ✓ SMF24 Chief Operations function ✓ SMF27 Partner function ✓ Includes any person(s) performing the With-Profits advisory arrangement.

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Annex 4
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers
Annex 4
Combined list of FCA and PRA Prescribed
Responsibilities
Description of prescribed responsibilities (as set out in SYSC, where prescribed by the FCA) FCAprescribed PRAprescribed Dual Applying to Solvency II firms & Large NDFs A Responsibility for the firm’s performance of its obligations under the Senior Managers Regime ✓ B Responsibility for the firm’s performance of its obligations under the employee Certification Regime ✓ B-1 Responsibility for the firm’s obligations for conduct rules training and reporting ✓ C Responsibility for compliance with the requirements of the regulatory system about the management responsibilities map ✓ D Responsibility for the firm’s policies and procedures for countering the risk that the firm might be used to further financial crime ✓ F Responsibility for:
a) leading the development of and b) monitoring the effective implementation of policies and procedures for the induction, training and professional development of all members of the firm’s governing body ✓ G Responsibility for monitoring the effective implementation of policies and procedures for the induction, training and professional development of all of the firm’s SMF managers and key function holders (other than members of the firm’s governing body) ✓ H Responsibility for overseeing the adoption of the firm’s culture in the day-to-day management of the firm ✓ I Responsibility for leading the development of the firm’s culture by the governing body as a whole ✓ J-2 Responsibility for providing for and oversight of the internal audit function, where this function is outsourced to an external third-party provided by a non-significant firms (large NDFs only) ✓ M Responsibility for overseeing the development of, and implementation of the firm’s remuneration policies and practices ✓ N Responsibility for the independence, autonomy and effectiveness of the firm’s policies and procedures on whistleblowing ✓

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Annex 4
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers Description of prescribed responsibilities (as set out in SYSC, where prescribed by the FCA) FCAprescribed PRAprescribed Dual O Responsibility for managing the allocation and maintenance of the firm’s capital, funding (where applicable) and liquidity ✓ Q Responsibility for the production and integrity of the firm’s financial information and its regulatory reporting ✓ T Responsibility for the development and maintenance of the firm’s business model by the governing body ✓ T-2 Responsibility for the performance of the firm’s Own Risk and Solvency assessment (ORSA) (applies to SII firms only) ✓ U Responsibility for the firm’s performance of its obligations under Fitness and Propriety (in the PRA Rulebook) in respect of notified non-executive directors and those who perform a key function (where applicable for insurers) ✓ X Responsibility for the firm’s performance of its obligations under the Outsourcing part of the PRA Rulebook (for CRR and non CRR firms), Conditions Governing Business 7 (for SII firms and third country branches) or Non-solvency II firms: Governance 5 (for large NDFs) ✓ Z Responsibility for the firm’s compliance with CASS ✓ Description of prescribed responsibilities (as set out in SYSC, where prescribed by the FCA) FCAprescribed PRAprescribed Dual Applying to small NDFs & small run-off firms A Responsibility for the firm’s performance of its obligations under the Senior Managers Regime ✓ B Responsibility for the firm’s performance of its obligations under the Certification Regime ✓ B-1 Responsibility for the firm’s obligations in relation to individual conduct rules for training and reporting ✓ D Overall Responsibility for the firm’s policies and procedures for countering the risk that the firm might be used to further financial crime ✓ CC Responsibility for managing the firm’s financial resources ✓ DD Responsibility for ensuring the governing body is informed of its legal and regulatory obligations ✓ GG Responsibility for the oversight of systems and controls, along with risk management policies and procedures, that are proportionate to the nature, scale, and complexity of the risks inherent in the firm’s business model ✓ T-1 Providing the governing body with an up-to-date business plan and all relevant MI ✓ Z Overall Responsibility for the firm’s compliance with CASS ✓

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Annex 4
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers Description of prescribed responsibilities (as set out in SYSC, where prescribed by the FCA) FCAprescribed PRAprescribed Dual Applying to Insurance Special Purpose Vehicles A Responsibility for the firm’s performance of its obligations under the Senior Managers Regime ✓ B Responsibility for the firm’s performance of its obligations under the Certification Regime ✓ B-1 Responsibility for the firm’s obligations in relation to individual conduct rules for training and reporting ✓ D Overall Responsibility for the firm’s policies and procedures for countering the risk that the firm might be used to further financial crime ✓ Description of prescribed responsibilities (as set out in SYSC, where prescribed by the FCA) FCAprescribed PRAprescribed Dual Applying to third-country branches A Responsibility for the firm’s performance of its obligations under the Senior Managers Regime ✓ AA Responsibility for implementing (where applicable) and management of the firm’s risk management policies and procedures ✓ B Responsibility for the firm’s performance of its obligations under the Certification Regime ✓ BB Responsibility for managing the systems and controls of the firm ✓ B-1 Responsibility for the firm’s obligations in relation to individual conduct rules for training and reporting ✓ C Responsibility for compliance with the requirements of the regulatory system about the management responsibilities map ✓ D Overall Responsibility for the firm’s policies and procedures for countering the risk that the firm might be used to further financial crime ✓ EE Responsibility for escalating correspondence from the PRA, FCA and other regulators to the appropriate governing or management bodies ✓ FF Responsibility for the firm’s compliance with the UK regulatory system ✓ O Responsibility for managing the allocation and maintenance of the firm’s capital, funding (where applicable) and liquidity ✓ Q Responsibility for the production and integrity of the firm’s financial information and its regulatory reporting ✓ T Responsibility for the development and maintenance of the firm’s business model by the governing body ✓ T-2 Responsibility for the performance of the firm’s Own Risk and Solvency assessment (ORSA) (applies to SII firms only) ✓

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Appendix 1
Financial Conduct Authority
Extending the Senior Managers & Certification Regime to insurers
Appendix 1
Near-final Rules

FCA 2018/XX
INDIVIDUAL ACCOUNTABILITY (DUAL-REGULATED FIRMS) INSTRUMENT Powers exercised A. The Financial Conduct Authority makes this instrument in the exercise of the following powers and related provisions in the Financial Services and Markets Act 2000 (“the Act”):
(1) section 59 (Approval for particular arrangements); (2) section 59AB(1) (Specifying functions as controlled functions: transitional provision); (3) section 60 (Applications for approval); (4) section 60A (Vetting candidates by authorised persons); (5) section 61 (Determination of applications); (6) section 62A (Changes to responsibilities of senior managers); (7) section 63ZA (Variation of senior manager’s approval at request of authorised person); (8) section 63ZD (Statement of policy relating to conditional approval and variation); (9) section 63C (Statement of policy); (10) section 63E (Certification of employees by authorised persons); (11) section 63F (Issuing of certificates); (12) section 64A (Rules of conduct); (13) section 64C (Requirements for authorised persons to notify regulator of disciplinary action); (14) section 69 (Statement of policy); (15) section 137A (The FCA’s general rules); (16) section 137T (General supplementary powers); (17) section 138D (Action for damages); (18) section 139A (Power of the FCA to give guidance); (19) section 395 (The FCA’s and PRA’s procedures); and (20) paragraph 23 of Schedule 1ZA (Fees). B. The rule-making powers listed above are specified for the purpose of section 138G(2) (Rule-making instruments) of the Act. Commencement
C. This instrument comes into force on 10 December 2018 except as follows:
Annex Date comes into force
Part 1 of Annex N [ ] 2018 [shortly after instrument is made]
Part 2 of Annex N 10 September 2018
Part 1 of Annex X 10 September 2018
Part 1 of Annex C 1 November 2018
Part 3 of Annex N 1 November 2018
Part 2 of Annex X 1 November 2018

FCA 2018/XX
Part 2 of Annex B 10 December 2019
Part 2 of Annex D 10 December 2019
Amendments to the Handbook
D. The FCA’s Handbook of rules and guidance is amended in accordance with paragraphs E, F, G, H and I of this instrument. E. Amendments to the numbering and location of, and deletions of, provisions in the Senior Management Arrangements, Systems and Controls sourcebook (SYSC) and
Chapter 10C of the Supervision manual (SUP) are set out in the tables in Annex A.
Except as further amended by paragraphs F, G, H and I of this instrument, the provisions in column B of the tables in Annex A otherwise remain in full force and effect. F. (1) Cross references throughout the FCA’s Handbook to provisions listed in column A of the tables in Annex A of this instrument are amended accordingly, but only where both the existing and revised cross reference is a reference in one of the following forms (but the existing and revised cross references need not be in the same form):
(a) an annex;
(b) a section; or
(c) in a form not including any sub-paragraph numbering or lettering after the letter designating the legal nature of the provision, such as a rule (designated with an “R”) or guidance (designated with a “G”). (2) A cross-reference in a provision deleted under paragraph G or J of this instrument is not updated under this paragraph F. (3) This paragraph F does not apply to an existing cross-reference that also covers a provision neither renumbered nor deleted by paragraph E. G. The modules of the FCA’s Handbook of rules and guidance listed in column (1) below (as amended, where applicable, by paragraphs E and F of this instrument) are amended or, as the case may be, further amended in accordance with the Annexes to this instrument listed in column (2) below:
(1) (2)
Glossary of definitions Annex B
Senior Management Arrangements, Systems and Controls sourcebook (SYSC)
Annex C
Code of Conduct (COCON) Annex D
Threshold Conditions (COND) Annex E
Statements of Principle and Code of Practice for Approved Persons (APER)
Annex F
The Fit and Proper test for Approved Persons and specified significant-harm functions (FIT)
Annex G
Training and Competence (TC) Annex H
General Provisions (GEN) Annex I

FCA 2018/XX
Prudential sourcebook for Investment Firms (IFPRU) Annex J Prudential sourcebook for Mortgage and Home Finance Firms, and Insurance Intermediaries (MIPRU)
Annex K
Conduct of Business sourcebook (COBS) Annex L Client Assets (CASS) Annex M Supervision manual (SUP) Annex N Decision Procedure and Penalties Manual (DEPP) Annex O Dispute Resolution: Complaints (DISP) Annex P Credit Unions sourcebook (CREDS) Annex Q Consumer Credit sourcebook (CONC) Annex R H. In each case in which one of the Annexes listed in column (2) of the table in paragraph G of this instrument says that the module of the FCA’s Handbook of rules and guidance to which that Annex relates is amended by inserting a new form into that module or amending a form in that module as set out in Annex X of this instrument, that module is amended accordingly.
I. The Fit and Proper test for Approved Persons and Specified significant-harm
functions (FIT) module of the FCA’s Handbook of rules and guidance is renamed the Fit and Proper test for Employees and Senior Personnel. Amendments to the material outside the Handbook J. The material outside the Handbook listed in column (1) below is amended in accordance with the Annexes to this instrument listed in column (2) below:
(1) (2)
The Energy Market Participants guide (EMPS) Annex S The Oil Market Participants guide (OMPS) Annex T Service companies guide (SERV) Annex U Benchmark Administration, Contribution and Use (BENCH) Annex V The Enforcement Guide (EG) Annex W K. Paragraph F of this instrument also applies to the material outside the Handbook listed in paragraph J. Notes
L. In this instrument, notes shown as “Editor’s note:” are intended for the convenience
of the reader and do not form part of the legislative text. Citation M. This instrument may be cited as the Individual Accountability (Dual-Regulated Firms) Instrument 2018. By order of the Board [date] 2018

FCA 2018/XX
Annex A
Renumbering and deletions in the Senior Management Arrangements, Systems and Controls sourcebook (SYSC) and the Supervision manual (SUP) (A) Old heading and numbering (B) New heading, numbering and deletions
4.5 Management responsibilities maps
for UK relevant authorised persons
Deleted
Application Application and purpose
(Section heading for 25.1)
4.5.1R 25.1.1R
4.5.2R 25.1.3R
4.5.3R 25.1.2R
General rule General rule
4.5.4R 25.2.1R
4.5.5R 25.2.2R
4.5.6G(1) and (2) 25.1.6G(1) and (2)
Specific requirements Specific requirements 4.5.7R 25.2.3R 4.5.8R 25.2.4R Guidance about what should be in a management responsibilities map Guidance about what should be in a management responsibilities map (Section heading for 25.4) 4.5.9G(1) 25.4.1G 4.5.9G(2) 25.4.2G 4.5.10G 25.4.3G 4.5.11G 25.4.4G

FCA 2018/XX
(A)
Old heading and numbering
(B)
New heading, numbering and deletions
4.5.12G(1) Deleted
4.5.12G(2) 25.4.5G
4.5.12G(3) 25.4.6G
4.5.12G(4) 25.4.7G
4.5.12G(5) 25.4.8G
4.5.12G(6) 25.4.11G
4.5.12G(7) 25.4.9G
4.5.12G(8) 25.4.10G
4.5.12G(9) 25.4.12G
Small firms Small firms
4.5.13G(1) 25.5.14G(1)
4.5.13G(2) 24.3.5G
Single document Management responsibilities map should be a single document 4.5.14R 25.5.1R 4.5.15G(1) to (4) 25.5.2G(1) to (4) 4.5.15G(5) 25.5.3G Purpose of SYSC 4 Annex 1G (The main business activities and functions of a relevant authorised person) Purpose of SYSC 25 Annex 1G 4.5.16G(1) Deleted 4.5.16G(2) and (3) 25.7.2G(1) and (2) 4.5.16G(4) 25.7.4G 4.5.16G(5) 25.7.3G 4.5.17G Deleted

FCA 2018/XX
(A)
Old heading and numbering
(B)
New heading, numbering and deletions
Contents of SYSC 4 Annex 1G (The main business activities and functions of a relevant authorised person) Contents of SYSC 25 Annex 1G 4.5.18G 25.7.6G 4.5.19G 25.7.7G 4.5.20G 25.7.8G Records Management responsibilities maps: Records (Section heading for 25.8) 4.5.21G 25.8.1G 4.5.22G 25.8.2G
4.6 Management responsibilities maps
for non-UK relevant authorised persons
Deleted
Application Deleted
4.6.1R 25.1.4R
4.6.2R Deleted
4.6.3R Deleted
4.6.4G Deleted
Purpose Deleted
4.6.5G(1) Deleted
4.6.5G(2) 25.6.3G
General rule for third-country relevant authorised persons Deleted 4.6.6R Deleted 4.6.7R Deleted 4.6.8G Deleted

FCA 2018/XX
(A)
Old heading and numbering
(B)
New heading, numbering and deletions
Specific requirements for third-country relevant authorised persons Deleted 4.6.9R(1) Deleted 4.6.9R(2) 25.1.5R 4.6.10R Deleted Single document Deleted 4.6.11R Deleted Guidance about management responsibilities maps for a branch maintained by a thirdcountry relevant authorised person Deleted 4.6.12G Deleted 4.6.13G Deleted 4.6.14G Deleted Management responsibilities maps for EEA relevant authorised persons: General rule Deleted 4.6.15R Deleted 4.6.16R Deleted Responsibilities maps for EEA relevant authorised persons: purpose Deleted 4.6.17G(1) 25.6.2G(1) 4.6.17G(2) 25.6.2G(2) 4.6.17G(3) 25.1.6G(3) 4.6.17G(4) 25.6.2G(4) Responsibilities maps for EEA relevant authorised persons: detailed requirements Deleted 4.6.18R Deleted

FCA 2018/XX
(A)
Old heading and numbering
(B)
New heading, numbering and deletions
4.6.19R Deleted
Responsibilities maps for EEA relevant authorised persons: leaving out information already supplied Leaving out information already supplied 4.6.20R 25.6.5R 4.6.21G 25.6.6G 4.6.22G 25.6.7G 4.6.23G 25.6.8G 4.6.24G 25.6.9G Management responsibilities maps for EEA relevant authorised persons: Single document Deleted 4.6.25R Deleted Management responsibilities maps for EEA relevant authorised persons: guidance about what should be included Deleted 4.6.26G 25.6.10G 4.6.27G Deleted 4.6.28G Deleted Management responsibilities maps for small branches maintained by non-UK relevant authorised persons Deleted 4.6.29G Deleted
4.7 Senior management responsibilities for
UK relevant authorised persons: allocation of responsibilities Deleted Application Application (Section heading for SYSC 24.1)

FCA 2018/XX
(A)
Old heading and numbering
(B)
New heading, numbering and deletions
4.7.1R 24.1.1R
4.7.2R 24.1.3R
4.7.3R 24.1.2R
Purpose of this section Deleted
4.7.4G Deleted
Allocation of FCA-prescribed senior management responsibilities Allocation of FCA-prescribed senior management responsibilities 4.7.5R(1) 24.2.1R 4.7.5R(2) Deleted 4.7.5R(3) Deleted 4.7.5R(4) Deleted 4.7.5R(5) 24.2.3R(1) 4.7.5R(6) 24.2.3R(2) 4.7.5R(7) 24.2.4R 4.7.6R 24.2.5R 4.7.7R 24.2.6R 4.7.8R(1) 26.3.1R 4.7.8R(2) 26.4.2R 4.7.8R(3) 26.3.4R 4.7.9G Deleted 4.7.10G Deleted Meaning of overall responsibility Deleted 4.7.11G 26.7.2G 4.7.12G 26.6.7G

FCA 2018/XX
(A)
Old heading and numbering
(B)
New heading, numbering and deletions
4.7.13G 26.7.4G
4.7.14G 26.7.5G
4.7.15G Deleted
4.7.16G Deleted
4.7.17G Deleted
4.7.18G 26.4.5G
Who functions should be allocated to Who prescribed responsibilities should be allocated to (Section heading for 24.3) 4.7.19G Deleted 4.7.20G Deleted 4.7.21G(1) Deleted 4.7.21G(2) 26.9.1G 4.7.22G Deleted 4.7.23G 26.9.4G 4.7.24G(1) 24.3.2G 4.7.24G(2) 24.3.3G 4.7.24G(3) 24.3.1G 4.7.24G(4) Deleted 4.7.24G(5) 24.3.4G Dividing and sharing management functions between different people Dividing and sharing management functions between different people 4.7.25G(1) 24.3.7G 4.7.25G(2) 24.3.8G

FCA 2018/XX
(A)
Old heading and numbering
(B)
New heading, numbering and deletions
4.7.26G 24.3.9G
4.7.27G 24.3.10G
4.7.28G 24.3.11G
4.7.29G 24.3.12G
Allocation of responsibilities and territorial scope Allocation of responsibilities and territorial scope 4.7.30G 24.3.13G Group management arrangements and outsourcing Group management arrangements and outsourcing (Section heading for 26.10) 4.7.31G 26.10.1G 4.7.32G 26.10.3G 4.7.33G Deleted 4.7.34G 26.10.2G Link between the senior management regime and this section Link between designated senior management functions and this chapter 4.7.35G Deleted 4.7.36G 26.11.1G(1) to (3) Link between SYSC 4 Annex 1G and this
section
Link between SYSC 25 Annex 1G and this
chapter
4.7.37G 26.11.2G
4.7.38G 26.11.3G
4.8 Senior management responsibilities
for third-country relevant authorised persons: allocation of responsibilities Deleted 4.8.1R Deleted

FCA 2018/XX
(A)
Old heading and numbering
(B)
New heading, numbering and deletions
4.8.2R 26.1.5R
4.8.3R 26.1.4R
4.8.4R 26.1.2R
Purpose Purpose
(Section heading for SYSC 26.2)
4.8.5G 26.2.1G
Allocation of FCA-prescribed senior management responsibilities for thirdcountry relevant authorised persons Deleted 4.8.6R Deleted 4.8.7R Deleted 4.8.8G 24.3.14G 4.8.9R Deleted Local responsibility for a branch’s activities, business areas and management functions Deleted 4.8.10R(1) to (3) 26.3.2R(1) to (3) 4.8.10R(4) 26.3.3R 4.8.10R(5) Deleted 4.8.10R(6) 26.4.3R 4.8.10R(7) Deleted 4.8.11G(2) 26.6.4G(1) 4.8.11G(3) 26.6.4G(2) 4.8.11G(1), (4), (5) and (6) Deleted Meaning of local responsibility: general Deleted 4.8.12G 26.6.6G

FCA 2018/XX
(A)
Old heading and numbering
(B)
New heading, numbering and deletions
4.8.13G(1) Deleted
4.8.13G(2) 26.4.4G
4.8.14G Deleted
Meaning of local responsibility in SYSC
4.8.10R(1): overall responsibility
Deleted
4.8.15G Deleted
4.8.16G Deleted
4.8.17G 26.7.3G
4.8.18G 26.7.6G
4.8.19G Deleted
Meaning of local responsibility in SYSC
4.8.10R(2)
Deleted
4.8.20G(1) 26.8.1G
4.8.20G(3) 26.8.2G
4.8.20G(2) and (4) Deleted
Who functions should be allocated to Who functions should be allocated to (Section heading for SYSC 26.9) 4.8.21G Deleted 4.8.22G 26.9.2G 4.8.23G Deleted 4.8.24G Deleted 4.8.25G Deleted 4.8.26G 26.8.4G Setting overall strategy for a branch Branches: Setting overall strategy for a branch

FCA 2018/XX
(A)
Old heading and numbering
(B)
New heading, numbering and deletions
4.8.27G 26.8.3G
Not giving too much responsibility to one individual Not giving too much responsibility to one individual 4.8.28G(1) to (4) Deleted 4.8.28G(5) 26.9.5G Group arrangements and outsourcing Deleted 4.8.29G Deleted Allocation of responsibility for transactions Allocation of responsibility for transactions in branches 4.8.30G 26.5.3G Application of SYSC 4.7 to branches maintained by third-country relevant authorised persons Deleted 4.8.31R Deleted Link between the senior management regime and this section Deleted 4.8.32G Deleted 4.8.33G(1) Deleted 4.8.33G(2) 26.11.1G(4) 4.8.34G 26.11.1G(5) Link between SYSC 4 Annex 1G and this
section
Deleted
4.8.35G Deleted
4.9 Handover procedures and material Handover procedures and material
(Section heading for 25.9)
Application Application

FCA 2018/XX
(A)
Old heading and numbering
(B)
New heading, numbering and deletions
4.9.1R(1) 25.9.1R
4.9.1R(2) 25.9.2R
4.9.2R Deleted
4.9.3R Deleted
Rules about handover material Rules about handover material 4.9.4R 25.9.4R 4.9.5R 25.9.5R 4.9.6G 25.9.6G 4.9.7G 25.9.7G Handover arrangements and certificates Handover arrangements and certificates 4.9.8G 25.9.8G Application of this section to other parts of a firm’s management Application of this section to other parts of a firm’s management 4.9.9G 25.9.9G 4 Annex 1G The main business activities and functions of a relevant authorised person 25 Annex 1G Examples of the business activities and functions of an SMCR firm
5.2 Certification regime Senior managers and certification regime:
Certification regime
(Chapter heading for 27)
Application Application and purpose
(Section heading for 27.1)
5.2.1R 27.1.1R
5.2.2G 27.1.2G
Purpose Purpose
5.2.3G 27.1.3G

FCA 2018/XX
(A)
Old heading and numbering
(B)
New heading, numbering and deletions
General requirements Basic requirements
5.2.4G 27.2.3G
5.2.5G(1) Deleted
5.2.5G(2) 27.2.2G
Fitness to act Fitness to act
5.2.6G 27.2.4G
5.2.7G 27.2.5G
5.2.8G 27.2.6G
5.2.9G 27.2.7G
5.2.10G 27.2.8G
Issuing and renewing certificates Issuing and renewing certificates 5.2.11G 27.2.9G 5.2.12G 27.2.10G 5.2.13G 27.2.11G 5.2.14G 27.2.12G 5.2.15G 27.2.13G 5.2.16G(1) 27.2.14G(1) 5.2.16G(2) 27.2.14G(4) 5.2.16G(3) 27.2.14G(5) 5.2.17G(1) 27.2.15G(1) and 27.2.15G(2) 5.2.17G(2) 27.2.15G(3) 5.2.17G(3) 27.2.15G(4) 5.2.17AG 27.2.16G

FCA 2018/XX
(A)
Old heading and numbering
(B)
New heading, numbering and deletions
Scope: general requirements General requirements 5.2.18R 27.6.1R Scope: territorial scope Deleted 5.2.19R 27.3.1R 5.2.20G 27.3.2G 5.2.20AG 27.3.3G Scope: employees Employees 5.2.21G 27.4.1G 5.2.22G 27.4.2G Scope: effect of PRA requirements Effect of PRA requirements 5.2.23G 27.4.3G Scope: exclusions Exclusions 5.2.24G 27.6.1G 5.2.25R 27.6.2R 5.2.26R 27.6.3R Scope: emergency appointments Emergency appointments 5.2.27R 27.5.1R 5.2.28G 27.5.2G Scope: temporary UK role (the 30-day rule) Temporary UK role (the 30-day rule) 5.2.28AR 27.5.3R 5.2.28BG 27.5.4G 5.2.28C(1)G 27.5.5G 5.2.28C(2)G 27.5.6G

FCA 2018/XX
(A)
Old heading and numbering
(B)
New heading, numbering and deletions
Scope: FCA-specified significant-harm functions FCA certification functions 5.2.29R 27.7.2R 5.2.30R 27.7.3R 5.2.31G 27.7.4G CASS oversight function CASS oversight function 5.2.32R 27.8.1R 5.2.32AR 27.8.2G Proprietary trader function Proprietary trader function 5.2.34R 27.8.3R Significant management function Significant management function 5.2.35R 27.8.4R 5.2.36G 27.8.5G 5.2.37G 27.8.8G 5.2.38G 27.8.9G Functions requiring qualifications Functions requiring qualifications 5.2.39R 27.8.10R 5.2.40G 27.8.11G Managers of certification employees Managers of certification employees 5.2.41R 27.8.13R Material risk takers Material risk takers 5.2.42R Deleted 5.2.43G Deleted Client-dealing function Client-dealing function

FCA 2018/XX
(A)
Old heading and numbering
(B)
New heading, numbering and deletions
5.2.44R 27.8.18R
5.2.45R 27.8.19R
5.2.46G 27.8.20G
5.2.47G 27.8.21G
5.2.48G 27.8.22G
Algorithmic trading function Algorithmic trading function 5.2.49R 27.8.23R 5.2.50R(1) 27.8.24R 5.2.50R(2) Deleted 5.2.51G 27.8.25G 5.2.52G 27.8.26G 5.2.53G 27.8.27G 5.2.54G 27.8.28G 5.2.55G 27.8.29G 5.2.56G 27.8.30G 5.2.57G 27.8.31G 5 Annex 1G Examples of how the temporary UK role rule in SYSC 5.2.28A (the 30-day rule) works 27 Annex 1G Examples of how the temporary UK role rule in SYSC 5.2.28AR (the 30-day rule) works Renumbering in SUP 10C (A) Old heading and numbering (B) New heading, numbering and deletions Chairman of the nomination committee function (SMF13) Chairman of the nomination committee function (SMF13)

FCA 2018/XX
Renumbering in SUP 10C
(A)
Old heading and numbering
(B)
New heading, numbering and deletions
10C.5.2R 10C.5A.3R
10C.5.3G 10C.5A.4G
10C.5.4G Deleted
Non-executive directors Non-executive directors 10C.5.6G 10C.5A.1G

FCA 2018/XX
Annex B
Amendments to the Glossary of definitions In this Annex, underlining indicates new text and striking through indicates deleted text, unless otherwise stated.
Part 1: Comes into force 10 December 2018
Insert the following new definitions in the appropriate alphabetical position. The text is not underlined. authorised approved person employer (in relation to an approved person with a current approved person approval) the firm on whose application approval for the performance of the controlled function was given under section 59 of the Act (Approval for particular arrangements). compliance requirements for SMCR firms any of the following requirements:
(a) SYSC 3.2.8R (The compliance function); (b) SYSC 6.1 (Compliance); (c) article 22 of the MiFID Org Regulation (Compliance); or (d) article 22 of the MiFID Org Regulation (as applied in accordance with SYSC 1 Annex 1 2.8AR, SYSC 1 Annex 1 3.2-AR, SYSC 1 Annex 1 3.2-BR, SYSC 1 Annex 1 3.2CR and SYSC 1 Annex 1 3.3R). certification function an FCA certification function or a PRA certification function. conduct risk oversight (Lloyd’s) function FCA controlled function SMF23b in the table of FCA-designated senior management functions, described more fully in SUP 10C.6.4R. EEA SMCR banking firm an incoming EEA firm or incoming Treaty firm that meets the following conditions:
(a) it has a branch in the United Kingdom; (b) it does not have permission for effecting contracts of insurance or carrying out contracts of insurance; and (c) it meets one of the following conditions:

FCA 2018/XX
(i) it is a credit institution which has a permission under
Part 4A, Schedule 3 or Schedule 4 of the Act that
includes accepting deposits; or
(ii) it meets all the following conditions:
(A) the institution is an investment firm; (B) it has a permission under Part 4A, Schedule 3 or Schedule 4 of the Act that covers dealing in investments as principal; and (C) when carried on by it, that activity is a PRAregulated activity. EEA SMCR firm (a) an EEA SMCR banking firm; or (b) any other SMCR firm that is an incoming EEA firm or incoming Treaty firm. executive director function FCA controlled function SMF3 in the table of FCA-designated senior management functions, described more fully in SUP 10C.5.1R to 10C.5.12R. FCA certification function a significant-harm function that has been specified under section 63E of the Act (Certification of employees by authorised persons) by the FCA (see SYSC 27.7.3R (Table: FCA certification functions)) and which consequently is a specified function as defined in section 63E(2) of the Act. internal audit requirements for SMCR firms any of the following requirements:
(a) SYSC 3 (Systems and controls) insofar as it relates to internal audit; (b) SYSC 6.2 (Internal audit); (c) article 24 of the MiFID Org Regulation (Internal audit); or (d) article 24 of the MiFID Org Regulation (Internal audit) (as applied in accordance with SYSC 1 Annex 1 2.8AR, SYSC 1
Annex 1 3.2-AR, SYSC 1 Annex 1 3.2-BR, SYSC 1 Annex 1
3.2CR and SYSC 1 Annex 1 3.3R).
MiFID authorisation and management body change notification ITS Commission Implementing Regulation 2017/1945 of 19 June 2017 laying down implementing technical standards with regard to notifications by and to applicant and authorised investment firms.

FCA 2018/XX overseas SMCR firm an SMCR firm that is an overseas firm. PRA certification function a significant-harm function that has been specified by the PRA under section 63E of the Act (Certification of employees by authorised persons) and which consequently is a specified function as defined in section 63E(2) of the Act. risk control requirements for SMCR firms any of the following requirements:
(a) SYSC 3 (Systems and Controls) insofar as it relates to risk controls; (b) SYSC 7.1.6R, SYSC 7.1.21R and SYSC 7.1.22R; (c) COLL 6.11 (Risk control and internal reporting); (d) article 23 of the MiFID Org Regulation (Risk management); or (e) article 23(2) of the MiFID Org Regulation (as applied in accordance with SYSC 1 Annex 1 2.8AR, SYSC 1 Annex 1 3.2-AR, SYSC 1 Annex 1 3.2-BR, SYSC 1 Annex 1 3.2CR and SYSC 1 Annex 1 3.3R). SMCR banking firm any of the following:
(a) a UK SMCR banking firm;
(b) an EEA SMCR banking firm; or
(c) a third-country SMCR banking firm.
SMCR financial activities any of the following:
(a) regulated activities;
(b) an activity carried on in connection with a regulated activity (whether current, past or contemplated); (c) an activity held out as being for the purposes of a regulated activity (whether current, past or contemplated); (d) activities that constitute dealing in investments as principal, disregarding the exclusion in article 15 of the Regulated Activities Order (Absence of holding out etc); or (e) activities listed in points 2 to 15 of Annex I to the CRD (List of activities subject to mutual recognition).

FCA 2018/XX
SMCR firm a firm identified as an SMCR firm in the decision tree in SYSC 23
Annex 1 (Definition of SMCR firm and different types of SMCR
firms).
table of FCAdesignated senior
management functions the table of FCA-designated senior management functions in SUP 10C.4.3R. third-country SMCR banking firm a non-UK institution other than an incoming firm that meets the following conditions:
(a) it has a branch in the United Kingdom; (b) it is not an institution that has permission for effecting contracts of insurance or carrying out contracts of insurance; and (c) it meets one of the following conditions:
(i) it is a credit institution which has a Part 4A permission that includes accepting deposits; or (ii) it meets all the following conditions:
(A) the institution is an investment firm; (B) its Part 4A permission covers dealing in investments as principal; and (C) when carried on by it, that activity is a PRAregulated activity. UK SMCR banking firm an institution that meets the following conditions:
(a) it is incorporated in, or formed under the law of any part of, the United Kingdom; (b) it does not have permission for effecting contracts of insurance or carrying out contracts of insurance; (c) it meets one of the following conditions:
(i) its Part 4A permission includes accepting deposits; or (ii) it meets all the following conditions:
(A) the institution is an investment firm; and (B) its Part 4A permission covers dealing in investments as principal; and

FCA 2018/XX
(C) when carried on by it, that activity is a PRAregulated activity. UK SMCR firm (a) a UK SMCR banking firm; or (b) any other SMCR firm that is a UK domestic firm. Amend the following definitions as shown. Where a cross-reference is amended by paragraph F of this instrument, that change is not shown. accountable functions (in relation to an approved person) the functions described in APER 1.1A.2P 1.1A.2R, which are in summary:
(a) FCA controlled functions in SUP 10A (FCA Approved Persons); and (b) PRA controlled functions; and [deleted] (c) any other functions of the approved person in relation to the carrying on of a regulated activity; in relation to the authorised persons in relation to which that person is an approved person approved person’s authorised approved person employer. accountable higher management function (in APER) any accountable function that is :
(a) an FCA controlled function that is a significant-influence function; or . (b) a PRA controlled function. advising on investments (1) (except in SUP 10A (FCA Approved Persons), SYSC 27 (Senior managers and certification regime: Certification regime), APER and CONRED 2) the regulated activities, specified in article 53(1) to (1D) and article 53(2) of the Regulated Activities Order (Advising on investments), which are:
(a) advising on investments (except P2P agreements); and (b) advising on P2P agreements. (2) (in SUP 10A (FCA Approved Persons), SYSC 27 (Senior managers and certification regime: Certification regime) and APER) the regulated activities specified in articles 53(1) to

FCA 2018/XX
(1D) and 53(2) (Advising on investments) of the Regulated Activities Order. For these purposes, advising on investments includes any activities that would be included but for the exclusion in article 72AA (Managers of UCITS and AIFs) of the Regulated Activities Order. (3) … apportionment and oversight function FCA controlled function CF8 in Parts 1 and Part 2 of the table of FCA controlled functions, described more fully in SUP 10A.7.1R. CASS operational oversight function FCA controlled function CF10a in Parts 1 and 2 of the table of FCA controlled functions, described more fully in SUP 10A.7.9R. certification employee (1) (as described in more detail in section 63E(1) of the Act (Certification of employees by relevant authorised person)) an employee (as defined) of a relevant authorised person an SMCR firm who has a valid certificate issued by that relevant authorised person SMCR firm. (2) (in relation to an SMCR firm that is in the insurance sector (as defined in Part Four of SYSC 23 Annex 1 (Definition of insurance sector))) an employee (as defined in section 63E of the Act) of an SMCR firm who performs a certification function under an arrangement entered into by the SMCR firm in relation to the carrying on by the SMCR firm of a regulated activity, even though the obligation of the SMCR firm to issue a certificate under section 63F of the Act has not yet come into force. [Note: Paragraph (2) of this definition applies until [ ] 2019 [one year after main commencement date for insurers].] chair of the nomination committee function (1) (for a relevant authorised person) FCA controlled function SMF13 in Part 1 of the table in SUP 10C.4.3R (Table of FCA-designated senior management functions for relevant authorised persons) table of FCA-designated senior management functions, described more fully in SUP 10C.5A.3R; . (2) (for certain Solvency II firms including a large non-directive insurer) the FCA controlled function CF2a in Part 2 of the
table of FCA controlled functions, described more fully in
SUP 10A.6.15AR. chair of the withprofits committee function (for certain Solvency II firms) FCA controlled function CF2b SMF15 in Part 2 of the table of FCA controlled FCA-designated senior management functions, described more fully in SUP 10A.6.15BR SUP 10C.5A.5R to SUP 10C.5A.6R.

FCA 2018/XX chief executive function
FCA controlled function CF3 in Part 1 and Part 2 of the table of FCA controlled functions, described more fully in SUP 10A.6.17R. compliance oversight function (1) (for relevant authorised persons SMCR firms) FCA controlled function SMF16 in Part 1 of the table in SUP 10C.4.3R (Table of FCA-designated senior management functions for relevant authorised persons) the table of FCAdesignated senior management functions, described more fully in SUP 10C.6.1R; and (2) (for other firms) FCA controlled function CF10 in Parts 1 and 2 of the table of FCA controlled functions, described more fully in SUP 10A.7.8R. controlled function a function, relating to the carrying on of a regulated activity by a firm, which is specified by:
(a) either the FCA in:
(i) (for relevant authorised persons SMCR firms) the tables in SUP 10C.4.3R (Table of FCA-designated senior management functions for relevant authorised persons) table of FCA-designated senior management functions; or (ii) (for other firms and in relation to appointed representatives) the table of FCA controlled functions; or (b) the PRA in:
(i) (for relevant authorised persons CRR firms, credit unions and third country CRR firms (as defined in the PRA Rulebook)) the part of the PRA’s rulebook PRA Rulebook titled ‘Senior Management Functions’, which specifies controlled functions); or (ii) (for Solvency II firms including large non-directive insurers, and for small non-directive insurers) the Senior Insurance Management Functions parts of the PRA Rulebook: Rulebook applicable to Solvency II Firms and Non-Solvency II Firms; or (iii) ; or under section 59 of the Act (Approval for particular arrangements). current approved person approval (in relation to an approved person in relation to a particular firm and controlled function as at any particular time) an approval under
section 59 of the Act (Approval for particular arrangements) given
by the FCA or the PRA in relation to that person for the

FCA 2018/XX performance of that controlled function in relation to that firm that is in force at that time. An approval is treated as having been given by the FCA or the PRA if it is deemed to have been given by either of them by or under:
(a) the Financial Services (Banking Reform) Act 2013 (Transitional and Savings Provisions) Order 2015 (SI 2015/492); or (b) rules made by either of them. customer function FCA controlled function CF30 in Parts 1 and 2 of the table of FCA controlled functions, described more fully in SUP 10A.10.7R. director (1) … … (c) in SYSC, COCON, MIPRU 2 (Responsibility for insurance distribution and MCD credit intermediation activity), SUP 10A (FCA Approved persons) and SUP 10C (FCA senior management managers regime for approved persons in relevant authorised persons SMCR firms) a partnership; … … director function FCA controlled functions function CF1 in Part 1 and, for a Solvency II firm (including a large non-directive insurer) and a small nondirective insurer, Part 2 of the table of FCA controlled functions, described more fully in SUP 10A.6.7R and SUP 10A.6.8R. director of unincorporated association function FCA controlled function CF5 in Part 1 of the table of FCA controlled functions, described more fully in SUP 10A.6.29R. EEA branch senior manager function FCA controlled function SMF21 in Part 2 of the table in SUP 10C.4.3R (Table of FCA controlled functions for relevant authorised persons) table of FCA-designated senior management functions, described more fully in SUP 10C.8.4R. employee … (3) (for the purposes of SYSC 5.2 SYSC 27 (Senior management and certification regime: Certification regime) and the definition of certification employee) has the meaning in
section 63E(9) of the Act (Certification of employees by
relevant authorised persons) which, in summary, says an

FCA 2018/XX employee of a person (the “employer”) includes a reference to a person who:
…
…
FCA controlled function a controlled function which is specified by the FCA under section 59 of the Act (Approval for particular arrangements) in:
(a) (for relevant authorised persons SMCR firms) the tables in SUP 10C.4.3R (Table of FCA-designated senior management functions for relevant authorised persons) table of FCA-designated senior management functions; or (b) (for other firms and in relation to appointed representatives) the table of FCA controlled functions. FCA governing functions any of the following FCA controlled functions labelled as FCA governing functions in the table of FCA-designated senior management functions or in the table of FCA controlled functions. :
(a) (for relevant authorised persons) FCA controlled functions SMF3 and SMF13 in Parts 1 and 3 of the table in SUP 10C.4.3R (Table of FCA-designated senior management functions for relevant authorised persons); (b) (for a Solvency II firm, including a large non-directive insurer) FCA controlled functions CF1, CF2a, CF2b, CF5 and, for large non-directive insurers only, CF6, in Part 2 of the table of FCA controlled functions; and (c) (for a small non-directive insurer) FCA controlled functions CF1, CF3, CF5 and CF6 in Part 2 of the table of FCA controlled functions; and (d) (for other firms and appointed representatives) FCA controlled functions 1 to 6 in Part 1 of the table of FCA controlled functions. FCA-prescribed senior management responsibilities (a) (for UK relevant authorised persons) the responsibilities in SYSC 24.2.6R (Table: FCA-prescribed senior management responsibilities) ; . (b) (for third-country relevant authorised persons) the responsibilities in SYSC 4.8.9R (Table: FCA-prescribed senior management responsibilities for third-country relevant authorised persons). FCA required functions any of the following FCA controlled functions labelled as FCA required functions in:

FCA 2018/XX
(a) (for relevant authorised persons SMCR firms) FCA controlled functions SMF16 and SMF17 in Parts 1 to 3 of the table in SUP 10C.4.3R (Table of FCA-designated senior management functions for relevant authorised persons) the
table of FCA-designated senior management functions; and
or
(b) (for other firms) FCA controlled functions 8 to 11 in Part 1 or Part 2 of the table of FCA controlled functions. firm … (8) (in SYSC 18 with the exception of the guidance in SYSC 18.3.9G):
(a) a UK relevant authorised person UK SMCR banking firm except a small deposit taker; and … … FIT the part of the Handbook in High Level Standards which has the title the Fit and Proper test for Approved Persons and Specified significant-harm functions Employees and Senior Personnel. management responsibilities map the document document describing the management arrangements of a relevant authorised person certain SMCR firms required by SYSC 4.5.4R, SYSC 4.6.6R or SYSC 4.6.15R SYSC 25 (Senior management and certification regime: Management responsibilities maps and handover procedures and material). money laundering reporting function (1) (for relevant authorised persons SMCR firms) FCA controlled function SMF17 in Parts 1 to 3 of the table in SUP 10C.4.3R (Table of FCA-designated senior management functions for relevant authorised persons) table of FCA-designated senior management functions, described more fully in SUP 10C.6.2R; and (2) (for other firms) FCA controlled function CF11 in Parts 1 and 2 of the table of FCA controlled functions, described more fully in SUP 10A.7.10R. non-executive director function FCA controlled function CF2 in Part 1 of the table of FCA controlled functions, described more fully in SUP 10A.6.12R and SUP 10A.6.13R. other local responsibility function FCA controlled function SMF22 in Part 3 of the table in SUP 10C.4.3R (Table of FCA controlled functions for relevant authorised persons) table of FCA-designated senior management functions, described more fully in SUP 10C.8.1R.

FCA 2018/XX other overall responsibility function FCA controlled function SMF18 in Part 1 of the table in SUP 10C.4.3R (Table of FCA-designated senior management functions for relevant authorised persons) table of FCA-designated senior management functions, described more fully in SUP 10C.7.1R. partner function (1) (for an SMCR firm) FCA controlled function SMF27 in the
table of FCA-designated senior management functions,
described more fully in SUP 10C.5.14R to SUP 10C.5.17R; and (2) (for other firms and in relation to appointed representatives) FCA controlled function CF4 in Part 1 of the table of FCA controlled functions, described more fully in SUP 10A.6.23R to SUP 10A.6.27R. PRA controlled function a controlled function which is specified by the PRA under section 59 of the Act (Approval for particular arrangements) in:
(1) (for relevant authorised persons CRR firms, credit unions and third country CRR firms (each as defined in the PRA Rulebook)) the part of the PRA’s rulebook PRA Rulebook titled ‘Senior Management Functions’; or (2) (for Solvency II firms including large non-directive insurers, and for small non-directive insurers) the Senior Insurance Management Functions parts of the PRA Rulebook: Rulebook applicable to Solvency II Firms and Non-Solvency II Firms; or . (3) [deleted]. PRA-prescribed senior management responsibilities one of the functions described as:
(1) (for CRR firms, credit unions and third country CRR firms (each as defined in the PRA Rulebook)):
(a) a ‘prescribed responsibility’ in Chapter 4; or (b) a ‘small firm prescribed responsibility’ in Chapter 5; or (c) a ‘UK branch prescribed responsibility’ in Chapter 6; of the part of the PRA’s rulebook PRA Rulebook called Allocation of Responsibilities; (2) (for firms covered by the Insurance - Allocation of Responsibilities and Large Non-Solvency II Firms –

FCA 2018/XX
Allocation of Responsibilities parts of the PRA Rulebook) a prescribed responsibility or a third country branch prescribed responsibility as defined in those parts; and (3) (for firms covered by the Non-solvency II Firms - Allocation of Responsibilities part of the PRA Rulebook) a small nondirective insurer prescribed responsibility as defined in that
part.
proprietary trader (in SYSC 27 (Senior managers and certification regime:
Certification regime), SUP 10A (FCA Approved Persons), COCON and APER) a person (A) whose responsibilities include committing another person (B) as part of B’s proprietary trading. proprietary trading (in SYSC 27 (Senior managers and certification regime:
Certification regime), SUP 10A (FCA Approved Persons), COCON and APER) dealing in investments as principal as part of a business of trading in specified investments. For these purposes dealing in investments as principal includes any activities that would be included but for the exclusion in Article 15 (Absence of holding out), Article 16 (Dealing in contractually based investments) or, for a UK AIFM or UK UCITS management company, article 72AA (Managers of UCITS and AIFs) of the Regulated Activities Order. relevant senior management application has the meaning in section 61(1)(b) of the Act (Determination of applications) which, in summary, is an application for approval to perform a designated senior management function in relation to the carrying on of a regulated activity by a relevant authorised person an SMCR firm. senior conduct rules staff member (in COCON) a person who:
(a) comes within row (1) of the table in COCON 1.1.2R (an SMF manager); (b) comes within row (2) of the table in COCON 1.1.2R (an employee of a relevant authorised person an SMCR firm who performs the function of an SMF manager); or (c) meets the following conditions:
(i) they come within row (7) of the table in COCON 1.1.2R (an approved person performing a controlled function (including a PRA controlled function) in a Solvency II firm (including a large non-directive insurer) or a small non-directive insurer); and (ii) that controlled function is a significant-influence function; or [deleted]

FCA 2018/XX
(d) is a non-executive director who comes within row (8) of the
table in COCON 1.1.2R (a standard non-executive board
director of a relevant authorised person, a Solvency II firm (including a large non-directive insurer) or a small nondirective insurer UK SMCR firm). significant-harm function a function defined in section 63E(5) of the Act (Certification of employees by relevant authorised persons) which is, in summary (in relation to the carrying on of a regulated activity by a relevant an authorised person), a function that meets the following conditions:
(a) it requires the person performing it to be involved in one or more aspects of the relevant authorised person’s affairs, so far as relating to the activity; and (b) those aspects involve, or might involve, a risk of significant harm to the relevant authorised person or to anyone who is using, or who is or may be contemplating using, any of the services provided by the relevant authorised person. [Note: This definition is not relevant to a firm that is not an SMCR firm.] significant-influence function (for the purposes of controlled functions specified in SUP 10A (FCA Approved persons) and in relation to the carrying on of a regulated activity by an authorised person) a function that is likely to enable the person responsible for its performance to exercise a significant influence on the conduct of the authorised person's affairs, so far as relating to the activity. For the purposes of SYSC 2, COCON and DEPP, this also includes a PRA controlled function, as specified in the Senior Insurance Management Functions parts of the PRA Rulebook: applicable to Solvency II Firms and NonSolvency II Firms. significant management function FCA controlled functions function CF29 in Parts 1 and 2 of the
table of FCA controlled functions, described more fully in SUP
10A.9.9R.
SMF manager (in relation to a relevant authorised person an SMCR firm) a person who has approval under section 59 of the Act (Approval for particular arrangements) to perform a designated senior management function in relation to the carrying on by that relevant authorised person SMCR firm of a regulated activity. Solvency II firm a firm which is any of:
…

FCA 2018/XX
(f) in SUP TP 7 and SUP TP 8, SYSC, COCON, APER, SUP 10A SUP 10C and DEPP only, a large non-directive insurer; … small friendly society function FCA controlled function CF6 in Part 1 and Part 2 of the table of FCA controlled functions, described more fully in SUP 10A.6.31R to SUP 10A.6.32R. staff being assessed under FIT (in FIT and in relation to a relevant authorised person: an SMCR firm) those persons set out in FIT 1.1.1G(4) to (7). (a) any of the following whose fitness is being assessed by the FCA or the relevant authorised person:
(i) an FCA-approved SMF manager; or
(ii) a candidate for an FCA-designated senior management function; or (b) a person whose fitness to perform an FCA-specified significant harm function is being assessed by the relevant authorised person under section 63F of the Act (Issuing of certificates), whether or not that person is already a certification employee in relation to that FCA-specified significant harm function. systems and controls function FCA controlled function CF28 in Part 1 and, for a Solvency II firm which is a third-country insurance or reinsurance undertaking or an insurance special purpose vehicle, Part 2 of the table of FCA controlled functions, described more fully in SUP 10A.8.1R and SUP 10A.8.1AR. Delete the following definitions. The text is not shown struck through. actuarial conduct function (third country) the part of the function of acting in the capacity of an actuary (as appointed by a firm under rule 7.1(2) of the PRA Rulebook:
Solvency II Firms: Third Country Branches) that relates to compliance with FCA requirements and standards under the regulatory system, described more fully in SUP 10A.7.14R. EEA relevant authorised person an incoming firm which is a relevant authorised person in accordance with article 2 of the Financial Services and Markets Act 2000 (Relevant Authorised Persons) Order 2015 which, in summary, is an incoming EEA firm or incoming Treaty firm that meets the following conditions:

FCA 2018/XX
(a) it has a branch in the United Kingdom; (b) it does not have permission for effecting contracts of insurance or carrying out contracts of insurance; and (c) it meets one of the following conditions:
(i) it is a credit institution which has a permission under
Part 4A, Schedule 3 or Schedule 4 of the Act that
includes accepting deposits; or
(ii) it meets all the following conditions:
(A) the institution is an investment firm; (B) it has a permission under Part 4A, Schedule 3 or Schedule 4 of the Act that covers dealing in investments as principal; and (C) when carried on by it, that activity is a PRAregulated activity. FCA-specified significant-harm function a specified significant-harm function that has been specified under
section 63E of the Act (Certification of employees by relevant
authorised persons) by the FCA (see SYSC 27.7.3R (Table: FCAspecified significant-harm functions)). full scope regulatory reference firm for the purpose of SYSC 22 (Regulatory references):
(a) a relevant authorised person;
(b) a Solvency II firm; or
(c) a large non-directive insurer. non-UK relevant authorised person (a) an EEA relevant authorised person; or (b) a third-country relevant authorised person. PRA-prescribed UK branch senior management responsibility a “UK branch prescribed responsibility” in Chapter 6 of the part of the PRA’s rulebook called Allocation of Responsibilities. relevant authorised person (a) an EEA relevant authorised person; or (b) a third country relevant authorised person; or (c) a UK relevant authorised person.

FCA 2018/XX specified significantharm function a significant-harm function that has been specified by the FCA or the PRA further to section 63E(2) of the Act (Certification of employees by relevant authorised persons). third-country relevant authorised person a non-UK institution other than an incoming firm which is a relevant authorised person in accordance with article 2 of the Financial Services and Markets Act 2000 (Relevant Authorised Persons) Order 2015 which, in summary, is a non-UK institution other than an incoming firm that meets the following conditions:
(a) it has a branch in the United Kingdom; (b) it is not an institution that has permission for effecting contracts of insurance or carrying out contracts of insurance; and (c) it meets one of the following conditions:
(i) it is a credit institution which has a Part 4A permission that includes accepting deposits; or (ii) it meets all the following conditions:
(A) the institution is an investment firm; (B) its Part 4A permission covers dealing in investments as principal; and (C) when carried on by it, that activity is a PRAregulated activity. UK relevant authorised person has the meaning in section 71A of the Act (‘relevant authorised person’) which, in summary, is an institution that meets the following conditions:
(a) it is incorporated in, or formed under the law of any part of, the United Kingdom; (b) it does not have permission for effecting contracts of insurance or carrying out contracts of insurance; and (c) it meets one of the following conditions:
(i) its Part 4A permission includes accepting deposits; or (ii) it meets all the following conditions:
(A) the institution is an investment firm; and

FCA 2018/XX
(B) its Part 4A permission covers dealing in investments as principal; and (C) when carried on by it, that activity is a PRAregulated activity.
Part 2: Comes into force 10 December 2019
Amend the following definitions as shown. certification employee (1) … (2) (In relation to an SMCR firm that is in the insurance sector (as defined in Part Four of SYSC 23 Annex 1 (Definition of insurance sector))) it also includes an employee (as defined in section 63E of the Act) of an SMCR firm who performs a certification function under an arrangement entered into by the SMCR firm in relation to the carrying on by the SMCR firm of a regulated activity, even though the obligation of the SMCR firm to issue a certificate under section 63F of the Act has not yet come into force. [Note: Paragraph (2) of this definition applies until [ ] 2019 [one year after main commencement date for insurers].]

FCA 2018/XX
Annex C
Amendments to the Senior Management Arrangements, Systems and Controls sourcebook (SYSC) In this Annex, underlining indicates new text and striking through indicates deleted text, unless otherwise stated. Where a cross-reference is amended by paragraph F of this instrument, that change is not shown.
Part 1: Comes into force 1 November 2018
4.7 Senior management responsibilities for UK relevant authorised persons:
allocation of responsibilities
…
4.7.7 R Table: FCA-prescribed senior management responsibilities
Part One (applies to all firms)
FCA-prescribed senior management responsibility Explanation Equivalent PRAprescribed senior management responsibility (4A) Acting as the firm’s whistleblowers’ champion … … (4B) Responsibility for the firm’s obligations for:
(a) conduct rules training; and
(b) conduct rules reporting.
(1) The firm’s obligations for conduct rules training means its obligations under
section 64B of the Act
(Rules of conduct:
responsibilities of authorised persons).
(2) The firm’s obligations for conduct rules reporting means its obligations under
section 64C of the Act
(Requirement for authorised persons to notify regulator of disciplinary action).

FCA 2018/XX
…
Part 2: Comes into force 10 December 2018
1 Application and purpose
1.1A Application
…
1.1A.1 G The application of this sourcebook is summarised at a high level in the following table. The detailed application is cut back in SYSC 1 Annex 1 and in the text of each chapter. Type of firm Applicable chapters Insurer, UK ISPV Chapters 2, 3, 12 to 18, 19F.2, 21, 22, 23, 24, 25, 26, 27, Managing agent Chapters 2, 3, 11, 12, 18, 19F.2, 21, 22, 23, 24, 25, 26, 27, 28 Society Chapters 2, 3, 12, 18, 19F.2, 21, 22, 23, 24, 25, 26, 27, 28 Any other SMCR firm Chapters 4 to 12, 18, 19D, 19F.2, 21, 22, 23, 24, 25, 26, 27, 28 Every other firm … …
1.4 Application of SYSC 11 to SYSC 22 and 28
What?
1.4.1-A G The application of each of the chapters SYSC 19F.2, SYSC 22 and to SYSC 28 is set out in those chapters. … Actions for damages

FCA 2018/XX
1.4.2 R A contravention of a rule in SYSC 11 to SYSC 21, SYSC 22.8.1R, SYSC
22.9.1R or SYSC 23 to SYSC 28 does not give rise to a right of action by a private person under section 138D of the Act (and each of those rules is specified under section 138D(3) of the Act as a provision giving rise to no such right of action). … 1 Annex Detailed application of SYSC …
Part 2 Application of the common platform requirements
…
2.6G R Except as provided for in (2), the common platform requirements (other than SYSC 4.5 to SYSC 4.9 and SYSC 4 Annex 1) do not apply to a firm in relation to benchmark activities. … 2.13D R SYSC 4.5 (Management responsibilities maps for UK relevant authorised persons), SYSC 4.6 (Management responsibilities maps for non-UK relevant authorised persons), SYSC 4.7 (Senior management responsibilities for UK relevant authorised persons: allocation of responsibilities), SYSC 4.8 (Senior management responsibilities for third country relevant authorised persons:
allocation of responsibilities), SYSC 4.9 (Handover procedures and material) and SYSC 5.2 (Certification regime) also:
(1) Apply to the carrying on of unregulated activities; and (2) Take into account any activity of other members of a group of which the firm is a member. … Where?
2.15 R The common platform requirements, except the common platform recordkeeping requirements, apply to a firm in relation to activities carried on by it
from an establishment in the United Kingdom. However, SYSC 4.5 (Management responsibilities maps for UK relevant authorised persons), SYSC 4.6 (Management responsibilities maps for non-UK relevant authorised persons), SYSC 4.7 (Senior management responsibilities for UK relevant authorised persons: allocation of responsibilities), SYSC 4.8 (Senior management responsibilities for third country relevant authorised persons:
allocation of responsibilities), SYSC 4.9 (Handover procedures and material)

FCA 2018/XX and SYSC 5.2 (Certification regime) apply in accordance with the rules in those sections. …
2.18 R The common platform organisational requirements, except the common
platform requirements on financial crime, also apply in a prudential context to a UK domestic firm and to an overseas firm (other than an incoming EEA firm or an Incoming Treaty firm) with respect to activities wherever they are carried on. However, SYSC 4.5 (Management responsibilities maps for UK relevant authorised persons), SYSC 4.6 (Management responsibilities maps for non-UK relevant authorised persons), SYSC 4.8 (Senior management responsibilities for third country relevant authorised persons: allocation of responsibilities), SYSC 4.7 (Senior management responsibilities for UK relevant authorised persons: allocation of responsibilities), SYSC 4.9 (Handover procedures and material) and SYSC 5.2 (Certification regime) apply in accordance with the rules in those sections. …
Part 3 Tables summarising the application of the common platform requirements to
different types of firm
…
3.3A R SYSC 1 Annex 1 3.3R(1)(b) does not apply to a firm in relation to the requirements in SYSC 4.5 (Management responsibilities maps for UK relevant authorised persons), SYSC 4.6 (Management responsibilities maps for non-UK relevant authorised persons), SYSC 4.7 (Senior management responsibilities for UK relevant authorised persons: allocation of responsibilities), SYSC 4.8 (Senior management responsibilities for third country relevant authorised persons: allocation of responsibilities), SYSC 4.9 (Handover procedures and material) and SYSC 5.2 (Certification regime). …
Table A: Application of the common platform requirements in SYSC 4 to SYSC 10
Provision
SYSC 4
COLUMN A
…
COLUMN A+
…
COLUMN A++
…
COLUMN B
…
… … … … …
SYSC 4.5 Whole
section
applies to UK relevant
Not applicable Not applicable Whole section applies to relevant authorised persons only. All rules apply as rules and not as guidance.

FCA 2018/XX authorised persons only
SYSC 4.6 Applies to
EEA relevant authorised persons and third country relevant authorised persons in accordance with the rules in SYSC 4.6 Not applicable Not applicable Whole section applies to relevant authorised persons only. All rules apply as rules and not as guidance. SYSC 4.7 Whole
section
applies to UK relevant authorised persons only Not applicable Not applicable Whole section applies to relevant authorised persons only. All rules apply as rules and not as guidance. SYSC 4.8 Applies to third country relevant authorised persons only Not applicable Not applicable Whole section applies to relevant authorised persons only. All rules apply as rules and not as guidance. SYSC 4.9 Whole
section
applies to third country relevant authorised persons and UK relevant authorised persons only Not applicable Not applicable Whole section applies to relevant authorised persons only. All rules apply as rules and not as guidance. Provision SYSC 5 COLUMN A … COLUMN A+ … COLUMN A++ … COLUMN B … … … … … … SYSC 5.2 Whole
section
applies to relevant authorised persons only.
Not applicable Not applicable Whole section applies to relevant authorised persons only. All rules apply as rules and not as guidance.

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All rules apply as rules and not as guidance.
… … … … …
Table B: Application of the common platform requirements in SYSC 4 to 10 to MiFID
optional exemption firms and third country firms Provision COLUMN A MiFID optional exemption firms COLUMN B Third country firms SYSC 4 … SYSC 4.5 Not applicable Not applicable SYSC 4.6 Not applicable Third country relevant authorised person: each provision applies as rule or guidance as shown in SYSC 4.6 SYSC 4.7 Not applicable Not applicable SYSC 4.8 Not applicable Third country relevant authorised person: each provision applies as rule or guidance as shown in SYSC 4.8 SYSC 4.9 Not applicable Third country relevant authorised person: each provision applies as rule or guidance as shown in SYSC 4.9 SYSC 5 … SYSC 5.2 Not applicable Third country relevant authorised person: each provision applies as rule or guidance as shown in SYSC 5.2 …

FCA 2018/XX
…
Delete SYSC 2.1.3R, SYSC 2.1.3AR, SYSC 2.1.3BG, SYSC 2.1.3CR, SYSC 2.1.3DR, SYSC 2.1.4R, SYSC 2.1.5G and SYSC 2.1.6G. The deleted text is not shown but [deleted] tags are added to each provision as shown below. 2 Senior management arrangements
2.1 Apportionment of responsibilities
…
2.1.3 R [deleted]
2.1.3A R [deleted]
2.1.3B G [deleted]
2.1.3C R [deleted]
2.1.3D R [deleted]
2.1.4 R [deleted]
2.1.5 G [deleted]
2.1.6 G [deleted]
…
Amend the following as shown. Where a cross-reference is amended by paragraph F of this instrument, that change is not shown.
2.2 Recording the apportionment
2.2.1 R (1) A firm must make a record of the arrangements it has made to satisfy
SYSC 2.1.1R (apportionment) and SYSC 2.1.3R (allocation) and take reasonable care to keep this up to date. … …

FCA 2018/XX
2.2.4 R (1) A Solvency II firm (including a large non-directive insurer) must
have, and maintain, a governance map which satisfies the following conditions:
(a) it complies, as applicable, with PRA Rulebook: Solvency II firms: Insurance – Allocation of Responsibilities, 5.1 and 5.2, or PRA Rulebook: Large Non-Solvency II firms – Allocation of Responsibilities, 5.1 and 5.2, as if those rules had been made by the FCA; (b) it includes details relating to all persons carrying out a significant influence function within the firm not already included under (a); (c) the details in (b) must give as much information as required by, as applicable, the PRA Rulebook: Solvency II firms:
Insurance – Allocation of Responsibilities, 5.1 or PRA Rulebook: Large Non-Solvency II firms – Allocation of Responsibilities, 5.1, as if those rules applied in relation to the persons in (b) and as if they had been made by the FCA; (d) where the FCA requires responsibilities to be allocated to a person carrying out a significant influence function, the governance map must clearly show the person allocated responsibilities; and (e) the details in (b) and (d) must be updated in the same way as required by, as applicable, PRA Rulebook: Solvency II firms:
Insurance – Allocation of Responsibilities, 5.2, or PRA Rulebook: Large Non-Solvency II firms – Allocation of Responsibilities, 5.2, as if those rules applied in relation to the persons in (b) and as if they had been made by the FCA. (2) A Solvency II firm must keep an up-to-date record of the scope of responsibilities for each approved person performing a significant influence function. (3) The scope of responsibilities record in (2), and each updated version, must:
(a) have the form and content, subject to amendments to keep it up to date, as required to be provided to the FCA or PRA on the application of an approved person to perform a significant influence function; and (b) be signed by the approved person and also an appropriate representative of the firm. (4) Where a firm amends its governance map to show changes in a person’s responsibilities it must also ensure that:

FCA 2018/XX
(a) the person concerned is informed in writing of the changes; and (b) the document recording the person’s scope of responsibilities is amended to show the changes. (5) Each version of the governance map and, separately, the document recording a person’s scope of responsibilities must be retained for ten years, or six years for large non-directive insurers, from the date on which it was superseded by a more up-to-date record, and the firm must be in a position to provide it to the FCA on request. (6) SYSC 2.2.4R(1) only applies to firms to whom PRA Rulebook:
Solvency II firms: Insurance – Allocation of Responsibilities, 5.1 and 5.2 or PRA Rulebook: Large Non-Solvency II firms – Allocation of Responsibilities, 5.1 and 5.2, applies. [deleted]
2.2.5 G Firms are not expected to update a person’s scope of responsibilities record
in SYSC 2.2.4R(2) more frequently than the governance map in SYSC 2.2.4R(1). [deleted]
2.2.6 R A small non-directive insurer must keep an up-to-date record of the scope of
responsibilities for each approved person performing a significant influence and must:
(1) retain each version of the record for six years from the date on which it was superseded by a more up-to-date record; (2) be in a position to provide any version of the record in (1) to the FCA on request; (3) ensure that the record in (1) and each updated version:
(a) has the form and content, subject to amendments to keep it up to date, as required, to be provided to the FCA or PRA on the application of an approved person to perform a significant influence function; and (b) is signed by the approved person and also an appropriate representative of the firm. [deleted]
2.2.7 G A firm applying for a person to be approved to perform a significant
influence function is required to submit with Form A (long and short form) a scope of responsibilities document (see SUP 10A Annex 4D). … 3 Systems and Controls controls …

FCA 2018/XX
3.2 Areas covered by systems and controls
…
The compliance function
…
3.2.8 R (1) A firm which carries on designated investment business with or for
retail clients or professional clients and a UK ISPV which carries on insurance risk transformation with respect to long-term insurance contracts must allocate to a director or senior manager the function of:
(a) having responsibility for oversight of the firm’s compliance; and (b) reporting to the governing body in respect of that responsibility. (2) In (1) “compliance” means compliance with the rules in the firm’s obligations under the regulatory system in relation to which the FCA has responsibility. :
(a) COBS (Conduct of Business);
(b) COLL ( Collective Investment Schemes sourcebook); and (c) CASS (Client Assets)
3.2.9 G (1) SUP 10A.7.8R SUP 10C.6.1R uses SYSC 3.2.8R to describe the
controlled function, known as the compliance oversight function, of acting in the capacity of a director or senior manager to whom this function is allocated. (2) The rules referred to in SYSC 3.2.8R(2) are the minimum area of focus for the firm’s compliance oversight function. A firm is free to give additional responsibilities to a person performing this function if it wishes. Conduct risk oversight (Lloyd’s) function 3.2.9A R In relation to business done at Lloyd’s, the Society must allocate to a director or senior manager the function of having responsibility for overseeing the conduct of business standards required of managing agents for which the Society has responsibility. … Risk assessment

FCA 2018/XX
3.2.10 G …
(3) The term ‘risk assessment function’ refers to the generally understood concept of risk assessment within a firm, that is, the function of setting and controlling risk exposure. The risk assessment function is not an FCA controlled function itself, but for certain firms is part of the systems and controls function (CF28) it may fall under the PRA chief risk officer controlled function. … …
3.2.14 G …
(4) The requirements on firms with respect to approved persons are in
Part V of the Act (Performance of regulated activities) and SUP 10A
SUP 10C and the Senior Insurance Management Functions parts of the PRA Rulebook Rulebook. … Internal audit
3.2.16 G …
(2) The term ‘internal audit function’ refers to the generally understood concept of internal audit within a firm, that is, the function of assessing adherence to and the effectiveness of internal systems and controls, procedures and policies. The internal audit function is not an FCA controlled function itself, but for certain firms is part of the is part of the systems and controls function (CF28) it may fall under the PRA chief risk officer controlled function. … … 4 General organisational requirements
4.1 General requirements
…
Application to a common platform firm
4.1.-2 G …
Subject Applicable rule or guidance
…

FCA 2018/XX
Management responsibilities maps for UK relevant authorised persons SYSC 4.5 Management responsibilities maps for non-UK relevant authorised persons SYSC 4.6 Senior management responsibilities for UK relevant authorised persons SYSC 4.7 Handover procedures and material SYSC 4.9 … In the text shown amended below, ‘Editor’s notes’ are included for the benefit of the reader and do not form part of the legislative text. The text of provisions marked only as ‘deleted’ is not shown struck through elsewhere in the instrument.
4.5 Management responsibilities maps for UK relevant authorised persons
Application
4.5.1 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.1.1R]
4.5.2 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.1.3R]
4.5.3 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.1.2R]
General rule
4.5.4 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.2.1R]
4.5.5 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.2.2R]

FCA 2018/XX
4.5.6 G (1) [deleted] [Editor’s note: The text of this provision has been moved to
SYSC 25.1.6G(1)]
(2) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 25.1.6G(2)] Specific requirements
4.5.7 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.2.3R]
4.5.8 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.2.4R]
Guidance about what should be in a management responsibilities map
4.5.9 G (1) [deleted] [Editor’s note: The text of this provision has been moved to
SYSC 25.4.1G]
(2) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 25.4.2G]
4.5.10 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.4.3G]
4.5.11 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.4.4G]
4.5.12 G (1) [deleted]
(2) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 25.4.5G] (3) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 25.4.6G] (4) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 25.4.7G] (5) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 25.4.8G] (6) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 25.4.11G] (7) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 25.4.9G] (8) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 25.4.10G]

FCA 2018/XX
(9) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 25.4.12G] Small firms
4.5.13 G (1) [deleted] [Editor’s note: The text of this provision has been moved to
SYSC 25.5.14G(1)]
(2) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 24.3.5G] Single document
4.5.14 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.5.1R]
4.5.15 G (1) [deleted] [Editor’s note: The text of this provision has been moved to
SYSC 25.5.2G(1)]
(2) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 25.5.2G(2)] (3) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 25.5.2G(3)] (4) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 25.5.2G(4)] (5) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 25.5.3G] Purpose of SYSC 4 Annex 1G (The main business activities and functions of a relevant authorised person)
4.5.16 G (1) [deleted]
(2) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 25.7.2G(1)] (3) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 25.7.2G(2)] (4) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 25.7.4G] (5) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 25.7.3G]
4.5.17 G [deleted]
Contents of SYSC 4 Annex 1G (The main business activities and functions of a relevant authorised person)

FCA 2018/XX
4.5.18 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.7.6G]
4.5.19 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.7.7G]
4.5.20 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.7.8G]
Records
4.5.21 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.8.1G]
4.5.22 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.8.2G]
4.6 Management responsibilities maps for non-UK relevant authorised persons
Application
4.6.1 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.1.4R]
4.6.2 R [deleted]
4.6.3 R [deleted]
4.6.4 G [deleted]
Purpose
4.6.5 G (1) [deleted]
(2) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 25.6.3G] General rule for third-country relevant authorised persons
4.6.6 R [deleted]
4.6.7 R [deleted]
4.6.8 G [deleted]
Specific requirements for third-country relevant authorised persons
4.6.9 R (1) [deleted]

FCA 2018/XX
(2) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 25.1.5R]
4.6.10 R [deleted]
Single document
4.6.11 R [deleted]
Guidance about management responsibilities maps for a branch maintained by a third-country relevant authorised person
4.6.12 G [deleted]
4.6.13 G [deleted]
4.6.14 G [deleted]
Management responsibilities maps for EEA relevant authorised persons: General rule
4.6.15 R [deleted]
4.6.16 R [deleted]
Responsibilities maps for EEA relevant authorised persons: purpose
4.6.17 G (1) [deleted] [Editor’s note: The text of this provision has been moved to
SYSC 25.6.2G(1)]
(2) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 25.6.2G(2)] (3) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 25.1.6G(3)] (4) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 25.6.2G(4)] Responsibilities maps for EEA relevant authorised persons: detailed requirements
4.6.18 R [deleted]
4.6.19 R [deleted]
Responsibilities maps for EEA relevant authorised persons: leaving out information already supplied
4.6.20 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.6.5R]

FCA 2018/XX
4.6.21 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.6.6G]
4.6.22 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.6.7G]
4.6.23 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.6.8G]
4.6.24 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.6.9G]
Management responsibilities maps for EEA relevant authorised persons: Single document
4.6.25 R [deleted]
Management responsibilities maps for EEA relevant authorised persons: guidance about what should be included
4.6.26 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.6.10G]
4.6.27 G [deleted]
4.6.28 G [deleted]
Management responsibilities maps for small branches maintained by non-UK relevant authorised persons
4.6.29 G [deleted]
4.7 Senior management responsibilities for UK relevant authorised persons:
allocation of responsibilities
Application
4.7.1 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
24.1.1R]
4.7.2 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
24.1.3R]
4.7.3 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
24.1.2R]
Purpose of this section
4.7.4 G [deleted]

FCA 2018/XX
Allocation of FCA-prescribed senior management responsibilities
4.7.5 R (1) [deleted] [Editor’s note: The text of this provision has been moved to
SYSC 24.2.1R]
(2) [deleted]
(3) [deleted]
(4) [deleted]
(5) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 24.2.3R(1)] (6) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 24.2.3R(2)] (7) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 24.2.4R]
4.7.6 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
24.2.5R]
4.7.7 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
24.2.6R]
Allocation of overall responsibility for a firm’s activities, business areas and management functions
4.7.8 R (1) [deleted] [Editor’s note: The text of this provision has been moved to
SYSC 26.3.1R]
(2) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 26.4.2R] (3) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 26.3.4R]
4.7.9 G [deleted]
4.7.10 G [deleted]
Meaning of overall responsibility
4.7.11 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
26.7.2G]
4.7.12 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
26.6.7G]
4.7.13 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
26.7.4G]

FCA 2018/XX
4.7.14 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
26.7.5G]
4.7.15 G [deleted]
4.7.16 G [deleted]
4.7.17 G [deleted]
4.7.18 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
26.4.5R]
Who functions should be allocated to
4.7.19 G [deleted]
4.7.20 G [deleted]
4.7.21 G (1) [deleted]
(2) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 26.9.1G]
4.7.22 G [deleted]
4.7.23 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
26.9.4G]
4.7.24 G (1) [deleted] [Editor’s note: The text of this provision has been moved to
SYSC 24.3.2G]
(2) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 24.3.3G] (3) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 24.3.1G] (4) [deleted] (5) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 24.3.4G] Dividing and sharing management functions between different people
4.7.25 G (1) [deleted] [Editor’s note: The text of this provision has been moved to
SYSC 24.3.7G]
(2) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 24.3.8G]
4.7.26 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
24.3.9G]

FCA 2018/XX
4.7.27 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
24.3.10G]
4.7.28 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
24.3.11G]
4.7.29 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
23.1.12G]
Allocation of responsibilities and territorial scope.
4.7.30 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
24.3.13G]
Group management arrangements and outsourcing
4.7.31 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
26.10.1G]
4.7.32 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
26.10.3G]
4.7.33 G [deleted]
4.7.34 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
26.10.2G]
Link between the senior management regime and this section
4.7.35 G [deleted]
4.7.36 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
26.11.1G(1) to (3)]
Link between SYSC 4 Annex 1G and this section
4.7.37 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
26.11.2G]
4.7.38 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
26.11.3G]
4.8 Senior management responsibilities for third-country relevant authorised
persons: allocation of responsibilities
4.8.1 R [deleted]
4.8.2 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
26.1.5R]

FCA 2018/XX
4.8.3 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
26.1.4R]
4.8.4 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
26.1.2R]
Purpose
4.8.5 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
26.2.1G]
Allocation of FCA-prescribed senior management responsibilities for thirdcountry relevant authorised persons
4.8.6 R [deleted]
4.8.7 R [deleted]
4.8.8 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
24.3.14G]
4.8.9 R [deleted]
Local responsibility for a branch’s activities, business areas and management functions
4.8.10 R (1) [deleted] [Editor’s note: The text of this provision has been moved to
SYSC 26.3.2R(1)]
(2) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 26.3.2R(2)] (3) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 26.3.2R(3)] (4) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 26.3.3R] (5) [deleted] (6) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 26.4.3R] (7) [deleted]
4.8.11 G (1) [deleted]
(2) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 26.6.4G(1)] (3) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 26.6.4G(2)]

FCA 2018/XX
(4) [deleted]
(5) [deleted]
(6) [deleted]
Meaning of local responsibility: general
4.8.12 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
26.6.6G]
4.8.13 G (1) [deleted]
(2) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 26.4.4G]
4.8.14 G [deleted]
Meaning of local responsibility in SYSC 4.8.10R(1): overall responsibility
4.8.15 G [deleted]
4.8.16 G [deleted]
4.8.17 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
26.7.3G]
4.8.18 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
26.7.6G]
4.8.19 G [deleted]
Meaning of local responsibility in SYSC 4.8.10R(2)
4.8.20 G (1) [deleted] [Editor’s note: The text of this provision has been moved to
SYSC 26.8.1G]
(2) [deleted]
(3) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 26.8.2G] (4) [deleted] Who functions should be allocated to
4.8.21 G [deleted]
4.8.22 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
26.9.2G]
4.8.23 G [deleted]

FCA 2018/XX
4.8.24 G [deleted]
4.8.25 G [deleted]
4.8.26 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
26.8.4G]
Setting overall strategy for a branch
4.8.27 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
26.8.3G]
Not giving too much responsibility to one individual
4.8.28 G (1) [deleted]
(2) [deleted]
(3) [deleted]
(4) [deleted]
(5) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 26.9.5G] Group arrangements and outsourcing
4.8.29 G [deleted]
Allocation of responsibility for transactions
4.8.30 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
26.5.3G]
Application of SYSC 4.7 to branches maintained by third-country relevant authorised persons
4.8.31 R [deleted]
Link between the senior management regime and this section
4.8.32 G [deleted]
4.8.33 G (1) [deleted]
(2) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 26.11.1G(4)]
4.8.34 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
26.11.1G(5)]
Link between SYSC 4 Annex 1G and this section

FCA 2018/XX
4.8.35 G [deleted]
4.9 Handover procedures and material
Application
4.9.1 R (1) [deleted] [Editor’s note: The text of this provision has been moved to
SYSC 25.9.1R]
(2) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 25.9.2R]
4.9.2 R [deleted]
4.9.3 R [deleted]
Rules about handover material
4.9.4 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.9.4R]
4.9.5 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.9.5R]
4.9.6 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.9.6G]
4.9.7 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.9.7G]
Handover arrangements and certificates
4.9.8 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.9.8G]
Application of this section to other parts of a firm’s management
4.9.9 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
25.9.9G]
…
4 Annex
1G
The main business activities and functions of a relevant authorised person [Editor’s note: The text of this annex has been moved to SYSC 25 Annex 1G] …
5.2 Certification regime

FCA 2018/XX
Application
5.2.1 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.1.1R]
5.2.2 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.1.2G]
Purpose
5.2.3 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.1.3G]
General requirements
5.2.4 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.2.3G]
5.2.5 G (1) [deleted]
(2) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 27.2.2G] Fitness to act
5.2.6 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.2.4G]
5.2.7 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.2.5G]
5.2.8 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.2.6G]
5.2.9 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.2.7G]
5.2.10 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.2.8G]
Issuing and renewing certificates
5.2.11 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.2.9G]
5.2.12 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.2.10G]
5.2.13 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.2.11G]

FCA 2018/XX
5.2.14 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.2.12G]
5.2.15 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.2.13G]
5.2.16 G (1) [deleted] [Editor’s note: The text of this provision has been moved to
SYSC 27.2.14G(1)]
(2) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 27.2.14G(4)] (3) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 27.2.14G(5)]
5.2.17 G (1) [deleted] [Editor’s note: The text of this provision has been moved to
SYSC 27.2.15G(1) and SYSC 27.2.15G(2)]
(2) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 27.2.15G(3)] (3) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 27.2.15G(4)] 5.2.17A G [deleted] [Editor’s note: The text of this provision has been moved to SYSC 27.2.16G] Scope: general requirements
5.2.18 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.6.1R]
Scope: territorial scope
5.2.19 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.3.1R]
5.2.20 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.3.2G]
5.2.20A G [deleted] [Editor’s note: The text of this provision has been moved to SYSC 27.3.3G] Scope: employees
5.2.21 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.4.1G]
5.2.22 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.4.2G]
Scope: effect of PRA requirements

FCA 2018/XX
5.2.23 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.4.3G]
Scope: exclusions
5.2.24 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.6.1G]
5.2.25 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.6.2R]
5.2.26 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.6.3R]
Scope: emergency appointments
5.2.27 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.5.1R]
5.2.28 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.5.2G]
Scope: temporary UK role (the 30-day rule) 5.2.28A R [deleted] [Editor’s note: The text of this provision has been moved to SYSC 27.5.3R] 5.2.28B G [deleted] [Editor’s note: The text of this provision has been moved to SYSC 27.5.4G] 5.2.28C G (1) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 27.5.5G] (2) [deleted] [Editor’s note: The text of this provision has been moved to SYSC 27.5.6G] Scope: FCA-specified significant-harm functions
5.2.29 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.7.2R]
5.2.30 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.7.3R]
5.2.31 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.7.4G]
CASS oversight function
5.2.32 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.8.1R]

FCA 2018/XX
5.2.32A G [deleted] [Editor’s note: The text of this provision has been moved to SYSC 27.8.2G] Proprietary trader function
5.2.34 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.8.3R]
Significant management function
5.2.35 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.8.4R]
5.2.36 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.8.5G]
5.2.37 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.8.8G]
5.2.38 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.8.9G]
Functions requiring qualifications
5.2.39 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.8.10R]
5.2.40 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.8.11G]
Managers of certification employees
5.2.41 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.8.13R]
Material risk takers
5.2.42 R [deleted]
5.2.43 G [deleted]
Client-dealing function
5.2.44 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.8.18R]
5.2.45 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.8.19R]
5.2.46 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.8.20G]

FCA 2018/XX
5.2.47 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.8.21G]
5.2.48 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.8.22G]
Algorithmic trading function
5.2.49 R [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.8.23R]
5.2.50 R (1) [deleted] [Editor’s note: The text of this provision has been moved to
SYSC 27.8.24R]
(2) [deleted]
5.2.51 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.8.25G]
5.2.52 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.8.26G]
5.2.53 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.8.27G]
5.2.54 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.8.28G]
5.2.55 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.8.29G]
5.2.56 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.8.30G]
5.2.57 G [deleted] [Editor’s note: The text of this provision has been moved to SYSC
27.8.31G]
5 Annex
1G
Examples of how the temporary UK role rule in SYSC 5.2.28A (the 30-day rule) works [deleted] [Editor’s note: The text of this annex has been moved to SYSC 27 Annex 1G] … 6 Compliance, internal audit and financial crime
6.1 Compliance
…

FCA 2018/XX
6.1.4-C G (1) This guidance is relevant to a relevant authorised person an SMCR firm required to appoint a compliance officer under SYSC 6.1.4R or
article 22(3) of the MiFID Org Regulation as applicable.
…
…
6.2 Internal audit
…
6.2.1B G (1) This guidance is relevant to a relevant authorised person an SMCR firm required to establish and maintain an internal audit function under article 24 of the MiFID Org Regulation. …
6.2.2 G …
(2) For a firm that is not a relevant authorised person an SMCR firm, the internal audit function is not a controlled function itself, but is part of the systems and controls function or the PRA’s systems and controls controlled function (CF28). (3) For a relevant authorised person an SMCR firm, the internal audit function is a PRA controlled function (SMF5). … 7 Risk control
7.1 Risk control
…
7.1.8 G …
(3) For a firm that is not a relevant authorised person an SMCR firm, the risk management function is not a controlled function itself, but is
part of the systems and controls function or the PRA’s systems and
controls controlled function (CF28).
(4) For a relevant authorised person an SMCR firm, the risk management function is a PRA controlled function (SMF4). … Additional rules for CRR firms …

FCA 2018/XX
7.1.23 G (1) This guidance is relevant to a relevant authorised person an SMCR
banking firm that has appointed a head of the risk management function. … … 18 Whistleblowing
18.1 Application and purpose
Application
18.1.1A R This chapter applies to:
…
(3) in relation to SYSC 18.3.6R and SYSC 18.3.10R, EEA relevant authorised persons SMCR banking firms and third-country relevant authorised persons SMCR banking firms only in relation to a branch maintained by them in the United Kingdom; and … 18.1.1A A G Firms are reminded that for the purpose of SYSC 18 (except for SYSC 18.3.9G) “firm” has the specific meaning set out in paragraph (8) of that definition in the Glossary, namely:
“(8) (in SYSC 18, with the exception of the guidance in SYSC 18.3.9G):
(a) a UK relevant authorised person SMCR banking firm except a small deposit taker; and … …
18.3 Internal arrangements
…
Reporting of concerns by employees to regulators
18.3.6 R This rule applies to a firm, an EEA relevant authorised person SMCR
banking firm and a third-country relevant authorised person SMCR banking firm. … …

FCA 2018/XX
Additional rules for UK branches
18.3.10 R (1) This rule applies where an EEA relevant authorised person SMCR
banking firm or a third-country relevant authorised person SMCR banking firm has:
(a) a branch in the United Kingdom; and
(b) a group entity which is a UK relevant authorised person SMCR banking firm. (2) An EEA relevant authorised person SMCR banking firm and a thirdcountry relevant authorised person SMCR banking firm must, in the manner described in (3), communicate to the UK-based employees of its UK branch:
(a) the whistleblowing arrangements of the group entity that is a UK relevant authorised person SMCR banking firm; and … …
18.4 The whistleblowers’ champion
18.4.1 G (1) A UK relevant authorised person SMCR banking firm is required
under SYSC 4.7.5R(1) SYSC 24.2.1R to allocate the FCA-prescribed senior management responsibility for acting as the firm’s whistleblowers’ champion. … … 21 Risk control: additional guidance
21.1 Risk control: guidance on governance arrangements
…
Chief Risk Officer
21.1.2 G …
(2) Firms will need to seek the appropriate regulator’s approval for a Chief Risk Officer to perform:
(a) (for a relevant authorised person an SMCR firm) the PRA’s Chief Risk Function controlled function; or

FCA 2018/XX
(b) (for any other firm) the systems and controls function (see SUP 10A (FCA approved persons)) or the relevant PRA controlled function. … 21.1.4A G (1) This guidance is relevant to a relevant authorised person an SMCR banking firm that has appointed a chief risk officer. … … 22 Regulatory references
22.1 Application
General application
22.1.1 R This chapter applies to all firms (subject to SYSC 22.1.5R).
Activities covered
22.1.2 G This chapter is not limited to regulated activities or other specific types of
activities.
Territorial scope and overseas firms
22.1.3 R There is no territorial limitation on the application of this chapter, subject to
SYSC 22.1.5R and SYSC 22.1.6R.
22.1.4 G One effect of SYSC 22.1.3R is that the obligation to provide a reference can
apply even if the employee worked in an overseas office of the employer.
22.1.5 R This chapter does not apply to:
(1) an overseas firm that does not have an establishment in the United Kingdom; (2) a UCITS qualifier (see section 266 of the Act (Disapplication of rules)); (3) an AIFM qualifier; or (4) an incoming EEA firm that is an EEA pure reinsurer.
22.1.6 R For an incoming firm or any other overseas firm, SYSC 22.2.2R (Obligation
to give references) only applies if the current or former employee in question

FCA 2018/XX
(defined as “P” in SYSC 22.2.2R) is or was an employee of its branch in the United Kingdom and only relates to their activities as such.
22.1.7 R (1) In order to decide whether someone is an employee of a branch, the
Glossary definition of employee is applied to the branch as if the branch and the firm of which it forms part were separate firms. (2) For the purpose of (1), paragraph (4A)(c) of the definition of employee (someone employed elsewhere in the group) does not apply.
22.2 Getting, giving and updating references: the main rules
Obligation to obtain references (full scope regulatory reference firms only applicable to SMCR firms)
22.2.1 R (1) If a full scope regulatory reference firm an SMCR firm (A) is
considering:
(a) permitting or appointing someone (P) to perform a controlled function; or (b) issuing a certificate under the certification regime for P; (as explained in more detail in rows (A) and (B) of the table in SYSC 22.2.3R), A must take reasonable steps to obtain appropriate references from:
(c) P’s current employer; and
(d) anyone who has been P’s employer in the past six years. (2) A must take reasonable steps to obtain the reference before the time in column two of the applicable row in the table in SYSC 22.2.3R. If A does not obtain it within that time it must take reasonable steps to obtain it as soon as possible thereafter. (3) A must in particular request:
(a) the information in SYSC 22.2.2R(1) to (3); and (b) (if P’s current or previous employer is also a full scope regulatory reference firm an SMCR firm) the information in SYSC 22.2.2R(4) (questions (A) to (F) of Part One of SYSC 22
Annex 1R).
(4) When deciding what information to request under (1), A must have regard to the factors in SYSC 22.2.2R(5) (Factors set out in SYSC 22
Annex 2R).
Obligation to give references

FCA 2018/XX
22.2.2 R (1) A firm (B) must provide a reference to another firm (A) as soon as
reasonably practicable if:
(a) A is considering:
(i) permitting or appointing someone (P) to perform a controlled function; or (ii) issuing a certificate under the certification regime for P; or (iii) appointing P to another position in the table in SYSC 22.2.3R; (as explained in more detail in the table in SYSC 22.2.3R); (b) A makes a request, for a reference or other information in respect of P from B, in B’s capacity as P’s current or former employer; (c) B:
(i) is P’s current employer; or
(ii) has been P’s employer at any time in the six year period preceding the request in (1)(b); and (d) A indicates to B the purpose of the request. (2) B must disclose to A in the reference all information of which B is aware that B reasonably considers to be relevant to A’s assessment of whether P is fit and proper. (3) B is only required to disclose under (1) and (2) something that occurred or existed:
(a) in the six years before the request for a reference; or (b) between the date of the request for the reference and the date B gives the reference; or (c) (in the case of serious misconduct) at any time. [Note: See SYSC 22.5.10G and SYSC 22.5.11G for guidance on the meaning of serious misconduct] (4) If B is a full scope regulatory reference firm Where B is an SMCR firm:
(a) B must in addition disclose the information in questions (A) to (F) of Part One of SYSC 22 Annex 1R (Template for

FCA 2018/XX regulatory references given by relevant authorised persons SMCR firms and disclosure requirements); and (b) B must disclose the information in (a) whether or not A is a full scope regulatory reference firm an SMCR firm. (5) When deciding what information to give to A under (1) to (3), B must have regard to the factors in SYSC 22 Annex 2R (Factors to take into account when asking for and giving regulatory references).
22.2.3 R Table: What positions need a reference
Position When to obtain reference Comments (A) Permitting or appointing someone to perform an FCA controlled function or a PRA controlled function. One month before the end of the application period Where a request for a reference would require:
(a) the firm requesting the reference;
(b) the employer giving the reference; or (c) any other person; to make a mandatory disclosure prior to P disclosing to its current employer that such application has been made, the date is the end of the application period. (B) Issuing a certificate under
section 63F of the
Act (Certification of employees by relevant authorised persons). Before the certificate is issued This includes renewing an existing certificate. (C) Appointing someone to any of the following positions (as Not applicable SYSC 22.2.1R (obligation to obtain a reference) does not apply to a firm appointing someone to

FCA 2018/XX
Obligation to revise references: The main rule (full scope regulatory reference firms only applicable to SMCR firms)
22.2.4 R If at any time:
(1) a full scope regulatory reference firm an SMCR firm (B) has given a reference under SYSC 22.2.2R to another firm (A) about an employee or ex-employee of B (P); (2) B was also a full scope regulatory reference firm an SMCR firm when it gave the reference in (1); (3) either of the following applies:
(a) B is aware of matters or circumstances that mean that if B had been aware of them when giving that reference, this
chapter would have required B to draft the reference
differently; or
(b) the following applies:
(i) B has since giving the reference reached conclusions of the type described in question (E) of Part One of SYSC 22 Annex 1R or taken disciplinary action of the type described in question (F) of Part One of SYSC 22
Annex 1R; and
(ii) if B had taken or reached those conclusions or actions within the six year period referred to in Part One of defined in the PRA Rulebook):
the position in column
(1).
However SYSC 22.2.2R does apply to a firm asked to give a reference to a firm appointing someone to the position in column (1). (a) a notified nonexecutive director; (b) a credit union non-executive director; or (c) a key function holder. Note 1: Mandatory disclosure means an obligation in any applicable laws, regulations or rules to declare or disclose information to the public. Note 2: P refers to the employee or ex-employee about whom the reference is given as defined in more detail in SYSC 22.2.1R and SYSC 22.2.2R. Note 3: The application period means the period for consideration referred to in section 61 of the Act (Determination of application).

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SYSC 22 Annex 1R, this chapter would have required B to draft the reference differently; and (4) it would be reasonable to consider the differences in (3) to be significant for an assessment by A of the fitness and propriety of P for the role at A for which the reference was given; B must:
(5) make reasonable inquiries as to the identity of P’s current employer; and (6) give A details of those differences in writing as soon as reasonably practicable, unless SYSC 22.2.5R says that B does not have to do so.
22.2.5 R B does not need to update A if:
(1) A is no longer a firm;
(2) P has not yet been employed by A (because, for example, P is still working their notice period with B) and it is no longer intended for A to employ P; (3) A is no longer P’s employer; or (4) despite making reasonable enquiries under SYSC 22.2.4R, B does not know whether P is still employed by A.
22.2.6 R This rule sets out time limits about the obligation to update a reference in
SYSC 22.2.4R.
(1) If B still employs P, SYSC 22.2.4R applies throughout the period B remains employed. (2) If B no longer employs P, the obligation to update ends six years after P ceased to be employed by B. (3) If B no longer employs P and the matters or circumstances are not serious misconduct by P, B does not have to disclose something if it did not occur or exist in the six year period ending on the date B gave the original reference. This limitation applies in addition to the one in (2). [Note: See SYSC 22.5.10G and SYSC 22.5.11G for guidance on the meaning of serious misconduct] Obligation to revise references: Finding out who the current employer is (all firms)
22.2.7 R If at any time:

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(1) a full scope regulatory reference firm an SMCR firm (B) has given a reference under SYSC 22.2.2R to another firm (A) about an employee or ex-employee of B (P); (2) B asks A whether P is still an employee of A; and (3) B gave A the reference no more than six years ago; A must answer that question as soon as reasonably practicable, even if B does not tell A why it wants to know that information.
22.3 Drafting the reference and the request for a reference
How to draft the reference
22.3.1 G There are no requirements about the form in which a firm that is not a full
scope regulatory reference firm an SMCR firm should give a reference.
22.3.2 G SYSC 22.4 has requirements about the form in which a full scope regulatory
reference firm an SMCR firm should give a reference.
How to draft the request for a reference
22.3.3 G (1) A firm (A) asking another firm (B) for a reference should give B
sufficient information to let B know that the requirements in this
chapter apply to the reference it is being asked to give and which
requirements apply.
(2) As long as it complies with (1), A does not have to set out specifically the information this chapter requires it to obtain. This is because B should include that information even though B is not specifically asked to include it.
22.3.4 G A firm asking for a reference under this chapter from a current or former
employer that is not a firm will normally need to specify what information it would like. Inclusion of additional material
22.3.5 G (1) This chapter sets out minimum requirements for a reference. It does
not prevent a firm from including more than is required by this
chapter.
(2) If a firm does disclose more than is required by this chapter the reference should still meet its duties under general law to its former employee and the recipient (see SYSC 22.5.3G to SYSC 22.5.5G).
22.3.6 G Nothing in this chapter prevents a firm from disclosing material outside the
time limits under this chapter.

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22.4 Drafting the reference: detailed requirements for full scope regulatory
reference firms SMCR firms
Purpose of SYSC 22 Annex 1R
22.4.1 G SYSC 22 Annex 1R (Template for regulatory references given by relevant
authorised persons SMCR firms and disclosure requirements) has two purposes:
(1) to set out what information a full scope regulatory reference firm an SMCR firm should disclose under SYSC 22.2.2R(4); and (2) to provide a template that a full scope regulatory reference firm an SMCR firm should use when giving a reference under this chapter. How to draft the reference
22.4.2 R (1) A full scope regulatory reference firm An SMCR firm must use the
template in Part One of SYSC 22 Annex 1R (Template for regulatory references given by relevant authorised persons SMCR firms and disclosure requirements) when giving a reference under this chapter to another firm (A). (2) A firm may make minor changes to the format of the template in Part One of SYSC 22 Annex 1R when giving a reference under this
chapter, provided that the reference includes all the information
required by SYSC 22 Annex 1R.
(3) This rule applies even if A is not a full scope regulatory reference firm an SMCR firm.
22.4.3 G (1) SYSC 22.4.2R does not stop a full scope regulatory reference firm an
SMCR firm including matters in the reference not required by the template in SYSC 22 Annex 1R. (2) A full scope regulatory reference firm An SMCR firm may include the material required by the template and additional material in the same document. (3) Any additional material should not alter the scope of any of the questions in the templates.
22.4.4 G A full scope regulatory reference firm An SMCR firm should use the
template in SYSC 22 Annex 1R (Template for regulatory references given by relevant authorised persons SMCR firms and disclosure requirements) even if the firm asking for the reference does not specifically ask it to. PRA requirements
22.4.5 R B may combine in a single reference what the PRA’s rules require and what
this chapter requires.

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22.5 Giving references: additional rules and guidance for all firms
Verification
22.5.1 R This chapter does not require a firm to disclose information that has not been
properly verified.
22.5.2 G (1) For example, this chapter does not necessarily require a firm to
include in a reference the fact that an ex-employee left while disciplinary proceedings were pending or had started. Including such information is likely to imply that there is cause for concern about the ex-employee but the firm may not have established that the exemployee was actually responsible for misconduct. (2) However, a firm may include such information in a reference if it wishes to (see SYSC 22.3.5G). Accuracy
22.5.3 G A firm should, when giving a reference under this chapter, provide as
complete a picture of an employee’s conduct record as possible to new employers. Fairness
22.5.4 G (1) A firm supplying a reference in accordance with this chapter owes a
duty under the general law to its former employee and the recipient firm to exercise due skill and care in the preparation of the reference. (2) The firm may give frank and honest views, but only after taking reasonable care both as to factual content, and as to the opinions expressed. (3) References should be true, accurate, fair and based on documented fact.
22.5.5 G (1) An example of the general duty described in SYSC 22.5.4G is that
fairness will normally require a firm to have given an employee an opportunity to comment on information in a reference. The firm might do this through, for example, disciplinary proceedings. (2) Paragraph (1) does not mean that the firm should provide an opportunity to comment on the reference itself, as opposed to the allegations on which it is based. (3) A firm may have given the employee an opportunity to comment on allegations that are later included in a reference even though, at the time that the firm is giving that opportunity, no reference is being contemplated. That may mean that the firm gives the employee their

FCA 2018/XX opportunity to comment on the allegations some time before the reference is prepared. (4) Paragraph (1) does not mean that a firm will be unable to include an allegation in a reference if it has offered the employee an opportunity to comment on the allegation but the employee has unreasonably refused to do so. (5) Where a firm should have given an employee an opportunity to comment on an allegation if the allegation is to be included in a reference, this chapter requires the firm to give the employee that opportunity rather than merely to leave the allegation out of the reference. (6) Paragraph (5) may mean that where the firm has not given its employee an opportunity to comment on a matter at the time it first arose, it will have to give the employee the opportunity around the time that the firm is preparing the reference. (7) The obligation to give an employee an opportunity to comment does not mean that there is a wider duty to investigate whether there are facts that show that there has been a conduct breach (see SYSC 22.5.18G). (8) This chapter does not require the employee’s views to be included in the reference. Instead the firm should take those views into account so far as appropriate when deciding whether something should be disclosed and how the disclosure is drafted. Outsourcing
22.5.6 G The requirements in this chapter for a firm (B) to give a firm (A) a reference
also apply where A has outsourced the collection of that information to another (unregulated) third party, where B has been made aware that the unregulated third party is acting on behalf of A. Circumstances in which the ex-employee left
22.5.7 G The obligation to give a reference for an employee or ex-employee applies
however the employment ended or is going to end. For example, it applies whether it ended through resignation, redundancy, dismissal or fixed term work, a secondment or temporary work coming to an end. Missing or incomplete information
22.5.8 G (1) If a firm’s records do not cover the maximum periods contemplated
by SYSC 22.2.2R or SYSC 22 Annex 1R (Template for regulatory references given by relevant authorised persons SMCR firms and disclosure requirements), the firm should note that in the reference.

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(2) A firm should not include a warning of the type described in (1) as a matter of routine. It should only be included if there is a genuine need to include it. All relevant information: Calculation of six year period for disclosure
22.5.9 G (1) In general there is a six year limit on what should be disclosed under
SYSC 22.2.2R(1) to (3).
(2) Where the matter to be disclosed consists of a single course of conduct (such as market manipulation) the six year period does not begin until that course of conduct has come to an end. This means that individual events that occurred more than six years ago may still be within the six year limit. (3) This guidance is also relevant to the six year time limits for updating references in SYSC 22.2.6R. All relevant information: Removal of six year period
22.5.10 G (1) SYSC 22.2.2R(1) to (3) normally has a six year time limit. SYSC
22.2.2R(3)(c) removes that time limit for serious matters. This paragraph (SYSC 22.5.10G) and SYSC 22.5.11G have guidance about this. This guidance is also relevant to the time limits for updating references in SYSC 22.2.6R. (2) The removal of the time limit does not mean that the time that has elapsed since the matter occurred is irrelevant. The length of time that has elapsed is relevant to deciding whether the matter is serious. In general, the longer ago the matter occurred, the less likely it is still to be serious for these purposes. (3) In determining whether something is serious for these purposes, the key question is how important the information still is for the requesting firm’s assessment of the employee’s fitness for the function that they are going to perform. (4) In considering what is relevant, a firm should, in particular, have regard to SYSC 22.5.4G (Fairness). (5) The table in SYSC 22.5.11G provides guidance on some of the factors which a firm should take into account when determining whether a matter is serious. (6) The guidance in this paragraph and in the table in SYSC 22.5.11G is only designed for the purposes of this chapter. It does not, for example, apply for the purposes of SUP 15 (Notifications to the FCA), DEPP or EG.
22.5.11 G Table: Examples of factors to take into account when deciding whether old
misconduct is sufficiently serious to disclose

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Factors to take into account Comments
(A) Whether P has committed a serious breach of individual conduct requirements. Individual conduct requirements has the same meaning as in Part Two of SYSC 22
Annex 1R (Template for regulatory
references given by relevant authorised persons SMCR firms and disclosure requirements). Factors to take into account in deciding whether the breach is serious include the following. (1) The extent to which the conduct was deliberate or reckless. (2) The extent to which the conduct was dishonest. (3) Whether the breaches are frequent or whether they have continued over a long period of time. The fact that breaches were frequent or repeated may increase the likelihood that they should be disclosed since the breaches may show a pattern of noncompliance. (4) The extent of loss, or risk of loss, caused to existing, past or potential investors, depositors, policyholders or other counterparties or customers. (5) The reasons for the breach. For example, where the breach was caused by lack of experience which has been remedied by training or further experience, it is less likely that the breach will still be relevant. (B) Whether the conduct caused B to breach requirements of the regulatory system or P was concerned in a contravention of such a requirement by B and, in each case, whether P’s conduct was itself serious. (1) The factors in (A) are relevant to whether P’s conduct was serious. (2) The seriousness of the breach by B is relevant. The factors in (A) are also relevant to this. (3) A breach by B of certain requirements is always likely to be serious under (2). Breach of the

FCA 2018/XX threshold conditions is an example.
However that does not mean that P’s involvement will automatically be serious. (C) Whether P’s conduct involved dishonesty (whether or not also involving a criminal act). Dishonesty is an important factor but it is not automatically decisive in every case. For instance, a small one-off case of dishonesty many years ago may not be sufficiently serious to require disclosure. (D) Whether the conduct would have resulted in B’s dismissing P, had P still been working for B, based on B’s disciplinary policies and the requirements of the law about unfair dismissal. (E) Whether the conduct was such that, if B was considering P for a role today and became aware of the historical conduct, B would not employ P today notwithstanding the time that has passed. Note 1: P refers to the employee about whom the reference is being written. Note 2: B refers to the firm giving the reference. Breach of APER
22.5.12 G (1) An example of information that may be relevant under SYSC
22.2.2R(1) to (3) is the fact that the employee has breached a requirement in APER. (2) This means that any firm (not just one that is a full scope regulatory reference firm an SMCR firm) should consider whether it needs to disclose a breach of APER individual conduct requirements (as defined in Part Two of SYSC 22 Annex 1R (Template for regulatory references given by SMCR firms and disclosure requirements)) when giving a reference under this chapter. Agreements not to disclose information
22.5.13 R A firm must not enter into any arrangements or agreements with any person
that limit its ability to disclose information under this chapter.

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22.5.14 G SYSC 22.5.13R covers all types of agreements and arrangements. For
example:
(1) it is not limited to an agreement or arrangement entered into when the employee leaves; (2) it applies however the employment ends (see SYSC 22.5.7G); and (3) it covers a “COT 3” Agreement settled by the Advisory, Conciliation and Arbitration Service (ACAS).
22.5.15 G A firm should not give any undertakings to supress or omit relevant
information in order to secure a negotiated release.
22.5.16 G The obligation to supply information to another firm under this chapter will
apply notwithstanding any agreement prohibited by SYSC 22.5.13R. Time in which to respond to reference requests
22.5.17 G The FCA expects that normally a firm should issue a reference under this
chapter within six weeks of being asked to.
Duty to investigate allegations
22.5.18 G (1) A firm should, wherever feasible, conclude investigative procedures
before the employee departs.
(2) However, this chapter does not create a duty to investigate alleged misconduct by an employee or former employee. (3) There are several reasons why a firm may find it appropriate to investigate potential misconduct by an employee or former employee, including:
(a) assessing the actual and potential damage resulting from misconduct; (b) identifying other individuals potentially culpable or accountable for the breach; (c) satisfying itself that the SMF manager responsible for the areas where the misconduct occurred took reasonable steps to prevent or stop it; and (d) (where the employee has remuneration susceptible to malus or clawback) enabling it to consider whether any adjustments are justified. Criminal record checks
22.5.19 G A firm giving a reference need not include information from a criminal
records check it has carried out under Part V of the Police Act 1997

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(Certificates of Criminal records Records, etc &). The recruiting firm should carry out a criminal records check itself if necessary. SUP 10C.10.16R requires a relevant authorised person an SMCR firm to carry out such a check when appointing an SMF manager.
22.6 Giving and updating references: additional rules and guidance for full scope
regulatory reference firms SMCR firms
Omitting or supplementing mandatory disclosures
22.6.1 G (1) A firm may have concluded that an employee is unfit or has breached
COCON or APER (as described in questions (E) to (F) of Part One of SYSC 22 Annex 1R (Template for regulatory references given by relevant authorised persons SMCR firms and disclosure requirements)). The firm may later become aware of facts or matters causing it to revise its original conclusions. (2) If so, the firm may decide not to disclose in a reference its conclusion or may qualify its conclusion with supplementary information.
22.6.2 G (1) A firm may have concluded that an employee is unfit or has breached
COCON or APER (as described in questions (E) to (F) of Part One of SYSC 22 Annex 1R (Template for regulatory references given by relevant authorised persons SMCR firms and disclosure requirements)). However the firm may consider that the disclosure is incomplete without including mitigating circumstances. (2) For example, if the firm is reporting a breach of COCON it may consider that the breach is very uncharacteristic of the employee and that they have had an exemplary record since then. In that case, the firm should include those views. Requirement to consider whether there has been a conduct breach
22.6.3 G (1) If a firm has taken disciplinary action of the type referred to in
question (F) in Part One of SYSC 22 Annex 1R (Template for regulatory references given by relevant authorised persons SMCR firms and disclosure requirements) against an employee and is asked to give a reference about that employee, the firm should (if it has not already done so) consider whether the basis on which it took that action amounts to a breach of any individual conduct requirements covered by question (F). (2) If the firm decides that the basis on which it took that action does amount to a breach of those requirements, it should include that disciplinary action in the reference under question (F). (3) Paragraph (2) applies even if the grounds of the disciplinary action did not include such a breach of individual conduct requirements.

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(4) SYSC TP 5.4.5R disapplies the The requirement in (1) is disapplied for disciplinary action taken before 7 March 2017 or, in the case of relevant authorised persons, 7 March 2016 certain specified dates, where a full scope regulatory reference firm’s records do not record whether previous conduct subject to disciplinary action amounted to a breach. The date differs between different types of SMCR firms. SYSC TP 5 and SYSC TP 7 set out those specified dates and other details. (5) The obligation to consider whether there was a conduct breach does not mean that there is a wider duty to investigate whether there are facts that show that there has been a conduct breach (see SYSC 22.5.18G). All relevant information: Interaction with mandatory disclosures
22.6.4 G (1) SYSC 22.2.2R(1) to (3) may require a full scope regulatory reference
firm an SMCR firm to disclose information that goes beyond the mandatory minimum information in Part One of SYSC 22 Annex 1R (Template for regulatory references given by relevant authorised persons SMCR firms and disclosure requirements). (2) This may mean, for instance, that a firm should in some cases disclose a conclusion that an employee or former employee has breached COCON or APER where that conclusion was reached outside the time limits in Part One of SYSC 22 Annex 1R. Updating references fairly
22.6.5 G (1) SYSC 22.5.1R to SYSC 22.5.5G (Verification, accuracy and fairness)
also apply to updating a reference under SYSC 22.2.4R.
(2) Therefore fairness may require a firm to have given an employee an opportunity to comment on an allegation if it is included in an update to a reference.
22.7 Getting references: additional rules and guidance for full scope regulatory
reference firms SMCR firms
Intra-group transfers
22.7.1 R (1) This rule applies when:
(a) a full scope regulatory reference firm an SMCR firm (A) would otherwise have to ask another person (B) for a reference under SYSC 22.2.1R; and (b) A and B are in the same group.

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(2) A need not ask for a reference from B if there are adequate arrangements in place under which A has access to the same information sources as B to the extent that they are relevant to things A has to ask B under SYSC 22.2.1R (Obligation to obtain references). (3) If A only has access to some of the information sources in (2), A may ask for a reference that only covers the sources to which A does not have such access. (4) If A, in accordance with this rule, does not ask for a reference or a full reference it must access the information resources referred to in this rule and get the relevant information within the time specified by SYSC 22.2.3R.
22.7.2 G (1) SYSC 22.7.1R means that a firm recruiting someone from another
member of its group is not required to request a reference from the other where the group has centralised records or alternative measures in place to ensure sharing of relevant information between its members. (2) The recruiting firm should be satisfied that the centralised or alternative measures ensure relevant information is made available as
part of the fit and proper assessment of the recruit.
Who should be asked to give a reference
22.7.3 G The Glossary definition of employer covers more than just a conventional
employer and so it may not always be obvious who a person’s employer is. Therefore a full scope regulatory reference firm an SMCR firm appointing someone to a position that requires a reference may have to get the employee’s help in identifying their previous employers.
22.7.4 G (1) SYSC 22.2.1R (Obligation of a full scope regulatory reference firm
an SMCR firm to try to obtain a reference) applies even if the exemployer is not a firm. (2) A full scope regulatory reference firm An SMCR firm should take all reasonable steps to try to obtain the reference in these circumstances. However, the FCA accepts that the previous employer may not be willing to give sufficient information. Asking for a reference to be updated
22.7.5 G (1) SYSC 22.2.1R (Obligation of a full scope regulatory reference firm
an SMCR firm to try to obtain a reference) applies even if the employer has already got a reference for the employee. For example:

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(a) a relevant authorised person an SMCR firm should have a reference whenever it renews the certificate of a certification employee; and (b) changing jobs within the same full scope regulatory reference firm SMCR firm may require a reference. (2) However, the full scope regulatory reference firm SMCR firm does not necessarily need to obtain a new reference each time (a) or (b) above occurs. That is because an existing reference will very often still be appropriate for the purpose (see SYSC 22.7.6G to SYSC 22.7.8G).
22.7.6 G If a relevant authorised person an SMCR firm (A):
(1) appoints someone (P) to a specified significant-harm certification function position; (2) obtains a reference from an ex-employer; and (3) later wishes to renew P’s certificate under the certification regime; it is unlikely that A will need to ask for another reference from that exemployer or ask for it to be reissued unless there is a change in P’s role of the type described in SYSC 27.2.15G (major changes in role).
22.7.7 G (1) If a full scope regulatory reference firm an SMCR firm (A):
(a) appoints someone (P) to a specified significant-harm certification function or an approved person position; (b) obtains a reference from an ex-employer (B); and (c) later wishes to:
(i) appoint P to another specified significant-harm certification function or approved person position; or (ii) keep P in the same specified significant-harm certification function but make a change in P’s role of the type described in SYSC 27.2.15G (major changes in role), whether that change is made at a time when the certificate has not yet come up for renewal or at the time it is being reissued; or (iii) move P from a specified significant-harm certification function to an approved person position or vice versa; A should consider whether to ask B to reissue or amend its reference.

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(2) A may decide that it is not necessary to ask B to reissue or amend its reference. For example, A may decide that:
(a) the existing reference already covers everything necessary; or (b) (where B is not a firm) B will not give any further information.
22.7.8 G If:
(1) a firm (A) appoints someone (P) to a specified significant-harm certification function or approved person position; (2) A obtains a reference from an ex-employer (B); (3) later P transfers to a specified significant-harm certification function or an approved person position with a full scope regulatory reference an SMCR firm in A’s group (C); (4) B’s reference is:
(a) addressed to all firms in A’s group; or (b) otherwise drafted so that it is clear that C may rely on it; and (5) C does not need to ask for the reference to be reissued or amended, taking account of SYSC 22.7.6G and SYSC 22.7.7G; C may be able to rely on that reference without asking B to give another one. When references are to be obtained
22.7.9 G If a full scope regulatory reference firm an SMCR firm is unable to obtain a
reference by the time in column two of the table in SYSC 22.2.3R, it should still try to obtain the reference as soon as possible afterwards.
22.7.10 G (1) Where a relevant authorised person an SMCR firm needs to fill a
vacancy for a specified significant-harm certification function which could not have reasonably been foreseen, the FCA recognises that it may not be reasonable to expect the relevant authorised person SMCR firm to obtain references prior to issuing a certificate. (2) In such cases, the relevant authorised person SMCR firm should take up the reference as soon as reasonably possible. (3) If a reference obtained later raises concerns about the person’s fitness and propriety, the relevant authorised person SMCR firm should revisit its decision to issue the person with a certificate.
22.7.11 G (1) Although this chapter (see SYSC 22.2.3R) only requires a full scope
regulatory reference firm an SMCR firm to try to get a reference for a

FCA 2018/XX person it is recruiting to perform an FCA controlled function or a PRA controlled function towards the end of the application process, the FCA would normally expect a firm to have obtained the reference before the application for approval is made. (2) The main examples of circumstances in which it would be reasonable for a firm to delay getting a reference are where asking for a reference earlier will create a serious risk of:
(a) breaching the confidentiality of a wider commercial or corporate transaction; (b) prematurely triggering the need for a public announcement; or (c) the candidate not applying for the position in the first place because it would reveal to the candidate’s current employer the proposed move too soon. (3) The FCA may consider that it needs to see the information in a reference before it reaches a decision. If so, it may formally ask for that information and extend the time period in which it has to make its decision until it gets the reference. SUP 10C.10.28G gives additional details about requests for further information and the effect they have on the period of time the FCA has to make a decision about an application. (4) Full scope regulatory reference firms SMCR firms are reminded that the Act itself requires a firm to be satisfied that a candidate is fit and proper before it makes an application for approval (see SUP 10C.10.14G for more detail). SYSC 22.7.11G(2) does not affect that obligation.
22.8 Additional rules and guidance for all firms
Policies and procedures
22.8.1 R A firm must establish, implement and maintain policies and procedures that
are adequate for the purpose of complying with the obligations in this
chapter.
22.8.2 G SYSC 22.8.1R does not require a firm to create or keep records that are not
required under SYSC 22.9.1R (General record keeping rules) or another rule. Appointed representatives
22.8.3 R This chapter applies to a firm’s appointed representatives as well as to the
firm.

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22.8.4 R When a relevant authorised person is permitting or appointing someone to
perform a controlled function whose approval is given under SUP 10A.1.15R or SUP 10A.1.16R (appointed representatives of relevant authorised persons) SYSC 22.8.3R applies to an SMCR firm, the requirements of this chapter for firms that are not full scope regulatory reference firms SMCR firms apply in place of the requirements that only apply to full scope regulatory reference firms SMCR firms. 22.8.4A R (1) The approved person’s authorised approved person employer is responsible for compliance with SYSC 22.8.3R in the case of a requirement to give a reference about an approved person whose approval is under SUP 10A.1.15R to SUP 10A.1.16BR (Appointed representatives). (2) In any other case, each principal of the appointed representative in question is responsible for compliance with SYSC 22.8.3R. (3) If another principal of the appointed representative has accepted responsibility for the obligation in SYSC 22.8.3R, that principal is responsible in place of the other firms in (1) or (2).
22.8.5 G A firm should ensure its appointed representative complies with the
requirements of this chapter when the One effect of SYSC 22.8.4R is that when an appointed representative appoints an approved person under SUP 10A.1.15R to SUP 10A.1.16BR (appointed representatives of an SMCR firm) there is no requirement for the appointed representative or its principal to request a reference.
22.8.6 G (1) A firm should ensure that its appointed representative gives a
reference when another firm (or its appointed representative) asks that appointed representative to give a reference in accordance with this chapter. (2) A firm is not responsible for its appointed representative’s giving references if another principal has accepted responsibility for this. Getting and giving a reference where the employee has worked in a group or on secondment
22.8.7 G If:
(1) a firm (A) is thinking of employing someone (P); (2) P is employed by a group services company (D) that is not a firm; (3) P (in their capacity as an employee of D) performs a function or service for a firm (B) in the same group as D such that P is also an employee of B; and (4) A intends to appoint (P) to a position that entitles A to obtain a reference from B;

FCA 2018/XX then:
(5) (if A is a full scope regulatory reference firm an SMCR firm) A should ask both B and D for a reference; (6) B is obliged to give the reference if A asks it to (whether or not A is a full scope regulatory reference firm an SMCR firm); (7) B should ask D to provide it with the information needed to provide a reference in accordance with this chapter; (8) D may give a reference but (as it is not a firm) it is not obliged to; and (9) D and B may give a single joint reference.
22.8.8 G SYSC 22.8.7G also applies where:
(1) D is not in the same group but has seconded P to B; and (2) P (in their capacity as an employee of D) performed any function or services for B such that P was also an employee of B.
22.8.9 G If:
(1) a firm (A) is thinking of appointing someone (P) to a position that entitles A to obtain a reference from another firm (B); and (2) P was an employee of other members of B’s group as well as of B; then:
(3) (if A is a full scope regulatory reference firm an SMCR firm) A should ask all the group members that employed P for a reference; (4) B should give a reference if A asks it to (whether or not A is a full scope regulatory reference firm an SMCR firm); (5) P’s employers in that group (including any that are not firms) may give a single joint reference; and (6) if the reference is being provided on a consolidated group basis, it should be clear what information is relevant to which employer within the group.
22.9 Records
General record keeping rules (full scope regulatory reference firms only applicable to SMCR firms)

FCA 2018/XX
22.9.1 R (1) A full scope regulatory reference firm An SMCR firm must arrange
for orderly records to be created and kept that are sufficient to enable it to comply with the requirements of this chapter. (2) This rule only applies to records in relation to the following questions in Part One of SYSC 22 Annex 1R (Template for regulatory references given by relevant authorised persons SMCR firms and disclosure requirements):
(a) question (E) (fit and proper); and
(b) question (F) (disciplinary action).
Time limit for records to be kept (full scope regulatory reference firms only applicable to SMCR firms)
22.9.2 G SYSC 22.9.1R does not have an express time limit for which a firm should
retain the records as its effect is that those time limits are the same as the time limits in SYSC 22 Annex 1R (Template for regulatory references given by relevant authorised persons SMCR firms and disclosure requirements). Reduction in disclosure obligations where there are limited record keeping requirements (all firms)
22.9.3 R A firm does not breach the requirements of this chapter by failing to include
information in a reference that it would otherwise have to include if:
(1) the reason for the omission is that the firm does not have the necessary records; and (2) neither SYSC 22.9.1R nor any other requirement of or under the regulatory system requires the firm to have those records.
22.9.4 G If a firm is asked to give a reference in circumstances where the record
keeping requirements in SYSC 22.9.1R do not apply:
(1) it is still required to give the reference; (2) it should give the reference based on the records it does have; and (3) it will not breach the requirements of this chapter by failing to include information in a reference if the reason for this is that it does not have the necessary records, as long as it is not required to have those records by some other requirement in the Handbook outside this chapter or some other requirement of or under the regulatory system. Effect of previous record keeping requirements (full scope regulatory reference firms only applicable to SMCR firms)

FCA 2018/XX
22.9.5 G (1) SYSC 22.9.1R applies to keeping records created before the date this
chapter came into force as well as ones created afterwards.
(2) A full scope regulatory reference firm An SMCR firm does not breach the requirements of this chapter by failing to include something in a reference or by failing to have records because it destroyed the relevant records before the date this chapter came into force in accordance with the record keeping requirements applicable to it at the time of destruction. (3) (1) and (2) also apply if the firm destroyed the records before this
chapter (or the relevant provision of this chapter) first applied to it.
22 Annex
1R
Template for regulatory references given by relevant authorised persons SMCR firms and disclosure requirements
Part One: Form of Template
Guide to using this template:
Each question must be answered. Where there is nothing to disclose, this should be confirmed by ticking the “No” box for the relevant question. In this template:

“we” / “our firm” refers to the firm or firms giving the reference (as set out in either 1A
or 1B below);
“individual” refers to the subject of the reference (as set out in 2 below); and
“your” refers to the firm requesting the reference (as set out in 3 below).
Information requested Response
1A Name, contact details and firm reference number of firm providing reference; or 1B Names, contact details and firm reference numbers (where applicable) of group firms providing a joint

FCA 2018/XX reference
2 Individual’s name
(i.e. the subject of the reference)
3 Name, contact details and firm reference number of firm requesting the reference 4 Date of request for reference 5 Date of reference [Editor’s note: The underlining in the heading of each question in the remaining portion of Part One of this Annex is in the existing Handbook text and does not indicate new text.] The answers to Questions A to F cover the period beginning six years before the date of your request for a reference and ending on the date of this reference. Question A Has the individual:
(1) performed a specified significant-harm certification function for our firm; or (2) been an approved person for our firm. Answer:
Yes
No
Question B:
Has the individual performed one or more of the following roles in relation to our firm:
(1) notified non-executive director;
(2) credit union non-executive director; or (3) key function holder (other than a controlled function). Answer:
Yes
No

FCA 2018/XX
Question C:
If we have answered ‘yes’ to either Question A or B above, we set out the details of each position held below, including:
(1) what the controlled function, specified significant-harm certification function or key function holder role is or was; (2) (in the case of a controlled function) whether the approval is or was subject to a condition, suspension, limitation, restriction or time limit; (3) whether any potential FCA governing function is or was included in a PRA controlled function; and (4) the dates during which the individual held the position. Answer:
Question D
Has the individual performed a role for our firm other than the roles referred to in Questions A and B above:
Answer:
Yes
No
If ‘yes’, we have provided summary details of the other role(s), e.g. job title, department and business unit, below. Question E Have we concluded that the individual was not fit and proper to perform a function:
Answer:
Yes
No

FCA 2018/XX
If ‘yes’ and associated disciplinary action was taken as a result, please refer to Question F below. If ‘yes’, and no associated disciplinary action was taken as a result, we have set out below the facts which led to our conclusion. Question F We have taken disciplinary action against the individual that:
(1) relates to an action, failure to act, or circumstances, that amounts to a breach of any individual conduct requirements that:
(a) apply or applied to the individual; or (b) (if the individual is or was a key function holder, a notified non-executive director or a credit union non-executive director for your firm) the individual is or was required to observe under PRA rules (including if applicable, PRA rules in force before 7 March 2016); or (2) relates to the individual not being fit and proper to perform a function. Answer:
Yes
No
If ‘yes’, we have provided below a description of the breaches (including dates of when they occurred) and the basis for, and outcome of, the subsequent disciplinary action. Question G Are we aware of any other information that we reasonably consider to be relevant to your assessment of whether the individual is fit and proper? This disclosure is made on the basis that we shall only disclose something that:
(1) occurred or existed:
(a) in the six years before your request for a reference; or (b) between the date of your request for the reference and the date of this reference; or

FCA 2018/XX
(2) is serious misconduct.
Answer:
Yes
No
If ‘yes’, we have provided the relevant information below.
Part Two: Definitions used in Part One
Section One of Part Two of this annex defines terms used in this annex.
Section Two of Part Two of this annex modifies the meaning of certain requirements in Part
One and has material about completing the template.
Section One: Meaning of certain terms and phrases
Defined term or phrase Meaning
B B refers to the employer or ex-employer giving the reference as defined in more detail in SYSC 22.2.1R and SYSC 22.2.2R. P P refers to the employee or ex-employee about whom the reference is given as defined in more detail in SYSC 22.2.1R and SYSC 22.2.2R. A finding or conclusion by B that P was not fit and proper to perform a function (see questions (E) to (F) of the template) This means a finding or conclusion by B in the following circumstances where:
(a) B assesses the continuing fitness and propriety of P as an approved person in accordance with the requirements of the regulatory system, including when carrying out this assessment under section 63(2A) of the Act (annual assessment of approved persons by a relevant authorised person an SMCR firm); or (b) B assesses the fitness and propriety of P when B is proposing to issue a certificate

FCA 2018/XX under section 63F of the Act (Certification of employees by relevant authorised persons SMCR firms) for P. Paragraph (b) applies whether the certificate is being issued for the first time or is being renewed. Individual conduct requirements Individual conduct requirements mean any of the following:
(a) COCON;
(b) APER;
(c) the PRA’s Individual Conduct Standards or Senior Insurance Manager Conduct Standards (in:
(i) Chapter 3 of the Part of the PRA
Rulebook called Solvency II Firms:
Insurance – Conduct Standards;
(ii) and in Chapter 3 of the Part of the PRA Rulebook called Non-Solvency II Firms:
Large Non-Solvency II Firms – Conduct
Standards; and
(iii) Chapter 2 of the Part of the PRA
Rulebook called Non-Solvency II firms -
Conduct Standards);
(d) the PRA’s Individual Conduct Rules or Senior Manager Conduct Rule (in:
(i) Chapters 2 and 3 of the Part of the PRA Rulebook called CRR Firms: Conduct Rules; and (ii) in Chapters 2 and 3 of the Part of the PRA Rulebook called Non-CRR Firms:
Conduct Rules); or
(e) the PRA’s Conduct Standards (in:
(i) Chapter 3 of the Part of the PRA’s PRA Rulebook called CRR Firms: Fitness and Propriety; and (ii) Chapter 3 of the Part of the PRA Rulebook called Non-CRR Firms: Fitness and Propriety). Function (as referred to in questions (E) to (F)) A function means a function as an approved person or certification employee.

FCA 2018/XX
Disciplinary action Disciplinary action has the same meaning as in section 64C(2) of the Act (Requirement for relevant authorised persons to notify regulatory of disciplinary action), which is:
(a) the issue of a formal written warning; or (b) the suspension or dismissal of P; or (c) the reduction or recovery of any of P’s remuneration. This definition applies even if B is not a relevant authorised person an SMCR firm. Notified non-executive director, credit union non-executive director and key function holder These terms have the same meaning as they do in the PRA Rulebook. Specified significant-harm Certification function, approved person, controlled function and PRA controlled function These terms have the same meaning as they do in the Glossary. Potential FCA governing function Potential FCA governing function means a function:
(a) that would have been an FCA controlled function but for:
(i) SUP 10A.11 (Minimising overlap with the PRA approved persons regime) (when that section was in force); or (ii) SUP 10C.9 (Minimising overlap with the PRA approved persons regime); (b) but instead is included in a PRA controlled function under the following parts of the PRA Rulebook : listed in SUP 10C.9.6G. (i) Part 2 of “Senior management functions”; (ii) Part 2 of “Insurance – Senior Insurance Management Functions”; (iii) Part 6 of “Solvency II Firms: Senior Insurance Managers Regime – Transitional Provisions”; or (iv) Part 6 of “Non-Solvency II Firms:
Large Non-Solvency II Firms – Senior
Insurance Managers Regime – Transitional Provisions.

FCA 2018/XX
Section Two: Supplementary requirements
Item of template for which supplemental requirements apply Supplemental requirements Questions (E) and (F) If:
(a) the finding or disciplinary action was reached or taken by another member of B’s group with the authority to do so; and (b) the finding or disciplinary action relates to conduct by P relating to the carrying on of activities (whether or not regulated activities) by B; this question applies to such finding or disciplinary action in the same way as it does to findings or disciplinary action made or taken by the firm itself. Question (F) This question is subject to SYSC TP 5.4.5R and SYSC TP 7.4.4R (where there is no need to disclose disciplinary action that took place before certain dates if the firm’s records do not show whether there was a breach of individual conduct requirements). The whole of Part One of this annex The template to be used by a firm in giving a reference includes consists of everything in Part One of this annex except for the “Guide to using this template” paragraph. 22 Annex Factors to take into account when asking for and giving regulatory references Matters to take into account Comments (A) Any outstanding liabilities of that person from commission payments (B) Any relevant outstanding or upheld complaint from an eligible complainant against P (C) Section 5 of the relevant Form A in SUP 10A Annex 4 (Application to perform controlled functions under approved persons

FCA 2018/XX regime) or SUP 10C Annex 2 3 (Application to perform senior management functions) (D) FIT 2 (Main assessment criteria) (E) The persistency of any life policies sold by P This only applies if SUP 16.8.1G(1) (Persistency reports from insurers) applies to B Note: P refers to the employee or ex-employee about whom the reference is given as defined in more detail in SYSC 22.2.1R and SYSC 22.2.2R. After SYSC 22 (Regulatory references) insert the following new chapter SYSC 23. The text is not underlined. 23 Senior managers and certification regime: Introduction and classification
23.1 Purpose
23.1.1 G The purpose of this chapter is to:
(1) explain what the senior managers and certification regime is and where to find the main FCA Handbook provisions; (2) define which firms the regime applies to; and (3) define the different kinds of SMCR firm.
23.2 Definitions and types of firms
23.2.1 R SYSC 23 Annex 1R (Definition of SMCR firm and different types of SMCR
firms) defines:
(1) what an SMCR firm is; and
(2) what the different types of SMCR firm are.
23.3 Overview of the senior managers and certification regime
23.3.1 G There are three main elements to the regime:
(1) the senior managers regime;
(2) the certification regime; and

FCA 2018/XX
(3) conduct rules that apply directly to a firm’s workforce.
23.3.2 G The table in SYSC 23.3.3G gives more details about each of those three
elements.
23.3.3 G Table: Summary of the senior managers and certification regime
Description of component of the regime
Handbook provisions
The senior managers regime: Parts that apply to all firms Pre-approval by the FCA of senior management (the FCA Handbook calls senior management subject to pre-approval SMF managers) SUP 10C Firm to be satisfied that a person is fit and proper before applying for them to be approved as an SMF manager by the FCA or PRA This requirement comes from
section 60A of the Act. There is
guidance on it in SUP 10C.10.14G
(Vetting of candidates by the firm)
Annual assessment of fitness and propriety by the SMF managers’ firms This requirement comes from
section 63(2A) of the Act. There is
guidance and related notification obligations in SUP 10C.14.18R to SUP 10C.14.25G (Notifications about fitness, disciplinary action and breaches of COCON). A firm should carry out criminal records checks before applying for someone to be approved as an SMF manager SUP 10C.10.16R (Criminal records checks and verifying fitness and properness) A firm should ask for a regulatory reference before appointing someone to be an SMF manager, or to certain other senior management positions, and give one if asked to by another firm doing so SYSC 22 (Regulatory references) Statements of responsibilities This is a document that sets out the responsibilities that an SMF manager performs as part of their designated senior management function. It is prepared as part of the firm’s application to the FCA or SUP 10C.11 (Statements of responsibilities). Many of the requirements are in the Act itself but they are summarised in SUP 10C.11.

FCA 2018/XX
PRA for them to be approved as an
SMF manager. It should be updated after approval when there has been any significant change in the responsibilities of the SMF manager SUP 10C.11 also adds some further requirements, particularly about there being one statement of responsibilities per SMF manager per firm. Duty of responsibility This applies to SMF managers in all types of firm. This is dealt with in section 66A(5) of the Act. There is guidance on this in DEPP 6.2.9-AG to DEPP 6.2.9-FG. The senior managers regime: Parts that apply to many firms A firm should allocate certain specified management responsibilities among its SMF managers. The FCA Handbook calls them FCA-prescribed senior management responsibilities. SYSC 24 (Senior managers and certification regime: Allocation of prescribed responsibilities) A firm should maintain a comprehensive and up-to-date document (called the management responsibilities map) that describes its management and governance arrangements SYSC 25 (Senior managers and certification regime: Management responsibilities maps and handover procedures and material) A firm should ensure that, at all times, one or more of its SMF managers have overall responsibility for each of the activities, business areas and functions of the firm SYSC 26 (Senior managers and certification regime: Overall and local responsibility) A firm should ensure that a person becoming an SMF manager has all the information and material that they could reasonably expect to have to perform their responsibilities SYSC 25.9 (Handover procedures and material) The senior managers regime: Parts outside the Handbook Criminal offence relating to a decision that causes a financial institution to fail. This is contained in section 36 of the Financial Services (Banking Reform) Act 2013

FCA 2018/XX
It applies to a UK SMCR banking firm but does not apply to a credit union. It does not apply to any firm that is not a UK SMCR banking firm. The certification regime A firm should not permit an employee to carry out certain functions (certification functions) unless it has issued them with a certificate. The certificate is only valid for a year. The firm will have to renew it if the employee is to carry on performing the function. A firm may not issue or renew a certificate unless it is satisfied that the person is fit and proper. Certification does not involve preapproval by the FCA or PRA. Most of the requirements of this regime are in sections 63E (Certification of employees by authorised persons) and 63F (Issuing of certificates) of the Act. SYSC 27 (Senior managers and certification regime: Certification regime) describes the regime and explains which employees are covered. A firm should ask for a regulatory reference before appointing someone to perform an FCA certification function (or a PRA equivalent) and give one if asked to by another firm doing so SYSC 22 (Regulatory references) Conduct rules (applies to all firms) Rules of conduct that apply directly to a firm’s workforce other than ancillary staff COCON A firm should report breaches of COCON to the FCA SUP 15.11 (Notification of COCON breaches and disciplinary action) A firm should:
(a) ensure that all persons subject to
COCON are notified of the rules that apply to them; and (b) take all reasonable steps to ensure that they understand how COCON applies to them These obligations are in section 64B of the Act (Rules of conduct:
responsibilities of authorised persons).
There is guidance in COCON 2.3
(Firms: Training and breaches).

FCA 2018/XX
23.3.4 G The PRA has requirements corresponding to the senior managers and
certification regime that apply to PRA-authorised persons. The FCA and PRAs’ regimes are designed to work together and complement each other. A PRA-authorised person will therefore need to consider the PRA’s requirements to get a complete picture of the requirements that apply to it (and its workforce) in the area covered by the senior managers and certification regime and the requirements in the Act on which it is based. 23 Annex Definition of SMCR firm and different types of SMCR firms
Part One: Flow diagram and other basic provisions
1.1 R The flow diagram in SYSC 23 Annex 1 1.2R defines:
(1) an SMCR firm; and
(2) the different categories of SMCR firm.
1.2 R Flow diagram: Types of SMCR firm
Are you an exempt firm (see
Part 2 of this annex)? You are not an SMCR firm Yes
Are you an SMCR banking firm? You are an SMCR firm.
Yes
No
Are you a firm? You are not an SMCR firm No Yes

FCA 2018/XX
Note: The categorisation in this flow diagram is subject to SYSC 23 Annex 1 2.1R. This note forms part of the flow diagram.
Part Two: Changing category
2.1 R If a firm is subject to a requirement that it must comply with the rules in
the FCA Handbook applicable to one of the categories of SMCR firm set out in this Annex, it is to be treated as falling into that category of SMCR firm for all purposes.
Part Three: Definition of exempt firm
3.1 R This part defines an exempt firm for the purposes of the flow diagram in
Part One of this Annex.
3.2 R An overseas firm is an exempt firm if it:
(1) does not have; and
(2) does not have an appointed representative that has; an establishment in the United Kingdom.
3.3 R An incoming EEA firm that is an EEA pure reinsurer is an exempt firm.
Part Four: Definition of insurance sector
4.1 R A firm is in the insurance sector for the purposes of the flow diagram in
Part One of this Annex if the firm is:
Are you in the insurance sector as defined in Part 3 of this annex? Yes You are an SMCR firm. You are not an SMCR firm No No

FCA 2018/XX
(1) a Solvency II firm (including a large non-directive insurer); or (2) a small non-directive insurer.
4.2 R (1) A firm from which the Solvency II rules (as defined by the part of
the PRA Rulebook described in this paragraph (1)) are disapplied by
chapter 2 of the Solvency II Firms: Transitional Measures part of
the PRA Rulebook is in the insurance sector for the purposes of the flow diagram in Part One of this Annex. (2) A firm defined as a small run-off firm in the Glossary part of the PRA Rulebook is in the insurance sector for the purposes of the flow diagram in Part One of this Annex. Amend the following as shown. Where a cross-reference is amended by paragraph F of this instrument, that change is not shown. 24 Senior managers and certification regime: Allocation of prescribed responsibilities
24.1 Application
Main application rules
24.1.1
4.7.1
R This section chapter applies to UK relevant authorised persons an SMCR firm, except to the extent that this chapter applies a narrower scope to a particular provision. However, this chapter does not apply to an EEA SMCR firm. 24.1.2 4.7.3 R This section chapter is not limited to regulated activities or other specific types of activities. Territorial scope 24.1.3 4.7.2 R There is no territorial limitation on the application of this section chapter, subject to SYSC 24.1.4R.
24.1.4 R When this chapter applies to an overseas SMCR firm, it applies in relation to
the activities of the firm’s branch in the United Kingdom.
24.2 Allocation of FCA-prescribed senior management responsibilities: Main
allocation rules
Allocation of FCA-prescribed senior management responsibilities

FCA 2018/XX
24.2.1
4.7.5(1)
R A firm must allocate each of the FCA-prescribed senior management responsibilities in Part 1 of the table in SYSC 24.2.6R that apply to it to one or more SMF managers of the firm.
24.2.2 G (1) Subject to (2), SYSC 24 Annex 1 (Which prescribed responsibilities
apply to which kind of firm) sets out which FCA-prescribed senior management responsibilities apply to which kind of SMCR firm. (2) In some cases, an FCA-prescribed senior management responsibility is subject to further restrictions on the types of firm and circumstances to which it applies, as set out in the table in SYSC 24.2.6R (Table: FCA-prescribed senior management responsibilities). 24.2.3 4.7.5(5) R (1) A firm may not allocate an FCA-prescribed senior management responsibility to an SMF manager who is only approved to perform the other overall responsibility function or the other local responsibility function for that firm, subject to (6) (2). 4.7.5(6) (2) A firm may allocate the FCA-prescribed senior management responsibility (z) in row (11) of the table in SYSC 24.2.6R (functions in relation to CASS) to an SMF manager who is only approved to perform the other overall responsibility function or the other local responsibility function. 24.2.4 4.7.5(7) R A firm must make the allocations of FCA-prescribed senior management responsibilities in this rule chapter in such a way that it is clear who has which of those responsibilities. What the FCA-prescribed senior management responsibilities are 24.2.5 4.7.6 R The FCA-prescribed senior management responsibilities are set out in the
table in SYSC 24.2.6R.
24.2.6
4.7.7
R Table: FCA-prescribed senior management responsibilities
Part One (applies to all firms)
FCA-prescribed senior management responsibility Explanation Equivalent PRAprescribed senior management responsibility Reference letter (1) Responsibility for the firm’s performance of its obligations under The senior management managers regime means the requirements of the PRA-prescribed senior management responsibility 4.1(1)

FCA 2018/XX the senior management managers regime regulatory system applying to relevant authorised persons SMCR firms insofar as they relate to SMF managers performing designated senior management functions, including SUP 10C (FCA senior management managers regime for approved persons in relevant authorised persons). (a) This responsibility includes:
(1) compliance with conditions and time limits on approval; (2) compliance with the requirements about the statements of responsibilities (but not the allocation of responsibilities recorded in them); (3) compliance by the firm with its obligations under
section 60A of the Act
(Vetting of candidates by relevant authorised persons); and (4) compliance by the firm with the requirements in SYSC 22 (Regulatory references) so far as they relate to the senior management managers regime, including the giving of references to another firm about an SMF manager or former SMF manager.

FCA 2018/XX
(2) Responsibility for the firm’s performance of its obligations under the employee certification regime The employee certification regime means the requirements of sections 63E and 63F of the Act (Certification of employees) and all other requirements of the regulatory system about the matters dealt with in those sections, including:
PRA-prescribed senior management responsibility 4.1(2) (b) (1) SYSC 27 (Senior managers and certification regime:
Certification Regime);
(2) the requirements in
SYSC 22 (Regulatory references) so far as they relate to the employee certification regime, including the giving of references to another firm about a certification employee or former certification employee; and (3) the corresponding PRA requirements. (3) Responsibility for compliance with the requirements of the regulatory system about the management responsibilities map This responsibility does not include allocating responsibilities recorded in it PRA-prescribed senior management responsibility 4.1(3) (4) (3) Overall responsibility Responsibility for the firm’s policies and procedures for countering the risk that the firm might be used to further financial crime (1) This includes the function in:
(a) responsibility for the firm’s policies and procedures in relation to the matters in SYSC 3.2.6R (Systems and controls in relation to compliance, financial None (d)

FCA 2018/XX crime and money laundering); (b) the functions in SYSC 3.2.6HR or SYSC 6.3.8R (firm must allocate to a director or senior manager overall responsibility within the firm for the establishment and maintenance of effective anti-money laundering systems and controls); , if that any of those rule rules applies apply to the firm. (2) The firm may allocate this FCAprescribed senior management responsibility to the MLRO but does not have to. (3) If the firm does not allocate this FCAprescribed senior management responsibility to the MLRO, this FCAprescribed senior management responsibility includes responsibility for supervision of the MLRO. (4B) (4) Responsibility for the firm’s obligations for:
(a) conduct rules training; and
(b) conduct rules reporting.
(1) The firm’s obligations for conduct rules training means its obligations under
section 64B of the Act
(Rules of conduct:
responsibilities of authorised persons).
(b-1)
(2) The firm’s obligations for conduct

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Part Two (applies to all firms except for small CRR firms and credit
unions)
(5) Responsibility for:
(a) leading the development of; and
(b) monitoring the effective implementation of; policies and procedures for the induction, training and professional development of all members of the firm’s governing body. PRA-prescribed senior management responsibility 4.1(13) (f) (6) Responsibility for monitoring the effective implementation of policies and procedures for the induction, training and professional development of all the firm’s:
(a) persons performing designated senior management functions on behalf of the firm SMF managers; and (b) key function holders; Key function holder has the same meaning as it does in the Glossary Part of the PRA Rulebook. Paragraph (b) of column (1) of this row (6) only applies to a firm if and to the extent that the PRA’s requirements about key function holders apply to it. PRA-prescribed senior management responsibility 4.1(5) (g) rules reporting means its obligations under
section 64C of the Act
(Requirement for authorised persons to notify regulator of disciplinary action). (4A) Acting as the firm’s whistleblowers’ champion The whistleblowers’ champion’s allocated responsibilities are set out in SYSC 18.4.4R

FCA 2018/XX other than members of the firm’s governing body. (7) Responsibility for compliance with the requirements of the regulatory system about the management responsibilities map This responsibility does not include allocating responsibilities recorded in the management responsibilities map. This responsibility does not apply to a firm to which the requirements about management responsibilities maps in SYSC 25 (Senior managers and certification regime:
Management responsibilities maps and handover procedures and material) do not apply. (c) (8) Acting as the firm’s whistleblowers’ champion The whistleblowers’ champion’s allocated responsibilities are set out in SYSC 18.4.4R. This responsibility does not apply to a firm that is not required to have a whistleblowers’ champion. (n) (7) (9) Responsibility for:
(a) safeguarding the independence of; and (b) oversight of the performance of; the internal audit function, in accordance with SYSC 6.2 (Internal Audit) or article 24 of the MiFID Org Regulation the internal audit requirements for SMCR firms. (1) This responsibility includes responsibility for:
(a) safeguarding the independence of; and (b) oversight of the performance of; a person approved to perform the PRA’s Head of Internal Audit function designated senior management function for the firm if PRA-prescribed senior management responsibility 4.1(15) (j)

FCA 2018/XX that function applies to the firm.
(2) This responsibility only applies if and to the extent that:
(a) the internal audit requirements for SMCR firms; or (b) the requirements listed in paragraph (1) of this column of this row (9); apply to the firm. (3) Independence means independence to the extent it is required by the requirements referred to in column (1) of this row (9) or paragraph (1) of this column of this row (9). (4) The Head of Internal Audit function means the PRA’s Head of Internal Audit designated senior management function. (8) (10) Responsibility for:
(a) safeguarding the independence of; and (b) oversight of the performance of; the compliance function in accordance with SYSC 6.1 (Compliance) or article 22 of the MiFID Org Regulation the compliance requirements for SMCR firms. (1) This responsibility includes responsibility for:
(a) safeguarding the independence of; and (b) oversight of the performance of; the person performing the compliance oversight function for the firm. (2) This responsibility only applies if and to the extent that the compliance PRA-prescribed senior management responsibility 4.1(16) (k)

FCA 2018/XX requirements for SMCR firms apply to the firm.
(3) Independence means independence to the extent it is required by the requirements referred to in column (1) of this row (10). (9) (11) Responsibility for:
(a) safeguarding the independence of; and (b) oversight of the performance of; the risk function, in accordance with SYSC 7.1.21R and SYSC 7.1.22R (Risk control) the risk control requirements for SMCR firms. (1) This responsibility includes responsibility for:
(a) safeguarding the independence of; and (b) oversight of the performance of; a person approved to perform the PRA’s Chief Risk designated senior management function function for the firm if that function applies to the firm. (2) This responsibility only applies if and to the extent that:
(a) the risk control requirements for SMCR firms; or (b) the requirements listed in paragraph (1) of this column; apply to the firm. PRA-prescribed senior management responsibility 4.1(17) (l) (3) Independence means independence to the extent it is required by the requirements referred to in column (1) of this row (11) or paragraph (1) of this column of this row (11). (4) The Chief Risk function means the

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PRA’s Chief Risk designated senior management function.
(10) (12)
Responsibility for overseeing the development of and implementation of the firm's remuneration policies and practices in accordance with SYSC 19D (Remuneration Code) This responsibility does not apply to a firm to which SYSC 19D does not apply. PRA-prescribed senior management responsibility 4.1(18) (m)
Part Three (applies in specified circumstances)
(11) Overall responsibility (13)
Responsibility for the firm’s compliance with CASS (A) (1) This responsibility only applies to a firm to which CASS applies. (B) (2) A firm may include in this FCAprescribed senior management responsibility whichever of the following functions apply to the firm:
(a) CASS 1A.3.1R
(certain CASS compliance functions for a CASS small firm); (b) CASS 1A.3.1AR (certain CASS compliance functions for a CASS medium firm or a CASS large firm); (c) CASS 11.3.1R (certain CASS compliance functions for certain CASS small debt management firms); or (d) CASS 11.3.4R (certain CASS compliance functions None (z)

FCA 2018/XX for a CASS large debt management firm); but it does not have to. (C) (3) If the firm does not include the functions in (B) paragraph (2) of this column of this row (13) in this FCA-prescribed senior management responsibility, this FCA-prescribed senior management responsibility includes responsibility for supervision of the person performing the functions in (B) paragraph (2) of this column of this row (13) that apply to the firm. (14) Responsibility for:
(a) providing for an effective internal audit function in accordance with one of the sections of the PRA Rulebook listed in paragraph (2) of column (2) of this row (14); and (b) overseeing the performance of the internal audit function. (1) Only applies to a firm:
(a) that outsources its internal audit function to an external third party service provider; and (b) to which one of the following internal audit PRA-prescribed senior management responsibilities applies:
(i) the responsibility in rule 3.3(1) in the Insurance – Allocation of Responsibilities Part of the PRA Rulebook; or (ii) the responsibility in rule 3.2(1) in the Large Non-Solvency II Firms – Allocation of Responsibilities Part of the PRA Rulebook. (j-2)

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(2) The parts of the
PRA Rulebook referred to in column (1) of this row (14) are:
(a) Solvency II firms -
Conditions Governing
Business 5; and
(b) Non-Solvency II
Firms – Governance
9.2.
(3) Terms used in column (1) of this row (14) have the same meaning as they do for the corresponding PRA-prescribed senior management responsibility described in paragraph (1) of this column of this row (14). (15) Responsibility for management of the firm’s risk management processes in the UK (aa) (16) Responsibility for the firm’s compliance with the UK regulatory system applicable to the firm (ff) (17) Responsibility for the escalation of correspondence from the PRA, FCA and other regulators in respect of the firm to each of the governing body or the management body of the firm and, as appropriate, of the firm’s parent undertaking and the ultimate parent undertaking of the firm’s group This includes taking steps to ensure that the senior management of the firm and, where applicable, the group, are made aware of any views expressed by the regulatory bodies and any steps taken by them in relation to the branch, firm or group. (ee)

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24.3 Who functions prescribed responsibilities should be allocated to
Seniority and authority
24.3.1
4.7.24
(3)
G In general, the The FCA expects that a person who has responsibility for an FCA-prescribed senior management responsibility in (2):
(1) will generally (in the case of the FCA-prescribed senior management responsibilities in SYSC 24.3.3G) be the most senior employee or officer responsible for managing that area (or the most senior below the chief executive); and (2) will:
(a) be sufficiently senior and credible; and (b) have sufficient resources and authority; to be able to exercise their management and oversight responsibilities effectively. Executive or non-executive 24.3.2 4.7.24(1) G The FCA expects that normally a firm will allocate the FCA-prescribed senior management responsibility in rows with the following FCA reference letters (5), (7), (8), (9) and (10) (see column three of the table in SYSC 24.2.6R) to an SMF manager who is a non-executive director of the firm (or, in the case of a partnership, a partner without management responsibilities):
(1) (f) (development of members of governing body); (2) (j) (internal audit oversight); (3) (k) (compliance oversight); (4) (l) (risk control oversight); (5) (m) (remuneration code oversight); and (6) (n) (whistleblowers’ champion). 24.3.3 4.7.24 (2) G The FCA expects that normally a firm will allocate: (a) the other FCAprescribed senior management responsibilities; and (b) functions under SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions); to an SMF manager who performs executive functions for the firm.

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Exceptions for small non-complex firms
24.3.4
4.7.24
(5)
G The FCA accepts that it may not be practical for a small non-complex firm (see SYSC 4.5.13G) to comply with the parts of (1), (2) and (3) SYSC 24.3.1G(1), SYSC 24.3.2G and SYSC 24.3.3G that would otherwise apply to it. 24.3.5 4.5.13(2) G (1) A firm UK SMCR banking firm is likely to be small and noncomplex for these the purposes in SYSC 24.3.4G if : (a) it is:
(a)
(i) a small CRR firm as defined in the part of the PRA’s rulebook PRA Rulebook called “Allocation of responsibilities”; or (b) (ii) a credit union that meets the PRA’s size requirements for small CRR firms as defined under the PRA’s requirements in (a)(i); . (2) A firm is likely to be non-complex for these purposes if:
(a)
(b) it conducts a limited number of simple business lines; and (b) (c) it does not rely on group governance arrangements; and (c) (in the case of a branch) it does not rely on governance arrangements for other parts of the firm. Not assigning too many responsibilities to one person
24.3.6 G When deciding how to allocate FCA-prescribed senior management
responsibilities, a firm should avoid assigning such a wide range of responsibilities to a particular SMF manager that they are not able to carry out those responsibilities effectively. Dividing and sharing management functions between different people 24.3.7 4.7.25(1) G The FCA expects that a firm will not normally split an FCA-prescribed senior management responsibility between several SMF managers, with each only having responsibility for part. 24.3.8 4.7.25(2) G The FCA expects that a firm will not normally allocate responsibility for:
(a) an FCA-prescribed senior management responsibility; or

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(b) a function under SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions); to two or more SMF managers jointly. 24.3.9 4.7.26 G (1) Although the norm should be for a firm to have a single individual performing each FCA-prescribed senior management responsibility or function allocated under SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions), there may be circumstances in which responsibilities can be divided or shared (see (2)). (2) A firm should only divide or share a responsibility where this is appropriate and can be justified. (3) For example, it would be justified to share a function or responsibility if that is done:
(a) as part of a job share; or
(b) where departing and incoming senior managers work together temporarily as part of a handover. (4) A firm may have co-heads of a department or business unit if this can be justified under (1) to (3). 24.3.10 4.7.27 G (1) The FCA expects a firm to divide and allocate responsibilities under:
this chapter
(a) SYSC 4.7.5R (Allocation of FCA-prescribed senior management responsibilities); and (b) SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions); between its SMF managers so that responsibilities are grouped together appropriately. (2) The firm should make the judgement:
(a) in (1); and
(b) about whether and how responsibilities and functions should be shared; under:
(c) SYSC 4.1.1R (robust governance arrangements); and (d) any other applicable Handbook requirements, including :

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(i) SYSC 4.7.25G and SYSC 4.7.26G SYSC 2 (Apportionment of Responsibilities); (ii) SYSC 24.3.7G to SYSC 24.3.9G; and (e) article 21 of the MiFID Org Regulation (General organisational requirements) or other similar relevant and directly applicable EU legislation. (3) The firm should take into account the way it is organised, the business it carries out and the need not to allocate too many responsibilities to one individual (see SYSC 4.7.23G SYSC 24.3.6G). (4) The FCA expects a firm to allocate FCA-prescribed senior management responsibilities and responsibilities allocated under SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions) to the SMF managers they are most closely linked to. 24.3.11 4.7.28 G SUP 10C.11.31G to SUP 10C.11.33G (Statements of responsibilities What statements of responsibilities should contain: dividing and splitting responsibilities) contains material about:
(1) how to prepare statements of responsibilities where a responsibility or function is shared or divided between several SMF managers; and (2) dividing and sharing responsibilities. 24.3.12 4.7.29 G (1) A firm may allocate more than one FCA-prescribed senior management responsibility to the same SMF manager. (2) This is subject to:
(a) SYSC 4.7.23G SYSC 24.3.6G (should not give too many responsibilities to one person); and (b) SYSC 24.3.10G (what responsibilities should be grouped together). Allocation of responsibilities and territorial scope. 24.3.13 4.7.30 G (1) As explained in SYSC 24.1.3R, there is no territorial limitation to the application of this section chapter. (2) This means that a firm should allocate:
(a) the FCA-prescribed senior management responsibilities; and (b) overall responsibilities under SYSC 4.7.8R;

FCA 2018/XX so that they cover activities, transactions, business areas and management functions that are located or take place wholly or partly outside, as well as ones in, the United Kingdom. 24.3.14 4.8.8 G The In the case of an overseas SMCR firm, the FCA-prescribed senior management responsibilities relate to the activities of the third-country relevant authorised person’s firm’s branch in the United Kingdom (see SYSC 24.1.4R). After SYSC 24 (Senior managers and certification regime: Allocation of prescribed responsibilities) insert the following new SYSC 24 Annex 1. The text is not underlined.
Annex 1
Which FCA-prescribed senior management responsibilities apply to which kind of firm Introduction and exclusions
1.1 G This annex sets out which FCA-prescribed senior management
responsibilities apply to which type of SMCR firm.
1.2 R In this annex:
(1) a ✓ means that the FCA-prescribed senior management responsibility does apply; (2) a × means that the FCA-prescribed senior management responsibility does not apply; and (3) a reference letter refers to the reference letters in column (3) of the
table in SYSC 24.2.6R (Table: FCA-prescribed senior management
responsibilities).
1.3 G If an FCA-prescribed senior management responsibility is not included in
the table for a particular class of firm, that FCA-prescribed senior management responsibility does not apply to any firm in that class. Banking sector firms
2.1 R (1) The table in SYSC 24 Annex 1 2.3R sets out which FCA-prescribed
senior management responsibilities apply to which type of SMCR banking firm. (2) SMCR firms in (1) are divided into the following categories for the purposes in (1):
(a) a UK SMCR banking firm (excluding firms in (b));

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(b) a small UK SMCR banking firm; and
(c) a third-country SMCR banking firm.
2.2 R A small UK SMCR banking firm means a UK SMCR banking firm that is:
(1) a small CRR firm as defined in the part of the PRA Rulebook called “Allocation of responsibilities”; or (2) a credit union.
2.3 R Table: FCA-prescribed senior management responsibilities applying to
banking sector firms
Brief description of responsibility
Reference letter of responsibility
UK firm Small UK firm
Thirdcountry firm
Responsibility for the firm’s performance of its obligations under the senior managers regime (a) ✓ ✓ ✓ Responsibility for the firm’s performance of its obligations under the employee certification regime (b) ✓ ✓ ✓ Financial crime (d) ✓ ✓ ✓ COCON (b-1) ✓ ✓ ✓ Training governing body (f) ✓ × × Training of staff performing designated senior management responsibilities See Note (2) (g) ✓ × × Management responsibilities maps (c) ✓ ✓ ✓ Whistleblowers’ champion (n) ✓ ✓ × Internal audit oversight (j) ✓ × × Compliance oversight (k) ✓ × × Risk oversight (l) ✓ × ×

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Remuneration (m) ✓ × ×
CASS (z) ✓ ✓ ✓
UK risk management (aa) × × ✓
Compliance with UK regulatory system
(ff) × × ✓
Escalation of correspondence (ee) × × ✓
Note (1): the categories of firm in the column headings of this table are to be interpreted in accordance with the classification of firms in SYSC 24 Annex 1 2.1R. Therefore:
(a) column three (UK firm) refers to SYSC 24 Annex 1 2.1R(2)(a); (b) column four (Small UK firm) refers to SYSC 24 Annex 1 2.1R(2)(b); and (c) column five (Third-country firm) refers to SYSC 24 Annex 1 2.1R(2)(c). Note (2): Paragraph (b) of this FCA-prescribed senior management responsibility (key function holder) does not apply to any firm in this table. Insurance sector firms
3.1 R (1) The table in SYSC 24 Annex 1 3.2R sets out which FCA-prescribed
senior management responsibilities apply to which type of firm in the insurance sector as defined in Part Four of SYSC 23 Annex 1 (Definition of insurance sector). (2) SMCR firms in (1) are divided into the following categories for the purposes in (1):
(a) a Solvency II firm (excluding firms in any other paragraph); (b) a firm falling within paragraph (b) of the definition of Solvency II firm (third country branch); (c) a small non-directive insurer; (d) a firm in SYSC 23 Annex 1 4.2R (firms in run-off); and (e) an insurance special purpose vehicle. (3) An insurance special purpose vehicle only falls into paragraph (2)(e). Subject to that, a firm in (2)(d) does not fall into any other paragraph.
3.2 G References to a Solvency II firm include a large non-directive insurer.

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3.3 R Table: FCA-prescribed senior management responsibility applying to
insurance sector firms
Brief description of responsibility
Reference letter of responsibility
Solvency
II firm
Third country branches
Other insurance sector
ISPV
Responsibility for the firm’s performance of its obligations under the senior managers regime (a) ✓ ✓ ✓ ✓ Responsibility for the firm’s performance of its obligations under the employee certification regime (b) ✓ ✓ ✓ ✓ Financial crime (d) ✓ ✓ ✓ ✓ COCON (b-1) ✓ ✓ ✓ ✓ Training governing body (f) ✓ × × × Training of staff performing designated senior management responsibilities (g) ✓ × × × Management responsibilities maps (c) ✓ ✓ × × Whistleblowers’ champion (n) ✓ × × × CASS (z) ✓ ✓ ✓ × Internal audit for nonsignificant insurers (j-2) ✓ × × × Compliance with UK regulatory system (ff) × ✓ × × Escalation of correspondence (ee) × ✓ × × Note: The categories of firm in the column headings of this table are to be interpreted in accordance with the classification of firms in SYSC 24 Annex 1 3.1R. Therefore:
(1) Solvency II firm (column three) refers to SYSC 24 Annex 1 3.1R(2)(a);

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(2) Third country branches (column four) refers to SYSC 24 Annex 1 3.1R(2)(b); (3) Other insurance sector (column five) refers to SYSC 24 Annex 1 3.1R(2)(c) and (d); and (4) ISPV (column six) refers to SYSC 24 Annex 1 3.1R(2)(e). Amend the following as shown. Where a cross-reference is amended by paragraph F of this instrument, that change is not shown. 25 Senior managers and certification regime: Management responsibilities maps and handover procedures and material
25.1 Application and purpose
Main application rules
25.1.1
4.5.1
R This section chapter applies to: UK relevant authorised persons. (1) an SMCR banking firm; and (2) a Solvency II firm (including a large non-directive insurer) but excluding:
(a) an insurance special purpose vehicle; and (b) a firm in SYSC 23 Annex 1 4.2R (firms in run-off); except to the extent that this chapter applies a narrower scope to a particular provision. 25.1.2 4.5.3 R This section chapter is not limited to regulated activities or other specific types of activities. Territorial scope 25.1.3 4.5.2 R Subject to SYSC 25.1.4R, There there is no territorial limitation on the application of this section chapter. 25.1.4 4.6.1 R This section chapter applies to an overseas SMCR firm:
(1) EEA relevant authorised persons; and (2) third-country relevant authorised persons;

FCA 2018/XX in relation to the activities of a branch maintained by them the firm in the United Kingdom. How this chapter applies to overseas SMCR firms 25.1.5 4.6.9(2) R Unless the context requires otherwise, the following terms in SYSC 4.5.7R this chapter are modified as follows in relation to an overseas SMCR firm:
Reference in SYSC 4.5.7R this
chapter
Modification firm treated as a reference to the branch governing body, management body, senior management and senior personnel (a) treated as a reference to the branch’s governing body, management body, senior management or senior personnel; (b) the Glossary definitions of these terms are adjusted so as to refer to the branch rather than the firm as a whole group treated as including the rest of the firm PRA-prescribed senior management responsibilities treated as a reference to PRAprescribed UK branch senior management responsibilities functions allocated under SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions) treated as a reference to functions allocated under SYSC 4.8.10R (Local responsibility for a branch’s activities, business areas and management functions) Purpose 25.1.6 4.5.6(1) G (1) One purpose of the management responsibilities map is to help the firm and the FCA satisfy themselves that the firm has a clear organisational structure (as required by SYSC the regulatory system). 4.5.6(2) (2) It also helps the FCA to identify who it needs to speak to about particular issues and who is accountable if something goes wrong. 4.6.17(3) (3) The management responsibilities map helps the FCA to operate its powers and requirements for individuals. For example it helps the FCA:

FCA 2018/XX
(a) to identify who is accountable if something goes wrong; (b) to understand the role of the approved person (or candidate) in the branch firm and therefore to judge how to use its powers under the approved persons regime for SMCR firms, such as the power to grant or refuse approval of an SMF manager or to amend or impose conditions.
25.2 Management responsibilities maps: Main rules
General rule
25.2.1
4.5.4
R (1) A UK SMCR firm must, at all times, have a comprehensive and upto-date document document (the management responsibilities map) that describes its management and governance arrangements. , including:
(2) An overseas SMCR firm must, at all times, have a comprehensive and up-to-date document (the management responsibilities map) that describes the management and governance arrangements for any branch it maintains in the United Kingdom. (3) A management responsibilities map must include:
(a)
(1) details of the reporting lines and the lines of responsibility; and (b) (2) reasonable details about:
(i)
(a) the persons who are part of those arrangements; and (ii) (b) their responsibilities. (See further requirements in SYSC 25.2.3R.) 25.2.2 4.5.5 R The firm’s management responsibilities map must show clearly how any responsibilities covered by a firm’s management responsibilities map are shared or divided between different persons. Specific requirements 25.2.3 4.5.7 R A management responsibilities map must include:

FCA 2018/XX
(1) (a) the names of all the firm’s:
(i) approved persons (including PRA approved persons); (ii) members of its governing body and (if different) management body who are not approved persons; (iii) senior management; (iv) senior personnel; and (b) details of the responsibilities which they hold; (2) all responsibilities described in any current statement of responsibilities; (3) details of the management and governance arrangements relating to:
(a) the FCA-prescribed senior management responsibilities; and (b) the PRA-prescribed senior management responsibilities; including the identity of the persons to whom those functions are allocated; (4) the reasons why (if it has done any of these things) the firm:
(a) allocates responsibility for an FCA-prescribed senior management responsibility to more than one person jointly; or (b) divides responsibility for an FCA-prescribed senior management responsibility between different persons; (5) details about the functions allocated under SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions) SYSC 26 (Senior managers and certification regime: Overall and local responsibility), including:
(a) what those the activities, business areas and management functions allocated under that chapter are; (b) the management and governance arrangements relating to them; (c) details about whether and how they are shared or divided up; [deleted] (d) the reasons why (if it has done this) the firm allocates responsibility for any such function to more than one person jointly; and

FCA 2018/XX
(e) the identity of the persons to whom those functions are allocated; (6) matters reserved to the governing body (including the terms of reference of its committees) and, if different, the management body; (7) details of how the firm’s management and governance arrangements fit together with:
(a) its group; and
(a) any other person in (8);
(8) details of the extent to which the firm’s management and governance arrangements are provided by, or shared with, other members of its group or others; (9) details of the reporting lines and the lines of responsibility (if any) between the firm and those who carry out functions in relation to them it and:
(a) other members of its group or other third parties; (b) persons acting as employees or officers of, or otherwise acting for, anyone in (a); or (c) committees or other bodies of anyone in (a); (10) reasonable information about the persons described or identified in the management responsibilities map, including:
(a) whether they are employees of the firm and, if not, by whom they are employed; (b) if they are certification employees of the firm; and (c) the responsibilities they have in relation to other group members or any other person in (8); and (11) details of how (1) to (10) fit together and fit into the firm’s management and governance arrangements as a whole. 25.2.4 4.5.8 R SYSC 4.5.7R(1) SYSC 25.2.3R(1) does not require the firm to include the names of approved persons under SUP 10A.1.16BR (Appointed representatives).
25.3 [This part has been left blank deliberately]

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25.4 Guidance about what should be in a management responsibilities map
Material applicable to all firms
25.4.1
4.5.9(1)
G The management responsibilities map should be consistent with the statements of responsibilities. 25.4.2 4.5.9(2) G The statements of responsibilities and the management responsibilities map should all be prepared in a way that makes it simple to see how the responsibilities allocated in a particular statement of responsibilities fit into the overall system of management and governance of the firm. 25.4.3 4.5.10 G The management responsibilities map should include functions that are:
(1) included in a PRA controlled function under the PRA rules complementing SUP 10C.9 (Minimising overlap with the PRA approved persons regime) (as listed in SUP 10C.9.6G(2)); or (2) excluded from the other overall responsibility function under SUP 10C.7.1R(2) (Exclusion for approved person with approval to perform other designated senior management functions); or (3) excluded from the other local responsibility function under SUP 10C.8.1R(2) (Exclusion for approved person with approval to perform other designated senior management functions). 25.4.4 4.5.11 G A firm’s management responsibilities map should demonstrate that there are no gaps in the allocation of responsibilities among its management. 25.4.5 4.5.12(2) G A firm need only include summary details of the persons in SYSC 4.5.7R(1) SYSC 25.2.3R(1). 25.4.6 4.5.12(3) G A firm’s SMF managers and members of its governing body may overlap with its senior management and senior personnel. If so, the firm does not have to give the same details twice. 25.4.7 4.5.12(4) G A firm should include details of about individuals in addition to those the details in SYSC 4.5.7R(1) (3) and (5) SYSC 25.2.3R(1), (3) and (5) if they are needed to make the management responsibilities map clear. For example, it may be necessary to include these details if the same individual has responsibilities in a number of different areas of the firm it may be necessary to make this clear. 25.4.8 4.5.12(5) G A firm should only include summary details about statements of responsibilities under SYSC 4.5.7R(2) SYSC 25.2.3R(2). There is no need to duplicate the statements of responsibilities. The main aim of including material about statements of responsibilities in the management responsibilities map is to show how the that material:

FCA 2018/XX
(1)
(a) fits into the firm’s overall governance structure; and (2) (b) for each statement of responsibilities, fits with the others. 25.4.9 4.5.12(7) G A management responsibilities map should include a checklist confirming that all FCA-prescribed senior management responsibilities have been allocated or, if some have not been allocated, the reason why. 25.4.10 4.5.12(8) G If:
(1)
(a) any designated senior management function is performed by; or (2) (b) any FCA-prescribed senior management responsibility is allocated to; more than one person, a firm’s management responsibilities map should give details of how the performance or discharge of the responsibilities is to be carried out by those persons. 25.4.11 4.5.12(6) G The executive executive director function, the other local responsibility function, the partner function and the other overall responsibility function are defined generally and generically and can be performed by several people. Therefore, there is no need to explain why several people perform one of the functions. 25.4.12 4.5.12(9) G The material in SUP 10C.11.31G and SUP 10C.11.32G (recording sharing and splitting of responsibilities in statements of responsibilities) also applies to a management responsibilities map. Branches of overseas firms
25.4.13 G One effect of SYSC 25.1.5R is that an overseas SMCR firm should draw up
its management responsibilities map as if the rest of the firm outside the UK branch were a separate company in its group. This means, for example, that the map should include:
(1) details of how the branch’s management and governance arrangements fit together with the wider firm; (2) details of the extent to which the branch’s management and governance arrangements are provided by, or shared with, the wider firm; and

FCA 2018/XX
(3) details of the reporting lines and the lines of responsibility between the branch and those who carry out functions in relation to it and the wider firm and persons acting for it. Small firms 25.4.14 4.5.13(1) G (1) The FCA expects that the management responsibilities map of a small and non-complex firm is likely to be simple and short. It may be no more than a single sheet of paper. (2) See SYSC 24.3.5G for what small and non-complex mean.
25.5 Single Management responsibilities map should be a single document
25.5.1
4.5.14
R A management responsibilities map must be a single document document. 25.5.2 4.5.15(1) G (1) The requirement for a management responsibilities map to be a single document document does not mean that it has to be a single sheet of paper or must be capable of being reproduced as one. 4.5.15(2) (2) A management responsibilities map may be made up of a folder with several files or items in it. The folder may be electronic. 4.5.15(3) (3) However, a firm that creates a management responsibilities map in this way should ensure that its approach is compatible with it being a single document document. In particular:
(a) there should be a single item that identifies every item making up the management responsibilities map and shows where each item can be found; (b) for example, this could be a contents list of the items making up the management responsibilities map with electronic links to each of them; (c) the management responsibilities map should be complete by itself and should not refer to documents not forming part of it; (d) every item in the management responsibilities map should only contain material about the matters required by this
section chapter to be included in management responsibilities
maps;
(e) for example, if there is relevant material in the firm’s report and accounts, the folder should only contain the relevant parts or a link to those parts.

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4.5.15(4) (4) The folder and its contents should be easily identifiable as the firm’s management responsibilities map. 25.5.3 4.5.15(5) G Although a management responsibilities map can be large and complex, SYSC 4.5.13G SYSC 25.4.14G explains that, for small non-complex firms, it may be small and simple.
25.6 Management responsibilities maps: Material only relevant to EEA SMCR
firms
Application
25.6.1 R This section applies to an EEA SMCR firm.
Purpose
25.6.2
4.6.17(1)
G (1) The management responsibilities map is an important support to the FCA’s functions as Host State competent authority. 4.6.17(2) (2) Having requirements and powers that apply directly to individuals helps to make the requirements on firms that the FCA is required or entitled to impose as Host State competent authority more effective. (3) As explained in SYSC 25.1.6G (Purpose), the management responsibilities map also helps the FCA to operate its powers and requirements for individuals. 4.6.17(4) (4) By helping the FCA to better understand how the branch is structured, the management responsibilities map also helps the FCA to carry out more effective supervision of conduct of business, money laundering and other Host State responsibilities. 25.6.3 4.6.5(2) G This section chapter is not intended to extend the application of the common platform requirements or other parts of SYSC to matters which are reserved by an EU instrument to the firm’s Home State regulator in relation to EEA relevant authorised persons SMCR firms. FCA-prescribed senior management responsibilities
25.6.4 G SYSC 25.2.3R (Specific requirements) requires a management
responsibilities map to cover the allocation of FCA-prescribed senior management responsibilities. This is not relevant to an EEA SMCR firm as FCA-prescribed senior management responsibilities do not apply to it. Responsibilities maps for EEA relevant authorised persons: leaving Leaving out information already supplied
25.6.5 R An EEA relevant authorised person SMCR firm may exclude from its
management responsibilities map:

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4.6.20
(1) any information contained in its requisite details; (2) any information contained in any notice of changes to its requisite details under the EEA Passport Rights Regulations; and (3) any other information that has been supplied by the firm to the FCA or the PRA (including through the firm’s Home State competent authority) if:
(a) that information was supplied to the FCA or the PRA as a Host State competent authority for credit institutions or investment firms; and (b) the Single Market Directives or any other EU legislation provides for the supply of that information to the FCA or the PRA as described in (a). 25.6.6 4.6.21 G Information contained in SYSC 4.6.20R (1) and (2) SYSC 25.6.5R(1) and (2) covers:
(1) details about the branch contained in the notice given by the firm’s Home State competent authority as part of the process for establishing the branch in the United Kingdom; and (2) any updates to that information under the EEA Passport Rights Regulations. 25.6.7 4.6.22 G The management responsibilities map of an EEA relevant authorised person SMCR firm may therefore consist of information:
(1) that has changed since its requisite details were supplied or were last changed; or (2) that is not covered in the firm’s Home State competent authority’s passport notification. 25.6.8 4.6.23 G The FCA expects that an EEA relevant authorised person SMCR firm that excludes information from its management responsibilities map under SYSC 25.6.5R will identify in its management responsibilities map the documents supplied to the FCA or the PRA where the omitted information can be found. 25.6.9 4.6.24 G In practice an EEA relevant authorised person SMCR firm may find it easier to prepare its management responsibilities map without omitting any information under SYSC 25.6.5R so that all the information referred to in SYSC 4.6.15R to SYSC 4.6.19R SYSC 25.2 (Management responsibilities maps: Main rules) can be found in a single integrated document document.
25.6.10 G SYSC 4.6.27G and SYSC 4.6.28G do SYSC 25.4 (Guidance about what
should be in a management responsibilities map) does not take into account

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4.6.26 the right of a firm to omit information under SYSC 25.6.5R. They assume It
assumes that the firm will prepare a single document document under SYSC 25.6.9G. However SYSC 4.6.27G and SYSC 4.6.28G are 25.4 is not intended to take away the right to omit information under SYSC 25.6.5R.
25.7 Guidance about SYSC 25 Annex 1G
25.7.1 G This section gives guidance about SYSC 25 Annex 1G (Examples of the
business activities and functions of an SMCR firm).
Purpose of SYSC 25 Annex 1G (The main business activities and functions of a relevant authorised person) 25.7.2 4.5.16(2) G (1) A firm may use it SYSC 25 Annex 1G as a checklist prompt to see whether its management responsibilities map covers all its business activities. 4.5.16(3) (2) A firm may wish to prepare its management responsibilities map using the same split of activities, where this is appropriate. 25.7.3 4.5.16(5) G As mentioned in SYSC 26.11.2G, a firm may also use it SYSC 25 Annex 1G as a checklist prompt when allocating responsibilities under SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions) 26 (Senior managers and certification regime:
Overall and local responsibility).
25.7.4
4.5.16(4)
G If a firm uses SYSC 25 Annex 1G to help it prepare its management responsibilities map or when allocating responsibilities under SYSC 26 (Senior managers and certification regime: Overall and local responsibility), it should bear in mind that it is not comprehensive and that there may be other business activities and functions that are relevant to that firm but that are not included in SYSC 25 Annex 1G (see SYSC 25.7.8G).
25.7.5 G The purpose of SYSC 25 Annex 1G is not say how an SMCR firm should:
(1) prepare its management responsibilities map; (2) allocate responsibilities amongst its senior management; or (3) organise itself. Contents of SYSC 25 Annex 1G (The main business activities and functions of a relevant authorised person) 25.7.6 4.5.18 G SYSC 25 Annex 1G sets out examples of the main business activities and functions that the FCA thinks are likely to could be relevant to most large or complex firms, although the FCA does not require firms (large or small, complex or non-complex) to organise themselves in this way.

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25.7.7
4.5.19
G Most or all of these activities and functions will normally apply to a complex firm. Many of them may not apply to a non-complex firm. 25.7.8 4.5.20 G (1) SYSC 25 Annex 1G is not comprehensive. While it is intended to cover most front-line business activities of a relevant authorised person an SMCR firm, it does not cover all internal oversight and monitoring functions. (2) For example, it does not cover compliance or internal audit or the firm’s governing body or its committees.
25.8 Management responsibilities maps: Records
25.8.1
4.5.21
G A firm should consider past versions of its management responsibilities map as an important part of its records and as an important resource for the FCA in supervising the firm. 25.8.2 4.5.22 G Past versions of a firm’s management responsibilities map form part of its records under SYSC 9.1 (General rules on record-keeping) the regulatory system.
25.8.3 R (1) This rule applies to a Solvency II firm (including a large nondirective insurer) to which SYSC 25.1.1R(2) (Main application rules)
applies.
(2) A firm must retain each version of its management responsibilities map for:
(a) (in the case of a large non-directive insurer) six years; or (b) (in any other case) ten years; from the date on which it was superseded by a more up-to-date version. (3) A firm must be prepared to provide each version to the FCA on request for as long as the firm is required to retain it.
25.9 Handover procedures and material
Application
25.9.1
4.9.1(1)
R This section applies to a firm that meets the following conditions:
(1) it falls within SYSC 25.1.1R (Application and purpose); and

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(2) it falls within one of the following categories:
(a) it is a UK relevant authorised persons SMCR firm; and or (b) it is a third-country relevant authorised persons SMCR banking firm. 25.9.2 4.9.1(2) R For third-country relevant authorised persons SMCR banking firms, references in this section to an SMF manager are references to the SMF manager when acting as an SMF manager for the firm’s branch in the United Kingdom.
25.9.3 [This has been left blank deliberately]
Rules about handover material
25.9.4
4.9.4
R A firm must take all reasonable steps to ensure that:
(1) a person who is becoming an SMF manager; (2) an SMF manager:
(a) taking on a new job or new responsibilities; or (b) whose responsibilities or job are being changed; and (3) anyone who has management or supervisory responsibilities for the SMF manager in (1) or (2); has, when the SMF manager starts to perform his their new or revised responsibilities or job, all information and material that a person in (1) to (3) could reasonably expect to have to perform those responsibilities or that job effectively and in accordance with the requirements of the regulatory system. 25.9.5 4.9.5 R (1) A firm must have a policy about how it complies with SYSC 25.9.4R, including the systems and controls it uses. (2) A firm must make and maintain adequate records of the steps taken to comply with SYSC 25.9.4R. 25.9.6 4.9.6 G The information and material in SYSC 25.9.4R that should be made available includes details:
(1) about unresolved or possible breaches of the requirements of the regulatory system; and (2) of any unresolved concerns expressed by the FCA, the PRA or another regulatory body.

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25.9.7
4.9.7
G (1) The main purpose of SYSC 25.9.4R is to help the SMF manager with his their new or revised responsibilities or job and to help the managers of SMF managers. (2) It The information and material should be a practical and helpful document and not just a record. (3) The material should include an assessment of what issues should be prioritised. (4) It The information and material should include judgement and opinion, not just facts and figures. Handover arrangements and certificates 25.9.8 4.9.8 G (1) Where the responsibilities or job in SYSC 25.9.4R are being taken over from another person, the firm should have arrangements for an orderly transition. (2) As part of these arrangements, the firm should take reasonable steps to ensure that the predecessor contributes to the information and material in SYSC 25.9.4R all that would be reasonable to expect the predecessor to know and consider relevant, including the predecessor’s opinions. (3) One way of doing this could be for the predecessor to prepare a handover certificate. (4) However, the FCA accepts that there will be cases in which it will be impractical to ask the predecessor to prepare a handover certificate. Application of this section to other parts of a firm’s management 25.9.9 4.9.9 G A firm should consider whether to apply the procedures in this section to other parts of its management. 25 Annex 1G 4 Annex 1G The main Examples of the business activities and functions of a relevant authorised person an SMCR firm Business areas and management functions Explanation (1) Payment services This means:
(1) payment services;

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(2) issuing and administering other means of payment (for example, cheques and bankers' drafts); (3) issuing electronic money; and (4) current accounts. (2) Settlement This means clearing and settlement of any transactions described in rows (3) and (6) to (9) of this annex, in relation to the assets covered by (9). It also includes clearing and settlement of any transactions described in row (10). (3) Investment management This has the same meaning as managing investments with the following adjustments:
(a) it covers all types of assets; and
(b) the exclusions in the Regulated Activities Order do not apply. It also covers fund management. (4) Financial or investment advice This includes advising on investments. (5) Mortgage advice This has the same meaning as advising on regulated mortgage contracts but is expanded to cover land anywhere in the world and to cover security of any kind over land. (6) Corporate investments This means acquiring, holding, managing and disposing a firm’s investments made for its own account. (7) Wholesale sales This means the selling of any investment to a person other than a retail customer. It does not include the activities in (1). (8) Retail sales This means the selling of any investment to a retail customer. It includes savings accounts. It does not include the activities in (1). (9) Trading for clients This means dealing in investments as agent and execution of orders on behalf of clients but the list of products also includes money market instruments and foreign exchange.

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(10) Market making This has the same meaning as it does in MIFID (see the definition of market maker in article 4.1(8)(7)). (11) Investment research (12) Origination/syndication and underwriting Origination and syndication include:
(1) entering into or acquiring (directly or indirectly) any commitment or investment with a view to transferring some or all of it to others, or with a view to others investing in the same transaction; (2) sub-participation; and (3) any transaction described in the Glossary definition of originator. Underwriting includes underwriting that is not on a firm commitment basis. A commitment or investment includes an economic interest in some or all of it. This activity also includes the provision of services relating to such transactions. (13) Retail lending decisions Deciding whether, and on what terms, to lend to retail customers. Lending includes granting credit, leasing and hire (including finance leasing). (14) Wholesale lending decisions Deciding whether, and on what terms, to lend to persons who are not retail customers. Lending includes granting credit, leasing and hire (including finance leasing). (15) Design and manufacturing of products intended for wholesale customers Wholesale customers mean persons who are not retail customers. (16) Design and manufacture of products intended for retail customers (17) Production and distribution of marketing materials and communications This includes financial promotions. (18) Customer service This means dealing with clients after the point of sale, including queries and fulfilment of client requests.

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(19) Customer complaints handling This includes the firm’s compliance with DISP. It also includes:
(1) any similar procedures relating to activities that do not come under the jurisdiction of the Financial Ombudsman Service; (2) activities that take place outside the UK; and (3) activities that are not subject to any ombudsman service. (20) Collection and recovering amounts owed to a firm by its customers Dealing with customers in arrears ‘Customer’ means any person falling into any of the definitions of client in the Glossary so far as they apply to the FCA’s Handbook. The definition is extended to cover all services provided by the firm and not just those that are provided in the course of carrying on a regulated activity or an ancillary service. (21) Middle office This means risk management and controls in relation to, and accounting for, transactions in securities or derivatives. (22) The firm’s information technology This includes cybersecurity. (23) Business continuity planning This If means the functions described in SYSC 4.1.6R and SYSC 4.1.7R (Business continuity) apply to the firm, this includes the systems and policies used to comply with those rules. This business area of function includes operational continuity, resilience and strategy. (24) Human resources This includes recruitment, training and competence and performance monitoring. (25) Incentive schemes for the firm’s staff This is not limited to schemes based on sales. (26) Contributing input data to a BMR benchmark administrator (other than an
Annex II benchmark administrator)
(27) Administering a benchmark
(28) Administration of insurance This means the activity described in SYSC 27.7.5G(1)(k) (examples of what the significant

FCA 2018/XX management FCA certification function can cover). (29) Issuing commitments This means the activity described in SYSC 27.7.5G(1)(i) (examples of what the significant management FCA certification function can cover). (30) Processing This means the activity described in SYSC 27.7.5G(1)(j) (examples of what the significant management FCA certification function can cover). (31) Outsourcing, procurement and vendor management Management of services shared with other group members (32) Internal operations Note (1): The purpose of this annex is explained in SYSC 4.5 (Management responsibilities maps for UK relevant authorised persons) SYSC 25.7 (Guidance about SYSC 25 Annex 1G) and SYSC 26.11.2G. This annex is also referred to in SYSC 4.6 (Management responsibilities maps for non-UK relevant authorised persons) and SYSC 4.8 (Senior management responsibilities for third-country relevant authorised persons: allocation of responsibilities) (see SYSC 4.6.14 and SYSC 4.8.35). Note (2): A firm does not have to use the split of example activities in this annex for the purposes in Note (1). If a firm does decide to use it, it may the firm should adapt it to suit its the firm’s management arrangements better. For example, a firm may find the split of activities into retail and wholesale activities unsuitable. If so, the firm might:
(a) treat retail and wholesale activities together; or (b) use its own definition of retail and wholesale activities. 26 Senior managers and certification regime: Overall and local responsibility
26.1 Application
Main application rules
26.1.1 R This chapter applies to:
(1) an SMCR banking firm; and

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(2) a Solvency II firm (including a large non-directive insurer) but excluding:
(a) an insurance special purpose vehicle; and (b) a firm in SYSC 23 Annex 1 4.2R (firms in run-off); except to the extent that this chapter applies a narrower scope to a particular provision. 26.1.2 4.8.4 R SYSC 4.8 This chapter is not limited to regulated activities or other specific types of activities. Exclusions
26.1.3 R This chapter does not apply to an EEA SMCR firm.
Territorial scope
26.1.4
4.8.3
R There is no territorial limitation on the application of SYSC 4.8 this chapter, save as set out in SYSC 26.1.5R. 26.1.5 4.8.2 R This section relates When this chapter applies to the activities of a thirdcountry relevant authorised person’s an overseas SMCR firm, it applies in relation to the firm’s branch in the United Kingdom.
26.1.6 R Unless the context requires otherwise, the terms in the first column of the
table in SYSC 26.1.7R are modified as described in the second column of
that table in relation to an overseas SMCR firm.
26.1.7 R Table: Application of this chapter to a third-country SMCR firm
Reference in this
chapter
Modification firm treated as a reference to the branch governing body (a) treated as a reference to the branch’s governing body; (b) the Glossary definition of this term is adjusted so as to refer to the branch rather than the firm as a whole group treated as including the rest of the firm chief executive branch manager or the person performing the PRA’s Head of

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Overseas Branch designated senior management function
26.2 Purpose
26.2.1
4.8.5
G The purpose of this section chapter is to ensure, together with the equivalent PRA requirements and the requirements about FCA-prescribed senior management responsibilities in SYSC 24 (Senior managers and certification regime: Allocation of prescribed responsibilities), that:
(1) an SMF manager is responsible and accountable for every area of a branch’s firm’s activities; (2) the allocation of responsibilities is done systematically and explicitly; and (3) the process of allocation of responsibilities under this chapter covers every part of a firm’s activities, business areas and management functions (subject to the exclusions in SYSC 26.4 (Exclusions) without any gaps in what is allocated in this process.
26.2.2 G The purpose of this chapter is not primarily to ensure that formal
responsibility for everything a firm does is allocated amongst its senior management. Even without the requirements of this chapter, responsibilities that have not been allocated explicitly would fall to the chief executive by default. However, one of the purposes of this chapter is to avoid responsibilities being allocated by implication or by default.
26.2.3 G (1) The allocation of responsibilities under this chapter does not replace
the responsibilities of the chief executive.
(2) If a firm allocates responsibilities under this chapter to an SMF manager other than the chief executive, the chief executive will be responsible for managing that person’s performance of those responsibilities in the same way that the chief executive manages that person’s other responsibilities. (3) A firm may allocate responsibilities under this chapter to the chief executive.
26.3 Main rules
26.3.1
4.7.8(1)
R A UK SMCR firm must ensure that, at all times, one or more of its SMF managers have overall responsibility for each of the activities, business areas and management functions of the firm.
26.3.2 R (1) A An overseas SMCR firm must ensure that, at all times, one or more
of its SMF managers has overall responsibility (subject to the

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4.8.10(1) branch’s governing body) for each of the activities, business areas and management functions of the branch that are under the management of the branch’s governing body. 4.8.10(2) (2) A An overseas SMCR firm must ensure that, at all times, one or more of its SMF managers has responsibility for each of the activities, business areas and management functions of the branch not covered by (1). 4.8.10(3) (3) An SMF manager in (2) must be directly involved in the management of the activity, business area or management function for which they have responsibility under (2). 26.3.3 4.8.10(4) R An SMF manager who has responsibility for an activity, business area or management function under (1) or (2) this section:
(1) (in the case of a UK SMCR firm) has “overall responsibility”; (2) (in the case of an overseas SMCR firm) has “local responsibility”; for that activity, business area or management function. 26.3.4 4.7.8(3) R A firm must make the allocations of responsibilities in this rule chapter in such a way that it is clear who has which of those responsibilities.
26.4 Exclusions
Exclusions where other requirements apply
26.4.1 R SYSC 26.3 (Main rules) does not require a firm to ensure that SMF managers
have local or overall responsibility for any activity, business area or management function that is included in an FCA-prescribed senior management responsibility that applies to the firm. 26.4.2 4.7.8(2) R This rule SYSC 26.3 (Main rules) does not require a firm to ensure that SMF managers have local or overall responsibility for any activity, business area or management function that is:
(a) included in an FCA-prescribed senior management responsibility; or (1) (b) included in an a PRA-prescribed senior management responsibility that applies to the firm; or (2) (c) managed (as part of the PRA-designated senior management function concerned) by any of the firm’s SMF managers approved to perform any of the following PRA-designated senior management functions for the firm:

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(a)
(i) the Chief Finance function;
(b)
(ii) the Chief Risk function;
(c)
(iii) the Head of Internal Audit function; or (d) (iv) the Head of Key Business Area function; or (e) the Chief Operations function; or (f) (v) the Group Entity Senior Manager function or the Group Entity Senior Insurance Manager function. Exclusion of the governing body and non-executive directors 26.4.3 4.8.10(6) R This rule SYSC 26.3 (Main rules) does not require a firm to allocate overall or local responsibility for the running of the branch’s firm’s governing body. 26.4.4 4.8.13(2) G This SYSC 26.4.3R means that a person does not have overall or local responsibility for a function under SYSC 4.8.10R this chapter just by being a member of a branch’s firm’s governing body or equivalent. 26.4.5 4.7.18 G (1) A person who just provides oversight of a function does not have overall or local responsibility for that function under SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions) this chapter. (2) Paragraph (1) and SYSC 4.7.17G SYSC 26.4.4G mean that a nonexecutive director acting as such does not have overall or local responsibility for a function under SYSC 4.7.8R SYSC 26.3 or perform the other overall responsibility function or the other local responsibility function. (3) Paragraph (1) and SYSC 4.7.17G SYSC 26.4.4G mean that a nonexecutive director:
(a) providing oversight of a function; or (b) being responsible for the independence of a function; does not have overall or local responsibility for that function under SYSC 4.7.8R this chapter or perform the other overall responsibility function or the other local responsibility function. Exclusion where the 12-week rule applies

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26.4.6 R (1) This rule applies where:
(a) a firm appoints someone to perform a function in order to provide cover as described in SUP 10C.3.13R(1) (The 12- week rule) or the PRA equivalent; and (b) the firm has allocated any responsibilities (the “Responsibilities”) under SYSC 26.3 (Main rules) to the SMF manager (the absent manager) who is absent as described in SUP 10C.3.13R(2) or the PRA equivalent. (2) While the disapplication of the designated senior management function provided for in SUP 10C.3.13R or the PRA equivalent is still in force the firm may allocate the Responsibilities to an employee who is not an SMF manager. (3) For the purposes of this rule, the PRA equivalent of:
(a) SUP 10C.3.13R is the following parts of the PRA Rulebook:
(i) rule 2.3 in the “Senior Management Functions”; (ii) rule 2.4 in the “Insurance - Senior Management Functions”; and (iii) rule 2.4 in the “Large Non-Solvency II Firms – Senior Management Functions”. (b) SUP 10C.3.13R(1) and (2) is the following parts of the PRA Rulebook:
(i) rules 2.3(1) and (2) in the “Senior Management Functions”; (ii) rules 2.4(1) and (2) in the “Insurance - Senior Management Functions”; and (iii) rules 2.4(1) and (2) in the “Large Non-Solvency II Firms – Senior Management Functions”.
26.4.7 G A firm need not allocate the Responsibilities referred to in SYSC
26.4.6R(1)(b) to the person who is providing cover for the absent SMF manager.
26.4.8 G SYSC 26.4.6R and SUP 10C.3.13R apply to a person performing the other
overall responsibility function or the other local responsibility function as well as to a person performing one of the other designated senior management functions.

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26.5 Guidance on territorial scope
Allocation of responsibilities and territorial scope
26.5.1 G SYSC 26.1.4R (territorial scope) means that a firm should allocate overall
responsibilities under this chapter so that they cover activities, transactions, business areas and functions that are located or take place wholly or partly outside, as well as ones in, the United Kingdom. Allocation of responsibility for transactions in branches
26.5.2 G There is an exception to SYSC 26.5.1G for an overseas SMCR firm. This is
that SYSC 26.1.5R limits this chapter to the activities of its UK branch. 26.5.3 4.8.30 G (1) It is common for a branch to carry out only part of a transaction. For instance, a transaction may be booked in a branch but negotiated and arranged elsewhere or vice versa. (2) When allocating responsibility to an SMF manager for activities in relation to transactions under SYSC 4.8.10R SYSC 26.3 (Main rules), a firm should not exclude a transaction which is arranged, booked or negotiated in the branch merely because other elements of the transaction occur outside the United Kingdom.
26.6 Meaning of local and overall responsibility: General
UK firms
26.6.1 G The meaning in practice of overall responsibility for a function of a UK
SMCR firm depends on whether that function is under the management of the firm’s governing body or not.
26.6.2 G (1) Certain EU legislation requires the governing body of a firm to have
ultimate responsibility for, and the prime and leading role in, managing the firm. (2) In particular this is the case under:
(a) article 88 of the CRD (Governance arrangements); (b) article 9 of MiFID (management body); and (c) article 40 of the Solvency II Directive (Responsibility of the administrative, management or supervisory body). (3) This means that the governing body of a UK SMCR firm subject to these requirements will manage the conduct of the whole of the business of the firm. In turn that means that the parts of this chapter

FCA 2018/XX dealing with a function that is not managed by the firm’s governing body will not be relevant to it.
26.6.3 G The FCA recognises that for some UK SMCR firms not subject to the
requirements in SYSC 26.6.2G, some activities, business areas and functions of a firm may not be under the management of its governing body. This may be the case where, for example:
(1) the firm does not have a governing body; or (2) the firm’s shareholders play a key role in managing it through, for example, a group management committee. Branches of overseas firms 26.6.4 4.8.11(2) G (1) SYSC 4.8.10R(1) SYSC 26.3.2R(1) refers to the activities, business areas and management functions of the branch that are under the management of the branch’s governing body. However, the FCA recognises that for some branches, some activities, business areas and functions of the branches branches may not be under the management of the branch’s governing body. This may be the case where the branch does not have its own governing body or where it is organised in such a way that certain functions are under the management of a person or body outside the branch’s management structure. In those circumstances, it would not be appropriate to require the firm to allocate overall responsibility for that matter to a person who is part of the management structure of the branch. 4.8.11(3) (2) The requirements to allocate responsibility for activities, business areas and functions of a branch under SYSC 4.8.10R(1) and (2) SYSC 26.3.2R(1) and (2) respectively are intended to allow for the difference described in (2) (1). In particular:
(a) SYSC 4.8.10R(1) SYSC 26.3.2R(1) is intended to cater for the situation where a particular activity, business area or function of the branch is under the management of the branch’s governing body. In that situation, the firm should allocate overall responsibility for that matter under SYSC 4.8.10R(1) SYSC 26.3.2R(1); and (b) SYSC 4.8.10R(2) SYSC 26.3.2R(2) is intended to cater for the situation where a particular activity, business area or function of the branch is not under the management of branch’s governing body. In that situation, the firm should allocate responsibility for that matter under SYSC 4.8.10R(2) SYSC 26.3.2R(2). Further guidance

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26.6.5 G SYSC 26.7 gives guidance on the effect of SYSC 26.3 (Main rules) when a
function is under the governing body’s management. SYSC 26.8 gives guidance on the effect of SYSC 26.3 when the function is not. Day-to-day or ultimate control 26.6.6 4.8.12 G SYSC 4.8.10R(4) states that a person who has responsibility for an activity, business area or management function under SYSC 4.8.10R(1) or (2) will have local responsibility for that matter. Having overall or local responsibility under this chapter for a matter does not necessarily mean:
(1) having ultimate authority over it; or (2) having day-to-day management control of that function. 26.6.7 4.7.12 G Having overall responsibility for a matter does not mean having ultimate authority over it. The In particular, the ultimate decision-making body of a firm many UK SMCR firms is its their governing body, acting collectively.
26.7 Meaning of local and overall responsibility: Reporting to the governing body
26.7.1 G This section gives guidance on what overall and local responsibility for a
function means when the governing body manages the function in question under SYSC 26.3 (Main rules). 26.7.2 4.7.11 G When SYSC 4.7 this chapter refers to a person having overall or local responsibility for a function as described in SYSC 26.7.1G, it means a person who has:
(1) ultimate responsibility (under the governing body and the chief executive) for managing or supervising that function; and (2) primary and direct responsibility for:
(a) briefing and reporting to the governing body about that function; and (b) putting matters for decision about that function to the governing body. 26.7.3 4.8.17 G In general, the FCA expects that a person to whom overall responsibility for a function is allocated under SYSC 4.8.10R(1) as described in SYSC 26.7.1G will be the most senior employee or officer responsible for managing or supervising that function under the management of the branch’s governing body. 26.7.4 4.7.13 G (1) A person with overall or local responsibility for a matter will either be a member of the governing body or will report directly to the governing body for that matter.

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(2) For example, a firm appoints A to be head of sales. A is not on the governing body. A reports to an executive director (B) and B reports to the governing body about the sales function. In this example B, rather than A, has overall responsibility for sales. 26.7.5 4.7.14 G (1) A person who reports to another, or is subject to oversight by another, may still have overall or local responsibility for a function. (2) For example, a head of compliance may report direct to the governing body but be subject to performance appraisal by the chief executive chief executive. In this example, the head of compliance will still have overall responsibility for compliance. (3) If a person (A):
(a) reports directly to the firm’s governing body about a particular matter; but (b) is not a member of the governing body; and (c) reports to a member of the governing body (B) about that matter, who also reports to the governing body about that matter; B has overall or local responsibility for that matter. (4) If:
(a) a person (A) reports directly to the firm’s governing body about a particular matter; (b) A also reports to another person (B) about that matter; (c) neither A nor B is a member of the governing body; and (d) B also reports directly to the firm’s governing body about that matter; B has overall responsibility for that matter. (5) A member of the governing body who reports to the chief executive chief executive may still have overall or local responsibility for a function. (6) If:
(a) a person (A) reports directly to the firm’s governing body about a particular matter; and

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(b) A’s function is subject to oversight by a non-executive director (B) or by a committee of the firm’s governing body chaired by B; A (not B) has overall or local responsibility for that matter. 26.7.6 4.8.18 G A person may have overall local responsibility for a function under SYSC 4.8.10R(1) for a branch of an overseas SMCR firm even though that person also reports to a person outside the branch.
26.8 Meaning of local and overall responsibility: Not reporting to the governing
body
Scope of this section
26.8.1
4.8.20(1)
G SYSC 4.8.10R(2) This section relates to the allocation of overall or local responsibility for any activities, business areas and functions of the branch firm which are not under the management of the branch’s its governing body (see SYSC 26.3 (Main rules)). Branches: Responsibility held outside the management structure of branch 26.8.2 4.8.20(3) G A person having local responsibility for a function under SYSC 4.8.10R(2) for a branch does not need to be part of the management structure of the branch in order to have local responsibility for the function. Branches: Setting overall strategy for a branch 26.8.3 4.8.27 G (1) Generally, where a an overseas SMCR firm allocates responsibility under SYSC 4.8.10R as described in SYSC 26.8.1G to one of the firm’s SMF managers who is not based in the branch the FCA would expect:
(a) that the responsibility would not be allocated to a manager whose responsibilities for the branch are limited to setting overall strategy for the branch; and (b) that, instead, the firm would allocate it to a manager who is the most senior person responsible for implementing the strategy for the branch. (2) See SUP 10C.1.5AG for more about how the difference between strategic and implementing responsibilities affects the FCA senior management managers regime for approved persons in third-country relevant authorised persons overseas SMCR firms. Branches: Seniority

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26.8.4
4.8.26
G (1) In some cases, a person who has local responsibility for a particular function may be very senior within the firm as a whole. (2) For instance, in some branches, an individual with local responsibility for a function may also be the head of the firm’s Europe and Middle East division for a business line and may be more senior within the firm as a whole than the person performing the PRA’s Head of Overseas Branch designated senior management function. UK firms
26.8.5 G Having overall responsibility for a function as described in SYSC 26.8.1G
for a UK SMCR firm means being the most senior employee or officer (under the chief executive if there is one) responsible for managing or supervising that function.
26.9 Who functions should be allocated to
Seniority
26.9.1
4.7.21(2)
G However, the The FCA expects that anyone who has overall or local responsibility for a matter:
(1)
(a) will be sufficiently senior and credible; and (2) (b) will have sufficient resources and authority; to be able to exercise his their management and oversight responsibilities effectively. 26.9.2 4.8.22 G (1) The FCA would not consider it unusual if a person who has overall or local responsibility for a particular function was not a member of the branch’s firm’s governing body or equivalent. (2) For example, in some branches firms, the head of compliance may report directly to the branch’s firm’s governing body even though the head of compliance is not a member of the governing body.
26.9.3 G Other parts of this chapter dealing with seniority are:
(1) SYSC 26.7.3G (seniority of someone with overall responsibility for a function under the management of a firm’s governing body);

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(2) SYSC 26.8.3G and SYSC 26.8.4G (seniority of someone from elsewhere in the firm having local responsibility in a branch); and (3) SYSC 26.8.5G (seniority of someone within a UK SMCR firm with overall responsibility for a function not under the management of a firm’s governing body). Not giving too much responsibility to one individual 26.9.4 4.7.23(1) G (1) It will be common for a small non-complex firm to divide overall or local responsibility for its activities under the management of its governing body between members of its governing body and not to assign overall or local responsibility for any activity to someone who is not a member. 4.7.23(2) (2) However, when deciding how to divide up overall or local responsibility for its activities, a firm should avoid assigning such a wide range of responsibilities to a particular person so that the person is not able to carry out those responsibilities effectively. 4.7.23(3) (3) Therefore, in a large or complex firm, the FCA expects overall or local responsibility for some functions to be assigned to persons in the layer of management below the governing body. Anyone in that layer having overall or local responsibility for an activity will be performing a designated senior management function. 26.9.5 4.8.28(5) G Paragraph (2) SYSC 26.9.4G(2) also applies to allocating responsibility for functions that are not under the management of the firm’s or branch’s governing body. Dividing and sharing management functions between different people
26.9.6 G The following provisions of SYSC 24.3 (Who prescribed responsibilities
should be allocated to) also apply to allocations under this chapter so far as those provisions deal sharing responsibilities:
(1) SYSC 24.3.8G (responsibilities should generally not be shared); (2) SYSC 24.3.9G (when responsibilities may be shared); and (3) SYSC 24.3.11G (statements of responsibilities);
26.9.7 G (1) The material in SYSC 24.3 (Who prescribed responsibilities should
be allocated to) about splitting of responsibilities is not directly relevant to this chapter. This is because SYSC 24 deals with functions that have been defined in the FCA Handbook whereas this chapter does not define the areas into which a firm’s activities should be divided when allocating responsibilities to its SMF managers. (2) However SYSC 24.3.10G (responsibilities should be grouped together appropriately) is also relevant for deciding whether

FCA 2018/XX responsibility for a particular set of matters should be allocated to one SMF manager or allocated between several.
26.10 Group management arrangements and outsourcing
26.10.1
4.7.31
G (1) SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions) This chapter requires overall or local responsibility for various aspects of a firm’s affairs to be allocated to an SMF manager. (2) This requirement does not prevent a firm from relying on an employee of a company in the same group to perform the function. (3) A firm has two main choices about how to fit such arrangements into the senior management managers regime for relevant authorised persons SMCR firms. (a) The group employee is appointed by the firm’s firm (usually by its governing body if it has one) to perform the function. This means that the firm will have entered into an arrangement with that person. As explained in SUP 10C.3.9G, an arrangement with the firm is one of the factors that makes the senior management managers regime for relevant authorised persons SMCR firms apply. The result is that the group official will be performing a controlled function and will need to be approved as an SMF manager. (b) The firm appoints someone (A) to oversee supervise what the group employee does (so far as it concerns the firm) and to take overall allocates responsibility for the function to A, leaving day-to-day activities to the group employee. A will need to be approved as an SMF manager. 26.10.2 4.7.34 G SYSC 26.10.1G and SYSC 4.7.33G also apply applies to a firm that outsources functions to a third party and is relying on an individual from the outsourced services provider to carry out the functions in those paragraphs. 26.10.3 4.7.32 G (1) SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions) This chapter does not cover responsibility for an aspect of a firm’s affairs managed by an individual approved to perform the Group Entity Senior Manager or the Group Entity Senior Insurance Manager PRAdesignated senior management function (see SYSC 26.4.2R (Exclusions where other requirements apply)). (2) Where a responsibility is held by someone approved to perform the Group Entity Senior Manager one of those PRA-designated senior management function functions for the firm, there is no need to

FCA 2018/XX appoint that person under this chapter and apply the arrangements in SYSC 26.10.1G. (3) (a) The statement of responsibilities for the individual performing the Group Entity Senior Manager PRAdesignated senior management function; and (b) the firm’s management responsibilities map; should clearly show what responsibilities are held by that individual.
26.11 Link between this chapter and other parts of the senior managers regime
Link between the designated senior management regime functions and this section
chapter
26.11.1
4.7.36(1)
G (1) Having overall or local responsibility for an activity under SYSC 4.7.8R this chapter requires approval as an SMF manager. This is because a person who has overall or local responsibility for an activity will be:
(a) performing the other overall responsibility function or the other local responsibility function; or (b) approved to perform another designated senior management function. 4.7.36(2) (2) The other overall responsibility function applies because this is the effect of SUP 10C.7.1R (definition of other overall responsibility function). 4.7.36(3) (3) SUP 10C.7.1R(2) says that the other overall responsibility function does not apply to a person who is approved to perform another designated senior management function. 4.8.33(2) (4) The other local responsibility function applies because this is the effect of SUP 10C.8.1R (Definition of the other local responsibility function (SMF22)).
4.8.34 (5) SUP 10C.8.1R(2) says that the other local responsibility function
does not apply to a person who is approved to perform another designated senior management function in relation to the branch. Link between SYSC 25 Annex 1G and this section chapter 26.11.2 4.7.37 G (1) The purpose of SYSC 25 Annex 1G (The main Examples of the business activities and functions of a relevant authorised person an SMCR firm) is to help a firm to prepare its management responsibilities map (see SYSC 25.7.2G).

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(2) There is no direct link between SYSC 25 Annex 1G and this section
chapter.
(3) However, a firm may find SYSC 25 Annex 1G useful as a checklist prompt to help it make sure that it has not failed to allocate overall or local responsibility under SYSC 4.7.8R this chapter for a particular activity of the firm. (4) If a firm uses SYSC 25 Annex 1G to help it check whether it has allocated as a prompt when it allocates overall or local responsibility as described in (3), it should bear in mind that it is not comprehensive (see SYSC 25.7.8G). 26.11.3 4.7.38 G SYSC 4.7.26G (a firm should normally allocate responsibility for particular areas to a single SMF manager) does not mean that the The FCA expects does not require:
(1) there to be a separate person with overall responsibility for each individual business area in SYSC 25 Annex 1G (The main Examples of the business activities and functions of a relevant authorised person an SMCR firm); or (2) a firm to allocate functions under this chapter using the same split of business areas as in SYSC 25 Annex 1G. 27 Senior managers and certification regime: Certification regime
27.1 Application and purpose
Application
27.1.1
5.2.1
R This section chapter applies to a relevant authorised person an SMCR firm. 27.1.2 5.2.2 G This section chapter is also relevant to employees of relevant authorised persons SMCR firms performing functions specified as FCA-specified significant-harm FCA certification functions. Purpose 27.1.3 5.2.3 G (1) This section chapter is about the FCA’s certification regime. (2) Under this regime, a firm should ensure that its employees only perform an FCA-specified significant-harm FCA certification function if they have a certificate issued by that firm to perform that function.

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(3) The purpose of this section chapter is to specify ‘FCA-specified significant-harm FCA certification functions’ and to give guidance on the FCA’s certification regime.
27.2 Requirements of the certification regime
General
27.2.1 G Most of the requirements of the certification regime are in the Act. This
section summarises and gives guidance on them.
27.2.2
5.2.5(2)
G (2) SYSC TP 5 explains how and SYSC TP 7 contain transitional material about the certification regime applies before then. This includes material about the fact that:
(1) the requirement in SYSC 27.2.3G did not come into force at the same time as the rest of the certification regime; and (2) the certification regime came into force at different times for different types of firm. General Basic requirements 27.2.3 5.2.4 G Under section 63E(1) of the Act, a firm must take reasonable care to ensure that no employee of the firm performs an FCA-specified significant-harm FCA certification function under an arrangement entered into by the firm in relation to the carrying on by that firm of a regulated activity, unless the employee has a valid certificate issued by that firm to perform the function to which the certificate relates. Fitness to act 27.2.4 5.2.6 G Under section 63F of the Act, a firm may issue a certificate to a person only if the firm is satisfied that the person is a fit and proper person to perform the FCA-specified significant-harm FCA certification function to which the certificate relates. 27.2.5 5.2.7 G Under section 63F of the Act, in assessing if a person is fit and proper to perform an FCA-specified significant-harm FCA certification function, a firm must have regard, in particular, to whether that person:
(1) has obtained a qualification;
(2) has undergone, or is undergoing, training; (3) possesses a level of competence; or (4) has the personal characteristics,

FCA 2018/XX required by general rules made by the FCA.
27.2.6
5.2.8
G FIT 1.3 provides guidance to firms about the criteria that the FCA would expect the firm to consider in assessing if a person is fit and proper to perform an FCA-specified significant-harm FCA certification function. 27.2.7 5.2.9 G SYSC 22 (Regulatory references) deals with obtaining references from a previous employer when a firm is planning to appoint someone to perform a specified significant-harm certification function as part of its assessment of whether that person is fit and proper. 27.2.8 5.2.10 G (1) A person seconded from a contractor may fall into the certification regime. The material in SYSC 27.4.1G is relevant to when this is the case. (2) In deciding if whether a person seconded from a contractor is fit and proper, the firm may take into account information and references from the contractor. (3) In deciding how much reliance to put on the contractor, the firm should take into account:
(a) the familiarity of the contractor with the obligations of firms under SYSC 5.2 this chapter, the corresponding PRA requirements and the requirements of the Act described in this section chapter; (b) whether any reference directly addresses the criteria in FIT; and (c) the degree to which the firm believes it can rely on the contractor’s judgement about the secondee’s fitness and properness and the grounds for that belief. Issuing and renewing certificates 27.2.9 5.2.11 G Under section 63F of the Act, a certificate issued by a firm to a person must:
(1) state that the firm is satisfied that the person is fit and proper to perform the function to which the certificate relates; and (2) set out the aspects of the affairs of the firm in which the person will be involved in performing the function. 27.2.10 5.2.12 G (1) The Act says that a certificate is valid for a period of 12 months, beginning with the day on which it is issued. (2) The FCA believes that the Act allows a firm to draft a certificate to expire after fewer than 12 months. The FCA interprets the Act in this way because to require a firm to make a certificate last longer than

FCA 2018/XX the firm thinks best is likely to make it harder for the firm to ensure the fitness of its certification employees. That would undermine the purpose of the certification regime in the Act. (3) A certificate cannot be drafted to last more than 12 months. 27.2.11 5.2.13 G Under section 63F of the Act, if, after having considered if a person is fit and proper to perform an FCA-specified significant-harm FCA certification function, a firm decides not to issue a certificate to that person, the firm must give the person a notice in writing stating:
(1) what steps (if any) the firm proposes to take in relation to the person as a result of the decision; and (2) the reasons for proposing to take those steps. 27.2.12 5.2.14 G If, after having considered whether a person is fit and proper to perform an FCA-specified significant-harm FCA certification function, a firm decides not to issue a certificate to that person, it should consider if the circumstances warrant making a notification to the FCA for a breach of the rules in COCON pursuant to SUP 15.3.11R (Breaches of rules and other requirements in or under the Act or the CCA). 27.2.13 5.2.15 G Under section 63F of the Act, a firm must maintain a record of every employee who has a valid certificate issued by it. 27.2.14 5.2.16(1) G (1) The FCA’s approach to specifying FCA-specified significant-harm functions has the effect that several elements of a person’s job may involve an FCA-specified significant-harm function or that a person may A firm need not issue multiple certificates for one of its employees even if they perform several FCA-specified significantharm FCA certification functions as part of the same job. (2) Similarly, a firm need not issue multiple certificates for one of its employees who performs an FCA certification function that is made up of a number of different functions. (3) An example of an FCA certification function in (2) is the material risk taker FCA certification function described in SYSC 27.8.14R. SYSC 27.8.14R says that each function carried out by someone who is covered by that rule is an FCA certification function. 5.2.16(2) (4) However, this does not mean that the FCA expects a firm to issue multiple certificates to each certification employee. Rather than having to issue multiple certificates, in a certificate, a firm may, in a certificate, describe the employee’s functions that involve an FCAspecified significant-harm FCA certification function in broad terms, and without listing all the activities that the function may involve. (5) A firm should assess whether the employee is fit and proper to perform all aspects of the employee’s functions that involve an FCA-

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5.2.16(3) specified significant-harm FCA certification function as described by a certificate. 27.2.15 5.2.17(1) G (1) In cases where a certification employee’s role changes to involve a new function involving an FCA-specified significant-harm FCA certification function part way through the twelve 12-month period for which their certificate is valid, and that new function may have different requirements relating to: the firm may need to reissue the certificate. (2) If that new function has different requirements relating to:
(a) personal characteristics;
(b) the level of competence, knowledge and experience; (c) qualifications; or (d) training; the FCA would expect the firm to assess whether the employee is fit and proper to perform that new function before they start it. 5.2.17(2) (3) A In such a case, the firm should not wait until the point of annual reassessment to determine whether the employee is fit and proper for the new function. 5.2.17(3) (4) Paragraphs (1) and (2) also apply if a certification employee’s role changes to involve a new FCA-specified significant-harm function
part way through the twelve-month period. A firm may not need to
issue a new certificate if:
(a) applying the conditions in paragraph (1) are met (2), the firm concludes that no re-assessment is required; and (b) the certificate is drafted broadly enough to cover the new FCA-specified significant-harm FCA certification function. (5) Paragraphs (1) to (4) also apply if a certification employee’s role changes part way through the 12-month period without the new role involving a new FCA certification function. 27.2.16 5.2.17A G (1) This paragraph gives further guidance on the flexibility a firm has in drafting its certificates. (2) A certificate may cover functions that a certification employee is not currently performing, as long as the firm has assessed the employee’s fitness for these additional functions. This is subject to (3). (3) When a firm is deciding what a certificate can cover beyond the functions that the certification employee is currently performing, it should take the factors in SYSC 5.2.17G(1) SYSC 27.2.15G(2) into

FCA 2018/XX account. A certificate should not normally cover an additional function if SYSC 5.2.17G(1) SYSC 27.2.15G(2) would require the firm to consider the employee’s fitness before allowing them to perform it. (4) A firm may, if it wishes, restrict a certificate to the functions that the certification employee is currently performing rather than drafting the certificate more widely as described in (2) and (3). (5) SYSC 27.2.10G deals with the flexibility a firm has in choosing the period for which a certificate lasts.
27.3 Territorial scope
Scope: territorial scope
27.3.1
5.2.19
R (1) A function is an FCA-specified significant-harm FCA certification function for a UK relevant authorised person UK SMCR firm only to the extent:
(a) it is performed by a person from an establishment of the firm (or its appointed representative) in the United Kingdom; or (b) the person performing that function is dealing with a client of the firm in the United Kingdom from an establishment of the firm (or its appointed representative) overseas. (2) A function is an FCA-specified significant-harm FCA certification function for a non-UK relevant authorised person an overseas SMCR firm, only to the extent that it is performed by a person from an establishment of the firm (or its appointed representative) in the United Kingdom. (3) Paragraph (1) does not apply to FCA-specified significant-harm FCA certification function (7) (6) (material risk takers). For a UK relevant authorised person SMCR firm, FCA-specified significant-harm FCA certification function (7) (6) applies without any territorial limitation. 27.3.2 5.2.20 G The FCA interprets the phrase ‘dealing with’ in SYSC 27.3.1R as including having contact with clients and extending beyond ‘dealing’ as used in the phrase ‘dealing in investments’. ‘Dealing in’ is used in Schedule 2 to the Act to describe in general terms the regulated activities which are specified in
Part II of the Regulated Activities Order.
27.3.3
5.2.20A
G The FCA interprets the phrase ‘a client of the firm in the United Kingdom’ in SYSC 27.3.1R as referring to:
(1) for a client which is a body corporate, its office or branch in the United Kingdom; or

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(2) for a client who is an individual, a client who is in the United Kingdom at the time of the dealing.
27.4 General material about the scope of the certification regime
Scope: employees Employees
27.4.1
5.2.21
G (1) The certification regime only applies to an employee. (2) This definition includes a person who:
(a) personally provides, or is under an obligation personally to provide, services to the firm in question under an arrangement made between the firm and the person providing the services or another person; and (b) is subject to (or to the right of) supervision, direction or control by the firm as to the manner in which those services are provided. 27.4.2 5.2.22 G (1) A person who works for an appointed representative of a firm may fall into the certification regime. In practice, however, they may not meet the conditions for the certification regime to apply. (2) One condition for the certification regime to apply to a person is that the person performs a specified significant-harm certification function under an arrangement entered into by the firm (see SYSC 27.2.3G). However, unlike the equivalent parts of the Act for the approved persons regime, the Act does not say that the certification regime applies if the function is performed under an arrangement entered into by the employee with a contractor of the firm instead of the firm. (3) The certification regime only applies if the person concerned is an employee. This is defined in SYSC 27.4.1G. In many cases, a person working for an appointed representative will not fall into this definition as they may not:
(a) provide services to the firm; or
(b) be subject to (or to the right of) supervision, direction or control by the firm. (4) If none of these limitations on the scope of the certification regime apply, a person working for an appointed representative will be subject to the certification regime, as long as the other conditions in this section chapter are met.

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Scope: effect Effect of PRA requirements 27.4.3 5.2.23 G A specified significant-harm function function does not cease to be an FCAspecified significant-harm FCA certification function if the PRA also specifies that function as a specified significant-harm is also a PRA certification function.
27.5 Exclusions for emergency and temporary appointments
Scope: emergency Emergency appointments
27.5.1
5.2.27
R (1) If:
(a) a firm appoints an individual to perform a function which, but for this rule, would be an FCA-specified significant-harm FCA certification function; (b) the appointment is to provide cover for a certification employee whose absence is reasonably unforeseen; and (c) the appointment is for less than four weeks; then the performance by that individual of such function does not constitute an FCA-specified significant-harm FCA certification function. (2) This rule does not apply to FCA-specified significant-harm FCA certification function (5) (4) (functions requiring qualifications). 27.5.2 5.2.28 G SYSC 27.5.1R does not apply to FCA-specified significant-harm FCA certification function (5) (4) (functions requiring qualifications). Where there is an unforeseen absence of an employee performing a function for which there is a qualification requirement:
(1) the firm should take reasonable care to ensure that no employee of that firm performs that function without a valid certificate; and (2) the certificate should be issued before the person starts to perform the function. Scope: temporary Temporary UK role (the 30-day rule) 27.5.3 5.2.28A R (1) None of the FCA-specified significant-harm FCA certification functions extend to an individual (“P”) in relation to a firm if:
(a) P is based outside the United Kingdom for the firm; and

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(b) in a 12-month period, P spends no more than 30 days performing what would otherwise be an FCA-specified significant-harm FCA certification function for that firm within the territorial scope of this section chapter as described in SYSC 27.3.1R. (2) Paragraph (1) only applies to the extent that P is appropriately supervised by:
(a) one of the firm’s SMF managers; or
(b) one of the firm’s certification employees whose certificate covers the FCA-specified significant-harm FCA certification function that is to be disapplied under (1). (3) This rule does not apply to any FCA-specified significant-harm FCA certification function to the extent that it involves:
(a) giving advice or performing related activities in connection with pension transfers, pension conversions or pension optouts for retail clients; or (b) giving advice to a person to become, or continue or cease to be, a member of a particular Lloyd’s syndicate. (4) In the case of a UK relevant authorised person SMCR firm, this rule does not apply to FCA-specified significant-harm FCA certification function (7) (6) (material risk takers). 27.5.4 5.2.28B G SYSC 27 Annex 1G gives examples of how SYSC 27.5.3R works. 27.5.5 5.2.28C( 1) G The FCA would expect an individual from overseas using the temporary UK role rule in SYSC 27.5.3R to be accompanied on a visit to a customer in the United Kingdom. 27.5.6 5.2.28C( 2) G An individual benefiting from the temporary UK role rule in SYSC 27.5.3R may still be subject to the requirements of TC (Training and competence). However, TC 2.1.9R gives an exemption from certain qualification requirements in TC to an individual benefiting from the temporary UK role rule.
27.6 Other exclusions
Scope: exclusions Single Market Directives 27.6.1 5.2.24 G Under section 63E(7) of the Act, SYSC 5.2 this chapter does not apply to an arrangement which allows an employee to perform a function if the question of whether the employee is fit and proper to perform the function is reserved

FCA 2018/XX under any of the Single Market Directives or the auction regulation to an authority in a country or territory outside the United Kingdom. Insolvency 27.6.2 5.2.25 R This section chapter does not apply to a function performed by a person acting as:
(1) an insolvency practitioner under section 388 of the Insolvency Act 1986; (2) a nominee in relation to a voluntary arrangement under Part I (Company Voluntary Arrangements) of the Insolvency Act 1986; (3) an insolvency practitioner under article 3 of the Insolvency (Northern Ireland) Order 1989; or (4) a nominee in relation to a voluntary arrangement under Part II (Company Voluntary Arrangements) of the Insolvency (Northern Ireland) Order 1989. Non-executive directors 27.6.3 5.2.26 R A function performed by a non-executive director of a firm acting as such is not an FCA-specified significant-harm FCA certification function for that firm. Benchmarks
27.6.4 R This chapter does not apply to a firm in relation to benchmark activities.
27.6.5 G Some benchmark activities are within the certification regime under SYSC
TP 7.5 (Transitional provisions about benchmarks and the certification regime). Overall responsibility
27.6.6 R Performing any of the following is not an FCA certification function:
(1) a responsibility allocated to an SMF manager under SYSC 26.3 (Main rules); or (2) a responsibility allocated to someone under SYSC 26.4.6R (Exclusion where the 12-week rule applies).
27.7 Specification of functions
Scope: general General requirements

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27.7.1
5.2.18
R In accordance with section 63E of the Act (Certification of employees by relevant authorised persons), a function is an FCA-specified significantharm FCA certification function only if, in relation to the carrying on of a regulated activity by a firm, that function:
(1) is not a controlled function in relation to the carrying on of that regulated activity by that firm; and (2) will require the person performing it to be involved in one or more aspects of the firm’s affairs, so far as relating to that regulated activity. Scope: FCA-specified significant-harm FCA certification functions 27.7.2 5.2.29 R In accordance with section 63E(3) of the Act, the functions in the table in SYSC 27.7.3R are FCA-specified significant-harm FCA certification functions. 27.7.3 5.2.30 R Table: FCA-specified significant-harm FCA certification functions Function Where defined (1) CASS oversight SYSC 27.8.1R (3) (2) Proprietary trader SYSC 27.8.3R (4) (3) Significant management SYSC 27.8.4R (5) (4) Functions requiring qualifications SYSC 27.8.10R (6) (5) Managers of certification employees SYSC 27.8.13R (7) (6) Material risk takers SYSC 27.8.14R (8) (7) Client-dealing SYSC 27.8.18R (9) (8) Algorithmic trading SYSC 27.8.23R 27.7.4 5.2.31 G (1) If a function falls into more than one of the FCA-specified significant-harm FCA certification functions in the table in SYSC 27.7.3R, all of those FCA-specified significant-harm FCA certification functions apply to it. (2) For example, if a person’s job involves both FCA-specified significant-harm FCA certification function (5) (4) (functions

FCA 2018/XX requiring qualifications) and (7) (6) (material risk takers), the emergency appointments rule (SYSC 27.5.1R) does not apply to that job. (3) Another example is the rule about the territorial scope of this section (SYSC 27.3.1R)) for a UK relevant authorised person SMCR firm. For example, if a person’s job involves both FCA-specified significant-harm FCA certification function (5) (4) (functions requiring qualifications) and (7) (6) (material risk takers), the territorial restriction in that rule does not apply to that job. Instead, this section chapter applies without any territorial limitation. (4) The reason for (3) is that SYSC 5.2.19R(3)) SYSC 27.3.1R(3) says that there is no territorial limitation on FCA-specified significantharm FCA certification function (7) (6) for a UK relevant authorised person SMCR firm. As explained in (1), it does not matter that the job also involves FCA-specified significant-harm FCA certification function (5) (4), to which the territorial limitation does apply.
27.8 Definitions of the FCA certification functions
CASS oversight function
27.8.1
5.2.32
R (1) Each of the following is an FCA-specified significant-harm FCA certification function:
(a) in relation to a CASS medium firm and a CASS large firm (other than a CASS large debt management firm), the function of acting in the capacity of a person who is allocated the function in CASS 1A.3.1AR (oversight of operational effectiveness); (b) in relation to a CASS large debt management firm, the function of acting in the capacity of a person who is allocated the function in CASS 11.3.4R (oversight of operational effectiveness). (2) A function in (1) is not an FCA-specified significant-harm FCA certification function for that firm if it is performed by an SMF manager of that firm. 27.8.2 5.2.32A G SYSC 5.2.32R(1) SYSC 27.8.1R(1) only applies to a firm to the extent that CASS applies to that firm. Proprietary trader function

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27.8.3
5.2.34
R The function of acting as a proprietary trader whose activity involves, or might involve, a risk of significant harm to the firm or any of its customers is an FCA-specified significant-harm FCA certification function. Significant management function 27.8.4 5.2.35 R (1) The function of acting as a senior manager, with significant responsibility for a significant business unit, is an FCA-specified significant-harm FCA certification function. (2) For a non-UK relevant authorised person’s an overseas SMCR firm’s branch in the United Kingdom, the significant management function is limited to business units of the branch. 27.8.5 5.2.36 G A senior manager carrying on the significant management FCA-specified significant-harm FCA certification function under SYSC 27.8.4R could, for example, be:
(1) the head of a unit carrying on the activities of:
(a) retail banking;
(b) personal lending;
(c) corporate lending;
(d) salvage or loan recovery; or
(e) proprietary trading; or
(f) designated investment business;
(g) effecting contracts of insurance;
(h) credit-related regulated activity;
(i) making material decisions on the commitment of the firm’s financial resources, its financial commitments, its assets acquisitions, its liability management or its overall cash and capital planning; (j) processing confirmations, payments, settlements, insurance claims, client money and similar matters; (k) administration of contracts of insurance; (l) complaints handling; or (m) determining whether an applicant should be accepted for credit (including lending) and on what terms; or

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(2) a member of a committee (that is, a person who, together with others, has authority to commit the firm) making decisions in these functions.
27.8.6 G The examples in SYSC 27.8.5G are illustrative only. They are not intended
to be exhaustive.
27.8.7 G A business unit is not limited to one that carries on commercial activities
with customers and third parties or that earns revenue. A business unit can be an internal support department that has no contact with people outside the firm. It may include, for example, human resources, operations or information technology. 27.8.8 5.2.37 G For the purposes of the definition of the significant management FCAspecified significant-harm FCA certification function, the following additional factors about the firm should be considered:
(1) the size and significance of the firm’s business in the United Kingdom – for example, a firm carrying on designated investment business may have a large number of certification employees (for example, in excess of 100 individuals); or a firm carrying on general insurance business may have gross written premiums in excess of £100m; (2) the number of regulated activities carried on, or proposed to be carried on, by the firm and (if relevant) other members of the group; (3) its group structure (if it is a member of a group); (4) its management structure (for example, matrix management); and (5) the size and significance of its international operations, if any. 27.8.9 5.2.38 G When considering whether a business unit is significant for the purposes of SYSC 27.8.4R, the firm should take into account all relevant factors in the light of the firm’s current circumstances and its plans for the future, including:
(1) the risk profile of the unit;
(2) its use or commitment of the firm’s capital; (3) its contribution to the profit and loss account; (4) the number of employees, certification employees or SMF managers in the unit; (5) the number of customers of the unit; and (6) any other factor which makes the unit significant to the conduct of the firm’s affairs so far as relating to the regulated activity.

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Functions requiring qualifications
27.8.10
5.2.39
R (1) Each function involving an activity for which there is a qualification requirement as specified in TC App 1.1.1R (Activities and Products/Sectors to which TC applies) is an FCA-specified significant-harm FCA certification function. (2) For a non-UK relevant authorised person an overseas SMCR firm, each function involving an activity for which there would have been a qualification requirement, as specified in (1) if the firm had been a UK relevant authorised person SMCR firm, is an FCA-specified significant-harm FCA certification function. (3) A person performs the FCA certification function in this rule even if:
(a) the time period within which the person must have obtained the qualification requirement has not yet expired; or (b) the person is exempt from the qualification requirement. 27.8.11 5.2.40 G (1) SYSC 27.8.10R (Functions requiring qualifications) does not may still apply to a UK relevant authorised person an SMCR firm where one of the exclusions in TC App 3.1 (Circumstances in which TC does not apply) or elsewhere in TC does not apply applies. (2) SYSC 27.8.10R (Functions requiring qualifications) applies to a nonUK relevant authorised person an overseas SMCR firm irrespective of whether the function in TC App 1.1.1R (Activities and Products/Sectors to which TC applies) applies to incoming EEA firms or overseas firms for the purposes of TC. (3) The territorial scope of qualification requirements as specified in TC App 2.1.1R (Territorial Scope subject to the limitation in TC
Appendix 3) does not apply to the FCA certification function in
SYSC 27.8.10R. However SYSC 27.3.1R (Territorial scope) restricts the scope of this chapter outside the United Kingdom.
27.8.12 G SYSC 27.8.10R(3) means that a person performs the FCA certification
function in SYSC 27.8.10R even if for example they are:
(1) still in training and do not yet need to have the qualification; or (2) exempt under TC 2.1.9R (Exemption from appropriate qualification requirements). Managers of certification employees 27.8.13 5.2.41 R (1) The function of managing or supervising a certification employee, directly or indirectly, is an FCA-specified significant-harm FCA certification function.

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(2) A function in (1) is not an FCA-specified significant-harm FCA certification function for that firm if it is performed by an SMF manager of that firm. Material risk takers
27.8.14 R Each function performed by a person in column (2) of the table in SYSC
27.8.15R is an FCA certification function with respect to a firm in the corresponding entry in column (1).
27.8.15 R Table: Definition of material risk taker
Type of SMCR firm Employees included
(1) A UK SMCR banking firm
A third-country SMCR banking firm
Each member of the dual-regulated firms Remuneration Code staff of the firm in column (1) of this row (1). This includes any person who meets any of the criteria set out in articles 3 to 5 of Commission Delegated Regulation (EU) No 604/2014 (criteria to identify categories of staff whose professional activities have a material impact on an institution’s risk profile). (2) An EEA SMCR banking firm For these purposes, subparagraphs (i) and (ii) in SYSC 19D.1.1R(1)(d) (application of the dual-regulated firms Remuneration Code) do not apply. In relation to a firm in column (1) of this row (2), the definition of dualregulated firms Remuneration Code staff is extended so that it includes employees of this kind of firm in the same way as it includes employees of a third-country SMCR banking firm. (3) A Solvency II firm Persons referred to in articles 275.1(c) and (d) of Solvency II Regulation 2015/35 (key functions and staff with a material impact).
27.8.16 G If the definitions or requirements in the ‘Employees included’ column of the
table in SYSC 27.8.15R (as adjusted) do not apply to a firm in the
corresponding entry in the ‘Type of SMCR firm’ column, that row of the
table does not apply to the firm.

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27.8.17 G One example of SYSC 27.8.16G is that a credit union is excluded from the
table in SYSC 27.8.15R. Therefore the material risk taker FCA certification
function does not apply to a credit union. However, it is subject to equivalent PRA requirements. Client-dealing function 27.8.18 5.2.44 R A person (“P”) performs the client-dealing FCA-specified significant-harm FCA certification function for a firm if:
(1) P is carrying out any of the activities in the table in SYSC 27.8.19R; and (2) those activities will involve P dealing with:
(a) a person with or for whom those activities are carried out; or (b) the property of any such person; in a manner substantially connected with the carrying on of regulated activities by the firm. 27.8.19 5.2.45 R Table: Activities covered by the client-dealing FCA-specified significantharm FCA certification function Activity Comments (1) The following activities: (a) does not include advising on investments in the course of carrying on the activity of giving basic advice on a stakeholder product. (a) advising on investments other than a non-investment insurance contract; or (b) performing other functions related to this, such as dealing and arranging. (2) The following activities:
(a) giving advice in connection with corporate finance business; or (b) performing other functions related to this. (3) If the firm does any of the following activities:
(a) and (b) do not include dealing or arranging (bringing about) deals in

FCA 2018/XX investments in a non-investment insurance contract. (a) dealing, as principal or as agent; or For the activity in this row (3), SYSC 5.2.44R(2)(a) and (b) SYSC 27.8.18R(2)(a) and (b) are expanded to cover also:
(b) arranging (bringing about) deals in investments; (a) a person in connection with whom the activities in the first column of this row are carried out; and taking part in those activities is included. (b) the property of any such person. (4) If the firm is acting in the capacity of an investment manager the following are included:
(a) taking part in that activity; and
(b) carrying on functions connected to this.
(5) Acting as a ‘bidder’s representative’ in relation to bidding in emissions auctions. Acting as a ‘bidder’s representative’ has the meaning in sub-paragraph 3 of article 6(3) of the auction regulation. 27.8.20 5.2.46 G SYSC 27.3.2G (the FCA interprets the phrase ‘dealing with’ as including having contact with and extending beyond ‘dealing’ as used in ‘dealing in investments’) applies to SYSC 27.8.18R. 27.8.21 5.2.47 G The client-dealing FCA-specified significant-harm FCA certification function generally involves dealing with any person with or for whom the activities in the table in SYSC 27.8.19R are carried out (or their property). That person need not be a client of the firm. 27.8.22 5.2.48 G The restrictions in SYSC 27.7.1R (FCA-specified significant-harm FCA certification function should require the person performing it to be involved in one or more aspects of the firm’s affairs so far as they relate to regulated activities) also applies to the client-dealing FCA-specified significant-harm FCA certification function. Algorithmic trading function 27.8.23 5.2.49 R (1) Each of the following is an FCA-specified significant-harm FCA certification function:

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(a) approving the deployment of:
(i) a trading algorithm or a part of one; or (ii) an amendment to a trading algorithm or a part of one; or (iii) a combination of trading algorithms; and (b) each of the following functions:
(i) having significant responsibility for the management of monitoring whether or not a trading algorithm; and (ii) deciding whether or not a trading algorithm; is, or remains, compliant with the firm’s obligations. (2) The firm’s obligations in (1)(b) include:
(a) the firm’s regulatory obligations; and (b) the rules and requirements of the trading venues to which the firm’s trading systems are connected. 27.8.24 5.2.50(1) R A trading algorithm means a computer algorithm used in algorithmic trading algorithmic trading. 27.8.25 5.2.51 G Algorithmic trading Algorithmic trading is not limited to high-frequency algorithmic trading. 27.8.26 5.2.52 G Deploying a trading algorithm includes deploying one on a trading venue on which the firm has not traded before where the firm is already using that trading algorithm on another trading venue. 27.8.27 5.2.53 G SYSC 5.2.49R(1)(b) SYSC 27.8.23R(1)(b) (monitoring or deciding whether or not a trading algorithm is compliant) includes testing, such as validation and stress testing. 27.8.28 5.2.54 G (1) Sometimes an approval or a decision involves sign-off from different people about different aspects of the decision or approval. (2) If this is the case, all will have given the approval or decision for the purposes of SYSC 27.8.23R. 27.8.29 5.2.55 G (1) Sometimes an approval or decision involves sign-off by a number of people of different levels of seniority about the same aspects of the decision.

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(2) If this is the case, only the most senior decision-taker gives the approval or decision for the purposes of SYSC 27.8.23R. (3) Where the firm’s procedures do not require the more senior person to carry out a detailed review of the decision of the more junior, both the junior and the senior person will give the approval or decision. 27.8.30 5.2.56 G A firm may have deployed an algorithm even though:
(1) it has not yet actually been used in the generation or acceptance of orders; or (2) it is not actually being used in the generation or acceptance of orders at the moment; or (3) it is not currently being used in the generation or acceptance of orders because the circumstances have not arisen for it to start doing so. 27.8.31 5.2.57 G In the examples in SYSC 27.8.30G the algorithm is capable of being used in the generation or acceptance of orders but is not actually generating or accepting them at the moment. However, a firm does not deploy an algorithm if the algorithm is not yet capable of generating or accepting orders because, for example, it is still in development.
27.8.32 G The algorithmic trading FCA certification function applies whether the firm
develops the algorithm itself or buys one from a third party.
Annex
1G
5 Annex
1G
Examples of how the temporary UK role rule in SYSC 27.5.3R (the 30-day rule) works Example How the temporary UK role rule applies (1) A spends 20 days in the UK performing the proprietary trader FCA-specified significant-harm FCA certification function for Firm X and wishes to spend another 20 days in the UK performing the significant management FCA-specified significantharm FCA certification function for Firm X. The rule does not allow this. There is a single 30-day allowance, not a separate 30-day allowance for each FCA-specified significant-harm FCA certification function.

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(2) A spends 20 days in the UK performing an FCA-specified significant-harm FCA certification function for Firm X (which is a UK relevant authorised person UK SMCR firm) and wishes to spend another 20 days dealing with Firm X’s clients in the UK from the overseas office of Firm X in which A is based. The rule does not allow this. There is a single 30-day limit for both types of contact with the UK. (3) A wishes to spend 40 days dealing with Firm X’s clients in the UK from the overseas office of Firm X (which is a UK relevant authorised person UK SMCR firm) in which A is based. However the total time spent doing that will only be a few hours overall. The rule does not allow this. If A deals with a UK client on one day, that uses up one day of the 30-day allowance, however short the time for which the contact lasts. (4) A spends 25 days in calendar year one for Firm X in the UK and 25 days in calendar year two. However A spends 40 days in the UK for Firm X between June in calendar year 1 and June in calendar year 2. The rule does not allow this. This is because the 30-day annual allowance relates to any 12-month period and not just a calendar year. (5) Firm X is a non-UK relevant authorised person an overseas SMCR firm. A is employed by Firm X and is based in one of its offices outside the UK. A wants to work in the UK branch for 10 days. The rule applies to non-UK relevant authorised persons overseas SMCR firms. It does not matter that A is not employed by the UK branch and instead is employed by another part of Firm X. It does not make a difference whether A is based in an office of Firm X in its home state or one in a third country. (6) A is based in one of Firm X’s overseas offices. Firm X then decides to relocate A to the UK, where A will be certified to perform an FCA-specified significant-harm FCA certification function for Firm X. Firm X wants to rely on the temporary UK role rule for the first 30 days while Firm X goes through the certification process for A. The rule does not allow this. A is no longer based in an overseas office and so the rule does not apply. (7) A is based in the overseas branch of a UK relevant authorised person UK SMCR firm. A is to be promoted, so that A will be performing the material risk taker FCAspecified significant-harm FCA certification The rule does not allow this because it does not apply to the material risk taker FCA-specified significant-harm FCA certification function when it is

FCA 2018/XX function. Firm X wants to rely on the temporary UK role rule for the first 30 days while Firm X goes through the certification process for A. performed for a UK relevant authorised person UK SMCR firm. A reference in this table to an FCA-specified significant-harm FCA certification function is to a function that would have been an FCA-specified significant-harm FCA certification function but for SYSC 27.5.3R (temporary UK role). … TP 5 Financial Services (Banking Reform) Act 2013: Certification and regulatory references Note to the reader 5.1.1-2 G (1) SYSC TP 5 has not been amended to reflect changes in the FCA Handbook and Glossary since the beginning of 2018. This is because it is made up of transitional provisions that mostly expired before then. (2) A small number of provisions may have effect beyond that date. To help the reader, the table in SYSC TP 5.1.1-1G explains how superseded Glossary terms in SYSC TP 5 should be interpreted. 5.1.1-1 G Table: meaning of superseded Glossary terms Term in SYSC TP 5 Term that has replaced it Comment FCA specified significant-harm function FCA certification function full scope regulatory reference firm Any of the following:
(a) an SMCR banking firm;
(b) a Solvency II firm; or
(c) a large non-directive insurer.
SYSC TP 5.4.2R refers to
SYSC 22.2.1R (Obligation to obtain a regulatory reference). On 7 March 2017 (the date referred to in SYSC TP 5.4.2R), SYSC 22.2.1R applied to what were then called full scope regulatory reference firms. relevant authorised person SMCR banking firm

FCA 2018/XX specified significantharm function certification function Purpose of SYSC TP 5
5.1.1 G …
…
…
After SYSC TP 6 (Transitional Provision 6) insert the following new SYSC TP 7. The text is not underlined. TP 7 Bank of England and Financial Services Act 2016: Certification and regulatory references
7.1 Application, purpose and definitions
7.1.1 R SYSC TP 7 applies as set out in the table in SYSC TP 7.1.2R.
7.1.2 R Table: Application of SYSC TP 7
Type of firm Parts of SYSC TP 7 that apply A firm in the insurance sector except one in the following row All applies A Solvency II firm (including a large nondirective insurer) All applies except as follows:
(1) SYSC TP 7.4.2R to SYSC TP 7.4.3G do not apply.
(2) Subject to (3), SYSC TP 7.4.4R and SYSC TP 7.4.5G do not apply. (3) SYSC TP 7.4.4R and SYSC TP 7.4.5G apply where the requirement to obtain a reference arises under SYSC 22.2.1R(1)(b) (certification). All other firms Only SYSC TP 7.4.6R, SYSC TP 7.4.7G and SYSC TP 7.6 apply.
7.1.3 G SYSC TP 7:

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(1) explains how the certification regime described in SYSC 27 applies during the certification transitional period described in SYSC TP 7.2.1G; (2) has certain transitional provisions dealing with SYSC 22 (Regulatory references); and (3) has certain other transitional provisions relating to the amendments made to the FCA Handbook by the Individual Accountability (DualRegulated Firms) Instrument 2018.
7.1.4 G (1) The main time period for which SYSC TP 7 operates is 2018 to 2019.
(2) There are transitional provisions that can apply beyond that period. They are based on events occurring during that period.
7.1.5 R The terms in the first column of the table in SYSC TP 7.1.6R, where they
appear in bold in SYSC TP 7, have the meaning in the corresponding row of column 2 for the purposes of SYSC TP 7.
7.1.6 R Table: glossary of bespoke terms used in SYSC TP 7
Part One: General
Defined term Meaning insurance sector a firm is in the insurance sector if it is in the insurance sector under Part Four of SYSC 23 Annex 1 (Definition of insurance sector).
Part Two: Dates
Defined term Meaning certification transitional period 10 December 2018 to 10 December 2019 general commencement date 10 December 2018
7.2 Certification: The certification transitional period

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7.2.1 G The obligation in section 63E(1) of the Act for an SMCR firm to take
reasonable care to ensure that no employee of the firm performs an FCA certification function, unless the firm has issued the employee with a valid certificate, does not apply until the end of the certification transitional period.
7.2.2 G However, other parts of the FCA Handbook and the Act about certification
employees apply in the certification transitional period.
7.2.3 G The table in SYSC TP 7.2.4G explains how the requirements of the
Handbook and the Act about certification employees apply in the certification transitional period.
7.2.4 G Table: How the certification regime applies in the certification transitional
period
Provision in the Act or the
Handbook
What that provision is about How it applies in the certification transitional period Glossary definition of certification employee During the certification transitional period, the Glossary definition of certification employee covers everyone who would need a certificate to perform their job if the obligation to issue certificates were in force SYSC 27.2 and the parts of the Act on which it gives guidance Issuing certificates and fitness Does not apply SYSC 27.3 Territorial scope of the certification regime Applies for the purpose of those parts of the FCA Handbook and the Act that are in force as described in this
table
SYSC 27.4 General material about the scope of the certification regime SYSC 27.5 Exclusions for emergency and temporary appointments SYSC 27.6 Other exclusions SYSC 27.7 Specification of functions

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SYSC 27.8 Definitions of the FCA certification functions SYSC 22 Regulatory references Obligation to obtain a reference does not apply because the obligation to get a reference is triggered by issuing a certificate. SYSC TP 7.4 has exemptions that apply after the certification transitional period. SYSC 25 SYSC 25 says that the management responsibilities map should say whether persons described or identified in the management responsibilities map are certification employees Applies to everyone who would need a certificate to perform their job if the obligation to issue certificates was in force COCON Applies to everyone who would need a certificate to perform their job if the obligation to issue certificates was in force. This applies even if they have not been notified:
(a) that COCON applies to them; or
(b) of the rules that apply to them.
COCON also applies to those who would have been excluded from the certification regime by SYSC 27.5.1R (Emergency appointments) or SYSC 27.5.3R (Temporary UK role).
Section 64B of
the Act
Firm should ensure that all persons subject to COCON are notified Firm should take reasonable steps to ensure that those persons understand how COCON applies to them. Applies to everyone who would need a certificate to perform their job if the

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The parts of
SUP 15.3 that deal with
COCON breaches
Notifying a significant breach of COCON to the FCA obligation to issue certificates was in force
Section 64C of
the Act and
SUP 15.11
Notifying the FCA of disciplinary action
7.3 General material about certification
7.3.1 G (1) SYSC 27.5.1R (Emergency appointments) allows a firm to appoint
someone (P) to perform a function which would normally be an FCA certification function without P becoming a certification employee. There is a maximum period for which the appointment can last. (2) When calculating the maximum time period in (1), the firm need not take into account any time spent by P before the general commencement date performing what will become the FCA certification function in (1). (3) When a firm, after the end of the certification transitional period, is calculating the maximum time period in (1), the firm should take into account any time spent by P during the certification transitional period performing the FCA certification function in (1).
7.3.2 G (1) SYSC 27.5.1R only applies where P (as referred to in SYSC TP
7.3.1G) is providing cover for a certification employee whose absence is reasonably unforeseen. (2) SYSC 27.5.1R may still apply if the absence referred to in (1) began before the general commencement date or during the certification transitional period.
7.3.3 G (1) Some FCA certification functions only apply where the place of
performance of the function has a connection with the United Kingdom (for example, it is carried on there). (2) SYSC 27.5.3R (Temporary UK role (the 30-day rule)) allows a person (P) to carry on a function for a firm that would normally be an FCA certification function because of its connection with the United Kingdom without P becoming a certification employee. There is a time limit on how long the firm can allow P to do this. (3) When calculating the time limit in (2), the firm need not take into account any time spent by P before the general commencement date performing functions with a United Kingdom connection.

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(4) When a firm, after the end of the certification transitional period, is calculating the maximum time period in (1), the firm should take into account any time spent by P during the certification transitional period performing functions with a United Kingdom connection.
7.4 Transitional provisions about regulatory references
7.4.1 R (1) If on the general commencement date an employee (P) is already
performing an FCA certification function for an SMCR firm (A), the obligation under SYSC 22 (Regulatory references) for A to obtain a reference when issuing a certificate (including reissuing a certificate) for P for that FCA certification function does not apply either on or after the end of the certification transitional period. (2) If there has been a significant change in P’s responsibilities forming
part of that FCA certification function as compared to the position on
the general commencement date, paragraph (1) ceases to apply from that time.
7.4.2 R SYSC 22.2.1R (Obligation to obtain a regulatory reference) does not apply to
an application for approval as an approved person that:
(1) is made before the general commencement date and is continued in force by SUP TP 11.7 (In-flight applications: Conversion); or (2) is made under SUP TP 11.15 (Applications of approved persons to take effect from the commencement date).
7.4.3 G SYSC 22.2.4R (Obligation to revise references) does not apply to references
given before the general commencement date.
7.4.4 R Question (F) (disciplinary action) in Part One of SYSC 22 Annex 1R
(Template for regulatory references given by SMCR firms and disclosure requirements) does not require disclosure of breaches of individual conduct requirements referred to in question (F) if:
(1) the disciplinary action referred to in that item took place before the general commencement date; and (2) the firm’s records do not show whether the conduct that was subject to disciplinary action amounted to a breach of those individual conduct requirements.
7.4.5 G The term individual conduct requirements in SYSC TP 7.4.4R is defined in
Section One of Part Two of SYSC 22 Annex 1R.
7.4.6 R If:

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(1) a firm (A) asks another firm (B) for a reference before the general commencement date; but (2) B gives the reference after that date; SYSC 22 (Regulatory references) in the form it is in at the time in (2) applies to B.
7.4.7 G SYSC 22 in the form it is in after the general commencement date applies
to a reference requested or given after the general commencement date even if the matters covered by the reference occurred before then.
7.5 Transitional provisions about benchmarks and the certification regime
7.5.1 G SYSC 27.6.4R excludes benchmark activities from the certification regime.
SYSC TP 7.5 brings certain activities in relation to benchmarks back into the certification regime.
7.5.2 R SYSC 27 (Senior managers and certification regime: Certification regime)
applies to a person with permission to carry on the regulated activity of administering a specified benchmark acting as such.
7.5.3 G As a consequence of the benchmarks regulation, the regulated activities
referred to in SYSC TP 7.5.2R will cease to apply in certain circumstances (see SUP TP 10 for an explanation of those circumstances).
7.6 Miscellaneous
Common platform requirements
7.6.1 G The Individual Accountability (Dual-Regulated Firms) Instrument 2018
renumbered material that used to be in SYSC 4 and SYSC 5 so that it now appears in SYSC 24 to SYSC 27. That instrument updated FCA Handbook cross-references accordingly.
7.6.2 G The requirements of chapters SYSC 24 to SYSC 27 no longer form part of the
common platform organisational requirements and a reference to SYSC 4 to SYSC 9 does not include any material referred to in SYSC TP 7.6.1G. Sch 1 Record keeping requirements …

FCA 2018/XX
Sch 1.2G
Handbook reference
Subject of record
Contents of record
When record must be made
Retention period
SYSC 2.2.1R … … … Six 6 years from the date on which the record is superseded by a more up-todate record SYSC 2.2.4R Governance map and scope of responsibilitie s for certain approved persons of Solvency II firms As stated in rule The records should be kept up to date, as stated in the rule 10 years from the date superseded, or 6 years for large non-directive insurers. SYSC 2.2.6R Scope of responsibilitie s for certain approved persons of small nondirective insurers As stated in rule The records should be kept up to date, as stated in the rule 6 years from the date superseded. … … … … … SYSC 4.5.21G Past versions of a firm’s management responsibilitie s maps Past versions of a firm’s management responsibiliti es maps SYSC 4.5.21G does not itself impose requirements but says that past versions of a firm’s management responsibiliti es maps are an important
part of its
records
SYSC 4.5.21G does not itself impose requirements but says that past versions of a firm’s management responsibilities maps are an important part of its records

FCA 2018/XX
SYSC 4.6.14G and SYSC
4.6.28G
Applies SYSC
4.5.21G to non-UK relevant authorised persons See entry for SYSC 4.5.21G See entry for SYSC 4.5.21G See entry for SYSC 4.5.21G SYSC 25.9.5R Steps taken to comply with SYSC 25.9.4R (Information to be made available to new manager) Adequate Adequate time None specified. … … … … … SYSC 22.9.1R … … … … SYSC 25.8.1G Past versions of a firm’s management responsibilitie s maps Past versions of a firm’s management responsibiliti es maps SYSC 25.8.1G does not itself impose requirements but says that past versions of a firm’s management responsibiliti es maps are an important
part of its
records
SYSC 25.8.1G does not itself impose requirements but says that past versions of a firm’s management responsibilities maps are an important part of its records SYSC 25.8.3R Past versions of a firm’s management responsibilitie s maps Past versions of a firm’s management responsibiliti es maps None specified 10 years from the date superseded, or 6 years for large non-directive insurers SYSC 25.9.5R Steps taken to comply with SYSC 25.9.4R (Information to be made available to new manager) Adequate Adequate time None specified

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…
Sch 5 Rights of action for damages
…
Sch 5.4G …
Chapter/
Appendix
Section/
Annex
Paragraph Right of action under section 138D For private person? Removed? For other person? … … … … … … SYSC 23 to SYSC 27 No No

FCA 2018/XX
Annex D
Amendments to the Code of Conduct sourcebook (COCON) In this Annex, underlining indicates new text and striking through indicates deleted text. Where a cross-reference is amended by paragraph F of this instrument, that change is not shown.
Part 1: Comes into force 10 December 2018
1 Application and purpose
1.1 Application
1.1.1 G Under section 64A of the Act, the FCA may make rules about the conduct of
certain persons working in firms.
To whom does it apply?
1.1.1A R COCON applies to the persons set out in the table in COCON 1.1.2R.
1.1.2 R Table: To whom does COCON apply?
Persons to whom COCON Applies Comments
(1) An SMF manager.
(2) An employee (“P”) of a relevant authorised person an SMCR firm who:
(a) performs the function of an
SMF manager;
(b) is not an approved person to perform the function in question; and (c) is required to be an approved person at the time P performs that function. (3) An employee of a relevant authorised person an SMCR firm who would be an SMF manager but for SUP 10C.3.13R (The 12- week rule). (4) A certification employee employed by a relevant This applies even if the certification employee has not been notified that COCON applies to

FCA 2018/XX authorised person of an SMCR firm. them or notified of the rules that apply to them. (5) An employee of a relevant authorised person an SMCR firm who would be a certification employee but for SYSC 5.2.27R(1) SYSC 27.5.1R (Scope: emergency Emergency appointments) or SYSC 5.2.28AR SYSC 27.5.3R (Scope:
temporary Temporary UK role).
(6) Any employee of a relevant authorised person an SMCR firm not coming within another row of this table, except one listed in column (2) of this table. (A) This row (6) does not apply to an employee of a relevant authorised person an SMCR firm who only performs functions falling within the scope of the following roles:
(a) receptionists;
(b) switchboard operators;
(c) post room staff;
(d) reprographics/print room staff;
(e) property/facilities management;
(f) events management;
(g) security guards;
(h) invoice processing;
(i) audio visual technicians;
(j) vending machine staff;
(k) medical staff;
(l) archive records management;
(m) drivers;
(n) corporate social responsibility staff; (o) data controllers or processors under the data protection legislation; (p) cleaners; (q) catering staff; (r) personal assistant or secretary; (s) information technology support (ie, helpdesk); and

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(t) human resources administrators
/processors.
(B) This row (6) also does not apply to an employee of an SMCR firm that is in the insurance sector as defined in Part Four of SYSC 23
Annex 1 (Definition of insurance
sector) until 10 December 2019.
(7) An FCA-approved person or
PRA-approved person approved to perform a controlled function in a Solvency II firm or a small non-directive insurer. [deleted] This row does not apply to approved persons approved to perform a controlled function in SUP 10A.1.15R to SUP 10A.1.16BR (appointed representatives). (8) A standard non-executive board director of : a UK SMCR firm. (a) a relevant authorised person; (b) a Solvency II firm; or (c) a small non-directive insurer. This row only applies to a UK domestic firm. Note: In accordance with the Glossary, Solvency II firm includes a large non-directive insurer. 1.1.2A R For Swiss general insurers, references in this sourcebook to parts of the PRA Rulebook for ‘Solvency II firms’ are to be read as references to the corresponding parts of the PRA Rulebook applying to large non-directive insurers.
1.1.3 R Rules 1 to 5 in COCON 2.1 apply to all conduct rules staff.
1.1.4 R (1) Rules SC1 to SC4 in COCON 2.2 apply to all senior conduct rules
staff members (subject to (2)).
(2) SC1 to SC3 in COCON 2.2 do not apply to a standard non-executive director senior conduct rules staff member within paragraph (d) of the definition of senior conduct rules staff member (P) unless, P also as well as being a standard non-executive director, they also fall falls into one of the other categories paragraph (a) or (b) of that definition of senior conduct rules staff member.
1.1.5 G (1) The guidance in COCON 2.3 applies to relevant authorised persons
SMCR firms.
(2) [deleted]

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(3) SYSC 27.6.3R provides that a function performed by a non-executive director of a firm acting as such is not an FCA-specified significantharm FCA certification function for that firm. To what conduct does it apply?
1.1.6 R For a person (P) who is an approved person, COCON applies to the conduct
of P in relation to the performance by P of functions relating to the carrying on of activities (whether or not regulated activities) by the firm (Firm A) on whose application approval was given to P. [Note: sections 64A(4) and (5)(a) of the Act (Rules of conduct)] 1.1.6A R For a person (P) who is a board director of a firm (Firm A) but is not an approved person of Firm A, COCON applies to the conduct of P in relation to the performance by P of functions relating to the carrying on of activities (whether or not regulated activities) by Firm A. [Note: sections 64A(4) and (5)(ab) of the Act (Rules of conduct)]
1.1.7 R (1) For a person (P) subject to COCON who is not an approved person,
COCON applies to the conduct of P in relation to the performance by P of functions relating to the carrying on of activities (whether or not regulated activities) by :
(1) (in the case of a board director of a firm) that firm; or (2) (in any other case) P’s employer employer (Firm A). (2) This rule does not apply where COCON 1.1.6A applies. [Note: sections 64A(4), (5)(ab) and (5)(b) of the Act (Rules of conduct)] 1.1.7A R (1) Where Firm A in COCON 1.1.6R to COCON 1.1.7R is an SMCR firm other than an SMCR banking firm, the application of COCON is further restricted by this rule. (2) COCON only applies to conduct that forms part of, or is for the purpose of, any of the following:
(a) the SMCR financial activities of Firm A; or (b) any activities of Firm A that have, or might reasonably be regarded as likely to have, a negative effect on:
(i) the integrity of the UK financial system; or (ii) the ability of Firm A to meet the “fit and proper” test in threshold condition 2E and 3D (Suitability); or

FCA 2018/XX
(iii) the ability of Firm A to meet the applicable requirements and standards under the regulatory system relating to Firm A’s financial resources.
1.1.8 G (1) Both More than one of COCON 1.1.6R and to COCON 1.1.7R
1.1.7AR may apply to the same individual performing several roles. (2) For example, say that an individual (A) is an approved person for firm X and is employed by firm Y in a role that does not involve a controlled function or being a director. Say that firm X is a Solvency II firm or a small non-directive insurer and that firm Y is a relevant authorised person. (3) COCON 1.1.6R applies to A’s role with firm X and COCON 1.1.7R applies to A’s role with firm Y. 1.1.8A R (1) This rule applies to a person (P):
(a) who is an approved person approved to perform a controlled function under SUP 10A.1.15R to SUP 10A.1.16BR (appointed representatives); (b) for whom P’s authorised approved person employer is an SMCR firm (F); and (c) to whom COCON also applies in P’s capacity as a member of F’s conduct rules staff. (2) COCON does not apply to conduct of P to the extent that:
(a) that conduct relates to the performance by P of functions:
(i) in (1)(a); or
(ii) in relation to the carrying on of a regulated activity by the appointed representative concerned; and (b) APER applies to that conduct. Where does it apply?
1.1.9 R (1) COCON applies to the conduct of conduct rules staff set out in (2)
wherever it is performed.
(2) This rule applies to:
(a) a senior conduct rules staff member; and (b) a certification employee performing FCA-specified significant-harm FCA certification function (7) (6) (material

FCA 2018/XX risk takers) in the table in SYSC 27.7.3R for a UK relevant authorised person UK SMCR firm. 1.1.9A G (1) This paragraph deals with how COCON 1.1.9R applies to a certification employee (P) who performs the material risk taker FCA certification function and another FCA certification function for the same UK SMCR firm. (2) If P’s conduct relates to both FCA certification functions (because for example those two functions cover the same activities) COCON applies without territorial limitation to P’s conduct. (3) If part of P’s conduct relates to the material risk taker FCA certification function and the rest of P’s conduct relates to the other FCA certification function, COCON only applies without territorial limitation to P’s conduct in relation to the material risk taker FCA certification function.
1.1.10 R (1) This rule applies to members of a firm’s conduct rules staff apart
from conduct rules staff in COCON 1.1.9R.
(2) Subject to (3), COCON only applies to the conduct of persons to whom this rule applies (as set out in (1)) if that conduct:
(a) is performed from an establishment maintained in the United Kingdom by: an SMCR firm; or (i) (for a relevant authorised person) that person’s employer; or (ii) (for a Solvency II firm or a small non-directive insurer) the firm in relation to whom that person carries out controlled functions; or (b) involves dealing with a client of the firm in the United Kingdom from an establishment overseas. (3) Paragraph (2)(b) only applies to a UK relevant authorised person SMCR firm.
1.1.11 G The FCA interprets the phrase ‘dealing with’ in COCON 1.1.10R as
including having contact with customers and extending beyond ‘dealing’ as used in the phrase ‘dealing in investments’. ‘Dealing in’ is used in Schedule 2 to the Act to describe, in general terms, the regulated activities which are specified in Part II of the Regulated Activities Order. 1.11A G The FCA interprets the phrase ‘a client of the firm in the United Kingdom’ in COCON 1.1.10R as referring to:
(1) for a client which is a body corporate, its office or branch in the United Kingdom; or

FCA 2018/XX
(2) for a client who is an individual, a client who is in the United Kingdom at the time of the dealing.
1.1.12 R A person will not be subject to COCON to the extent that it would be
contrary to the UK’s obligations under a Single Market Directive, the auction regulation or the benchmarks regulation. Purpose
1.1.13 G The purpose of this chapter is to set out rules for conduct rules staff and to
provide guidance about those rules to firms whose staff are subject to them.
1.1.14 G COCON 1 Annex 1 has guidance on the role and responsibilities of nonexecutive directors to whom COCON applies.
1.2 Investments
1.2.1 G COCON refers in a number of places to ‘investments’. The Glossary
meaning of investment is wide and is not just limited to the ordinary dictionary meaning.
1.2.2 G Therefore, for example, an approved person performing controlled functions
in a Solvency II firm or a small non-directive insurer should note that that term includes rights under a contract of insurance, meaning they should also take into account those parts of COCON which provide guidance on individual conduct rules that refer to ‘investments’.
1.2.3 G Where guidance refers to risks associated with investments that will include
risks applicable to rights under a contract of insurance including for example the risk of inadequate cover. … 1 Annex 1G Guidance on the role and responsibilities of NEDs subject to COCON nonexecutive directors of SMCR firms 1 Introduction
1.1 This annex applies to non-executive directors (NEDs) of: an SMCR firm.
(1) a relevant authorised person;
(2) a Solvency II firm (including a large non-directive insurer); or (3) a small non-directive insurer.
1.2 This annex covers the role of a NED in performing the roles in (1) to (4), below:
(1) the role of chairman chair of the board of directors; (2) the role of chairman chair of the nomination committee;

FCA 2018/XX
(3) the role of chairman chair of any other committee (irrespective of whether performing that role is itself a designated senior management function); (4) the general NED role.
1.3 The FCA’s view of the role of a NED is consistent with the duties of directors
included in UK company law and the description of the role of a NED in the UK Corporate Governance Code. 2 The general role of a NED
2.1 The role of a NED performing the general NED role is to:
(1) provide effective oversight and challenge; and (2) help develop proposals on strategy.
2.2 To deliver this, their responsibilities include:
(1) attending and contributing to board and committee meetings and discussions; (2) taking part in collective board and committee decisions, including voting and providing input and challenge; and (3) ensuring they are sufficiently and appropriately informed of the relevant matters prior to taking part in board or committee discussions and decisions.
2.3 Other key roles of a NED include:
(1) scrutinising the performance of management in meeting agreed goals and objectives; (2) monitoring the reporting of performance; (3) satisfying themselves on the integrity of financial information; (4) satisfying themselves that financial controls and systems of risk management are robust and defensible; (5) scrutinising the design and implementation of the remuneration policy; (6) providing objective views on resources, appointments and standards of conduct; and (7) being involved in succession planning. 3 Role of a NED as chair of the board or a committee

FCA 2018/XX
3.1 Subject to any specific governance arrangements, rules or requirements applicable
to the board or particular committees, a NED’s responsibility as chairman chair of the board or a committee includes:
(1) ensuring that the board or committee meets with sufficient frequency; (2) fostering an open, inclusive discussion which challenges executives, where appropriate; (3) ensuring that the board or committee devotes sufficient time and attention to the matters within its remit; (4) helping to ensure that the board or committee and its members have the information necessary to its and their tasks; (5) reporting to the main board on the committee’s activities; and (6) facilitating the running of the board or committee to assist it in providing independent oversight of executive decisions; and (7) in relation to the nomination committee, safeguarding the independence and overseeing the performance of the nomination committee.
3.2 The chair of the nomination committee should take reasonable steps to ensure that
the nomination committee complies with:
(1) the requirements in SYSC 4.3A about the nomination committee (if that
part of SYSC applies to the firm); and
(2) any specific and relevant requirements relating to the committee or to the matters within the committee’s responsibilities.
3.3 SYSC 4.3A.8R and SYSC 4.3A.9R deal with the nomination committee for
relevant authorised persons. There is no equivalent material for Solvency II firms. Although being the chair of the nomination committee is not a controlled function for a small non-directive insurer, paragraph Paragraph 3.2 of this annex is still relevant to a small non-directive insurer firm:
(1) that is not required by the FCA Handbook to have a nomination committee; or (2) for which being the chair of such a committee is not a controlled function; if it has such a committee. 4 General approach to the role of a NED
4.1 The FCA recognises that NEDs individually do not manage a firm’s business in
the same way as executive directors. Therefore, the responsibilities for which NEDs are accountable are likely to be more limited.

FCA 2018/XX
4.2 A NED is neither required nor expected to assume executive responsibilities.
4.3 Although NEDs who are subject to the senior management regime for SMF
managers or the approved persons regime for insurers have individual duties under that regime, the FCA views the regime and its application as consistent with the principle of collective decision-making.
4.4 The standard of care, skill and diligence that the FCA would expect from a NED
is the care, skill and diligence that would be exercised by a reasonably diligent person with:
(1) the general knowledge, skill and experience that may reasonably be expected of a person carrying out the functions carried out by the NED in relation to the firm, taking into account the standards in the Handbook (especially COCON and DEPP); and (2) the general knowledge, skill and experience that the NED has. 2 Individual conduct rules
2.1 Individual conduct rules
2.1.1 R Rule 1: You must act with integrity.
2.1.2 R Rule 2: You must act with due skill, care and diligence.
2.1.3 R Rule 3: You must be open and cooperative with the FCA, the PRA and other
regulators.
2.1.4 R Rule 4: You must pay due regard to the interests of customers and treat them
fairly.
2.1.5 R Rule 5: You must observe proper standards of market conduct.
2.2 Senior management conduct rules
2.2.1 R SC1: You must take reasonable steps to ensure that the business of the firm
for which you are responsible is controlled effectively.
2.2.2 R SC2: You must take reasonable steps to ensure that the business of the firm
for which you are responsible complies with the relevant requirements and standards of the regulatory system.
2.2.3 R SC3: You must take reasonable steps to ensure that any delegation of your
responsibilities is to an appropriate person and that you oversee the discharge of the delegated responsibility effectively.

FCA 2018/XX
2.2.4 R SC4: You must disclose appropriately any information of which the FCA or
PRA would reasonably expect notice.
2.3 Firms: Training and breaches
2.3.1 G Under section 64B of the Act, a relevant authorised person an SMCR firm
must:
(1) ensure that all persons subject to the rules in COCON are notified of the rules that apply to them; and (2) take all reasonable steps to ensure that those persons understand how the rules in COCON apply to them.
2.3.2 G (1) The steps that a relevant authorised person an SMCR firm must take
to secure ensure that its conduct rules staff understand how the rules in COCON apply to them include the provision of suitable training. (2) Suitable training should always ensure that those who are subject to the rules in COCON have an awareness and broad understanding of all of the rules in COCON, and that they also have a deeper understanding of the practical application of the specific rules which are relevant to their work. (3) For example:
(a) for individuals who trade in the markets, rule 5 in COCON 2.1.5R may apply in various circumstances arising in the individual’s day-to-day activities and additional training may be appropriate to ensure that the individual knows how that rule applies to those activities in those various circumstances; or (b) for individuals who deal directly with customers, rule 4 in COCON 2.1.4R may apply in various circumstances which makes additional training appropriate for such individuals.
2.3.3 G There are rules and guidance in SUP 15.3 (General notification
requirements) and SUP 15.11 (Notification of COCON breaches and disciplinary action) that deal with reporting by a relevant authorised person an SMCR firm of COCON breaches to the FCA. 3 General factors for assessing compliance
3.1 General factors for assessing compliance

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3.1.1 G Where descriptions of conduct are provided in this chapter which exemplify
breaches of the rules in COCON, they are not intended to be an exhaustive list of the kind of conduct that may contravene the relevant rule.
3.1.2 G In assessing compliance with, or a breach of, a rule in COCON, the FCA
will have regard to the context in which a course of conduct was undertaken, including:
(1) the precise circumstances of the individual case; (2) the characteristics of the particular function performed by the individual in question; and (3) the behaviour expected in that function.
3.1.3 G Without prejudice to section 66A of the Act, a person will only be in breach
of any of the rules in COCON where they are personally culpable. Personal culpability arises where:
(1) a person’s conduct was deliberate; or (2) the person’s standard of conduct was below that which would be reasonable in all the circumstances.
3.1.4 G In determining whether or not the particular conduct of a person complies
with the rules in COCON, factors the FCA would expect to take into account include:
(1) whether that conduct relates to activities that are subject to other provisions of the Handbook; (2) whether that conduct is consistent with the requirements and standards of the regulatory system relevant to the person’s firm.
3.1.5 G In determining whether or not the conduct of a senior conduct rules staff
member complies with rules SC1 to SC4 in COCON, factors the FCA would expect to take into account include:
(1) whether they exercised reasonable care when considering the information available to them; (2) whether they reached a reasonable conclusion upon which to act; (3) the nature, scale and complexity of the firm’s business; (4) their role and responsibility as determined by reference to the relevant statement of responsibility; (5) the knowledge they had, or should have had, of regulatory concerns, if any, relating to their role and responsibilities.

FCA 2018/XX
3.1.6 G In assessing whether a senior conduct rules staff member may have breached
a rule in COCON, the nature, scale and complexity of the business and the role and responsibility of the individual undertaking the activity in question within the firm will be relevant in assessing whether that person’s conduct was reasonable. For example, the smaller and less complex the business, the less detailed and extensive the systems of control need to be.
3.1.7 G UK domestic firms listed on the London Stock Exchange are subject to the
UK Corporate Governance Code, whose internal control provisions are explained in the publication entitled ‘Internal Control: Revised Guidance for Directors on the Combined Code (October 2005)’ issued by the Financial Reporting Council. Therefore, firms in this category will be subject to that code, as well as to the rules in COCON. In forming an opinion as to whether a senior conduct rules staff member has complied with the rules in COCON, the FCA will give due credit if they followed corresponding provisions in the UK Corporate Governance Code and related guidance. 4 Specific guidance on individual conduct rules
4.1 Specific guidance on individual conduct rules
…
Rule 5: You must observe proper standards of market conduct. …
4.1.16 G …
4.1.17 G (1) Markets include relevant markets as defined in section 1F of the Act
(Meaning of “relevant markets” in strategic objective).
(2) Markets are not limited to regulated markets or formal markets such as one on a stock exchange. (3) Nor are markets limited to markets for professionals (such as the wholesale foreign exchange markets) or ones that involve tradeable and transferable assets. (4) Therefore markets include consumer markets (whether for products, services, credit or otherwise).
4.2 Specific guidance on senior manager conduct rules
…
4.2.28 G (1) If a senior conduct rules staff member comes across a piece of
information that is something of which they think the FCA or PRA

FCA 2018/XX could reasonably expect notice, they should determine whether that information falls within the scope of their responsibilities: , which (for an SMF manager) is by virtue of that person’s statement of responsibilities : . (a) ; or (b) (for an approved person performing a significant influence function in a Solvency II firm or a small non-directive insurer) including by reference to their scope of responsibilities document. (2) If it does, then they should ensure that, if it is otherwise appropriate to do so, it is disclosed to the appropriate regulator.
Part 2: Comes into force 10 December 2019
1 Application and purpose
1.1 Application
…
To whom does it apply?
…
1.1.2 R Table: To whom does COCON apply?
Persons to whom COCON Applies Comments
…
(6) … …
(B) This row (6) also does not apply to an employee of an SMCR firm that is in the insurance sector as defined in Part Four of SYSC 23
Annex 1 (Definition of insurance
sector) until 10 December 2019.
…
…

FCA 2018/XX
Annex E
Amendments to the Threshold Conditions (COND) In this Annex, underlining indicates new text and striking through indicates deleted text. 2 The threshold conditions …
2.5 Suitability
…
2.5.3 G (1) The emphasis of the threshold conditions set out in paragraphs 2E
and 3D of Schedule 6 of the Act is on the suitability of the firm itself. The suitability of each person who performs a controlled function will be assessed by the FCA and/or the PRA, as appropriate, under the approved persons regime (in relation to an FCA-approved person, see SUP 10A (FCA Approved Persons), SUP 10C (FCA senior management regime for approved persons in relevant authorised persons) (FCA senior managers regime for approved persons in SMCR firms) and FIT). In certain circumstances, however, the FCA may consider that the firm is not suitable because of doubts over the individual or collective suitability of persons connected with the firm. … …
2.5.6 G Examples of the kind of particular considerations to which the FCA may
have regard when assessing whether a firm will satisfy, and continue to satisfy, the threshold condition include, but are not limited to, whether:
…
(7) the firm has put in place procedures which are reasonably designed to:
…
(b) ensure that its approved persons and, in the case of relevant authorised persons, the rest of its conduct rules staff are aware of those requirements and standards under the regulatory system applicable to them, whether or not they are employed by the firm;

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…
(d) determine that its approved persons and, in the case of relevant authorised persons, the rest of its conduct rules staff, are adhering to those requirements and standards; … (12) those persons who perform controlled functions under certain arrangements entered into by the firm or its contractors (including appointed representatives or, where applicable, tied agents) act with due skill, care and diligence in carrying out their controlled function (see APER 4.2 (Statement of Principle 2) or COCON 2.1.2R or managing the business for which they are responsible (see APER 4.7 (Statement of Principle 7) or COCON 2.2.2R, as applicable); …

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Annex F
Amendments to the Statements of Principle and Code of Practice for Approved Persons (APER) In this Annex, underlining indicates new text and striking through indicates deleted text. Where a cross-reference is amended by paragraph F of this instrument, that change is not shown. 1.1A Application Who? 1.1A.1 R APER applies to FCA-approved persons and PRA-approved persons who fall under (1) or (2) are either:
(1) approved persons of firms that are not: SMCR firms; or (a) relevant authorised persons; or (b) Solvency II firms or small non-directive insurers; or (2) approved persons approved to perform a controlled function in SUP 10A.1.15R to SUP 10A.1.16BR (appointed representatives appointed representatives). 1.1A.1A G (1) APER does not apply to FCA-approved persons or PRA-approved persons of relevant authorised persons, Solvency II firms or small non-directive insurers SMCR firms. COCON applies instead. For the purposes of APER (and SYSC, SUP 10A, COCON and DEPP) a large non-directive insurer is treated as and included in the Glossary definition of a Solvency II firm. (2) However, APER applies to approved persons approved to perform a controlled function under SUP 10A.1.15R to SUP 10A.1.16BR (appointed representatives appointed representatives) even if the appointed representative’s principal is a relevant authorised person or Solvency II firm an SMCR firm. What? 1.1A.2 R (1) APER applies to the performance by an approved person of:
(a) FCA controlled functions in SUP 10A (FCA Approved Persons) (whether or not approval has been sought and granted); and . (b) PRA controlled functions (whether or not approval has been sought and granted);

FCA 2018/XX in relation to the authorised persons in relation to which that person is an approved person. (2) APER also applies to the performance by an approved person of any other functions in relation to the carrying on of a regulated activity by the authorised persons referred to in (1) their authorised approved person employer. (3) Subject to (4), APER does not apply to conduct to which COCON applies. (4) APER applies to conduct to which COCON does not apply under COCON 1.1.8AR (To what conduct does it apply?). … Coverage of APER 1.1A.6 G APER 1.1A.7G gives examples of the effect of APER 1.1A.1R and APER 1.1A.2R. The first column says whether the example involves an FCAapproved person in relation to one or two firms and the second column says whether the example involves a PRA-approved person. So for example if there is a “Yes” in both columns that means that the example concerns a person who has been approved both by the FCA and by the PRA. The third second column explains what functions APER covers in the scenario set out in the first two columns column. The table is divided between cases in which the person performs the controlled function for an FCA-authorised person and ones where the person does so for a PRA-authorised person. 1.1A.7 Table: Examples of what activities APER APER covers FCA approved PRA approved Coverage of APER APER FCA-authorised person (1) Yes, in relation to firm A Not applicable Applies to the FCA controlled function. Also applies to any other function performed for firm A in relation to the carrying on by firm A of a regulated activity even if it is not a controlled function. (2) Yes, in relation to firm A. No, in relation to firm B, Not applicable In relation to firm A, the answer is the same as for scenario (1). However, APER does not apply to any function that the approved person carries on in relation to firm B even if that function relates to regulated activities carried out by firm B. However, if the function that he performs they perform in

FCA 2018/XX relation to firm B is a controlled function the approved person and firm B may be subject to legal sanctions (see SUP 10A.13.1G to SUP 10A.13.2G). PRA-authorised person that is not a relevant authorised person, or a Solvency II firm or a small non-directive insurer. (3) Yes, in relation to firm A No The answer is the same as for scenario (1). (4) No Yes, in relation to firm A Applies to PRA controlled function. Also applies to any other function performed for firm A in relation to the carrying on by firm A of a regulated activity even if it is not a controlled function. (5) Yes, in relation to firm A Yes, in relation to firm A Applies to FCA controlled function and PRA controlled function. Also applies to any other function performed for firm A in relation to the carrying on by firm A of a regulated activity even if it is not a controlled function. (6) Yes, in relation to firm A. No, in relation to firm B, Yes, in relation to firm A. No, in relation to firm B, In relation to firm A, the answer is the same as for scenario (5). However, APER does not apply to any function that the approved person carries on in relation to firm B even if that function relates to regulated activities carried out by firm B. However, if the function that he performs in relation to firm B is a controlled function the approved person and firm B may be subject to legal sanctions (see SUP 10A.13.1G to SUP 10A.13.21G). PRA-authorised person that is a relevant authorised person, a Solvency II firm or a small non-directive insurer. (7) Yes, in relation to firm A No No. APER does not apply to approved persons of relevant authorised persons, Solvency II firms or small non-directive insurers. COCON applies instead. (8) No Yes, in relation to firm A The answer is the same as for scenario (7). (9) Yes, in relation to firm A Yes, in relation to firm A The answer is the same as for scenario (7).

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1.1A.8 G (1) A person may be an approved person in relation to more than one firm. When that is the case, APER applies in relation to all those firms. (2) APER does not apply if the firm is a relevant authorised person or a Solvency II firm an SMCR firm, except for approved persons of an appointed representative of a relevant authorised person, a Solvency II firm or a small non-directive insurer an SMCR firm. (3) If a person is an approved person of a firm (A) that is not a relevant authorised person, a Solvency II firm or a small non-directive insurer an SMCR firm and also of another firm (B) that is either a relevant authorised person, a Solvency II firm or a small non-directive insurer an SMCR firm, the result is:
(a) APER applies to the approved person in relation to firm A; and (b) COCON applies to the approved person in relation to firm B. 1.1A.9 G (1) APER 1.1A refers to the authorised person in relation to which a person is an approved person’s firm. This means their authorised approved person employer. It also refers to an approved person of a firm. … (3) Section 59(1) of the Act describes the first. It covers a person who performs a controlled function under an arrangement entered into by an authorised person (“A”). In this case, APER 1.1A refers to the authorised approved person employer is A. (4) Section 59(2) of the Act describes the second. It covers a person who performs a controlled function under an arrangement entered into by a contractor (“B”) of an authorised person (“A”). In this case, APER 1.1A refers to the authorised approved person employer is A (and not B). … 3 Code of Practice for Approved Persons: general
3.1 Introduction
…
3.1.7A G Statements of Principle 1 to 4 apply to all approved persons. A person performing an accountable higher management function is also subject to the additional requirements set out in Statements of Principle 5 to 7 in performing that accountable function. Those responsible under SYSC 2.1.3R

FCA 2018/XX or SYSC 4.4.5R (Apportionment of responsibilities) for the firm’s apportionment obligation will be specifically subject to Statement of Principle 5 (and see, in particular, APER 4.5.6G). In addition, it will be the responsibility of any such approved person to oversee that the firm has appropriate systems and controls under Statement of Principle 7 (and see, in particular, APER 4.7.3G). …
3.1.9 G …
3.1.10 R (1) In the case of an approved person approved to perform a controlled
function in SUP 10A.1.15R to SUP 10A.1.16BR (appointed representatives), a reference in in APER 2 to APER 4 to a firm is a reference to:
(a) the appointed representative in relation to which that approved person performs the controlled function in SUP 10A.1.15R to SUP 10A.1.16BR; and (b) their authorised approved person employer. (2) For the purposes of Statements of Principle 5 to 7 the reference is only to (a). … 4 Code of Practice for Approved Persons: specific …
4.5 Statement of Principle 5
…
4.5.6 G In the case of an approved person who is responsible under SYSC 2.1.3R (1)
or SYSC 4.4.5R(1) for dealing with the appointment of responsibilities under SYSC 2.1.1R or SYSC 4.4.3R, failing to take reasonable care to maintain a clear and appropriate apportionment of significant responsibilities among the firm’s directors and senior managers falls within APER 4.5.2G. …
4.7 Statement of Principle 7
…
4.7.3 G Failing to take reasonable steps to implement (either personally or through a
compliance department or other departments) adequate and appropriate systems of control to comply with the relevant requirements and standards of the regulatory system in respect of the regulated activities of the firm in question (as referred to in Statement of Principle 7) falls within APER

FCA 2018/XX
4.7.2G. In the case of an approved person who is responsible, under SYSC 2.1.3R(2) or SYSC 4.4.5R(2), with overseeing the firm’s obligation under SYSC 3.1.1R or SYSC 4.1.1R, failing to take reasonable care to oversee the establishment and maintenance of appropriate systems and controls falls within APER 4.7.2G. …
4.7.9 G In the case of the money laundering reporting officer, failing to discharge
the responsibilities imposed on them by the firm in accordance with SYSC 3.2.6IR or SYSC 6.3.9R falls within APER 4.7.2G.
4.7.10 G In the case of an approved person performing an accountable higher
management function responsible for compliance in respect of the following provisions, failing to take reasonable steps to ensure that appropriate compliance systems and procedures are in place falls within APER 4.7.2G:
(1) SYSC 3.2.8R; or [deleted]
…
…
Review and improvement of systems and procedures
4.7.14 G Where independent reviews of systems and procedures have been
undertaken and result in recommendations for improvement, the approved person performing an accountable higher management function should ensure that, unless there are good reasons not to, any reasonable recommendations are implemented in a timely manner (APER 4.7.10G 4.7.8G). What is reasonable will depend on the nature of the inadequacy and the cost of the improvement. It will be reasonable for the approved person performing an accountable higher management function to carry out a cost benefit analysis when assessing whether the recommendations are reasonable.

FCA 2018/XX
Annex G
Amendments to the Fit and Proper test for Approved Persons and Specified Significantharm Functions Fit and Proper test for Employees and Senior Personnel sourcebook (FIT) In this Annex, underlining indicates new text and striking through indicates deleted text. Where a cross-reference is amended by paragraph F of this instrument, that change is not shown. 1 General
1.1 Application and purpose
1.1.1 G FIT FIT applies to:
(1) a firm (including a relevant authorised person an SMCR firm); (2) an applicant for Part 4A permission; (3) an EEA firm, or a Treaty firm or a UCITS qualifier that wishes to establish a branch into the United Kingdom using EEA rights, or Treaty rights; or UCITS directive rights (see SUP 10A.1.10G and SUP 10A.1.11R), or apply for a top-up permission (see SUP 10A.1.13R); (4) an approved person performing an FCA controlled function; (5) a candidate for an FCA controlled function; (6) a certification employee performing an FCA-specified significantharm FCA certification function; and (7) a person whom a firm an SMCR firm is proposing to certify to perform an FCA-specified significant-harm FCA certification function.
1.1.2 G The purpose of FIT is to set out and describe the criteria that:
(1) a relevant authorised person an SMCR firm should consider when:
(a) assessing the fitness and propriety of a candidate whom the firm is proposing to put forward for approval as an FCAapproved SMF manager; (b) assessing the continuing fitness and propriety of a person approved to perform the function of an FCA-approved SMF manager, including for formulating an opinion about whether there are any grounds on which the regulator could withdraw

FCA 2018/XX the approval given to that individual to perform that function under section 63(2A) of the Act; (c) assessing the fitness and propriety of a person whom the firm is proposing to certify to perform an FCA-specified significant-harm FCA certification function; and (d) assessing the continuing fitness and propriety of a person whom the firm has certified to perform an FCA-specified significant-harm FCA certification function. (2) the FCA will consider when assessing the fitness and propriety of a candidate for a controlled function, including a designated senior management function (see generally SUP 10A and SUP 10C on approved persons), and may consider when assessing the continuing fitness and propriety of approved persons.
1.1.3 G The table in FIT 1.1.4G summarises the situations to which FIT applies.
1.1.4 G Table: Situations to which FIT applies
What FIT applies to
Does it apply to relevant authorised persons SMCR firms?
Does it apply to firms that are not relevant authorised persons SMCR firms? Comment (1) A firm assessing the fitness and propriety of a candidate whom the firm is proposing to put forward for approval Yes No However, the answer to Question 11 in SUP 10A
Annex 1 (Frequently
asked questions) says that the FCA’s approval process is not a substitute for the checks that a firm should be carrying out on its prospective recruits. FIT may be a useful guide to matters that a firm that is not a relevant authorised person an SMCR firm should take into account. (2) A firm assessing the continuing fitness Yes No However, a firm should employ personnel with the skills, knowledge and

FCA 2018/XX and propriety of an approved person expertise necessary for the discharge of the responsibilities allocated to them (SYSC 5.1). FIT may be a useful guide to matters which a firm should take into account if it is not a relevant authorised person an SMCR firm. (3) The FCA assessing the fitness and propriety of a candidate for approval as an approved person Yes Yes (4) The FCA assessing the continuing fitness and propriety of an approved person Yes Yes (5) A firm assessing the fitness and propriety of a person whom a firm is proposing to certify to perform an FCA-specified significant-harm FCA certification function Yes No See the comment on row (2) (6) A firm assessing the continuing fitness and propriety of a person whom a firm has certified to perform an FCAspecified significant-harm FCA certification function Yes No See the comment on row (2)

FCA 2018/XX
1.2 Introduction
1.2.-1 G Under section 60A(1) of the Act, before a relevant authorised person an SMCR firm may make an application for the FCA’s approval of a designated senior management function, controlled function the relevant authorised person firm must be satisfied that the person for whom the application is made is a fit and proper person to perform that function.
1.2.1 G Under section 61(1) of the Act (Determination of applications), the FCA
may grant an application for approval made under section 60 (Applications for approval) of the Act only if it is satisfied that the candidate is fit and proper to perform the controlled function to which the application relates. 1.2.1A G Under section 63F of the Act, a relevant authorised person an SMCR firm may issue a certificate to a person to perform a specified significant-harm certification function only if it is satisfied that the person is a fit and proper person to perform that function. 1.2.1B G Under sections 60A and 63F of the Act, in assessing whether a person is a fit and proper person to perform an FCA designated senior management function or an FCA-specified significant-harm FCA certification function, a relevant authorised person an SMCR firm must have particular regard to whether that person:
(1) has obtained a qualification; or
(2) has undergone, or is undergoing, training; or (3) possesses a level of competence; or (4) has the personal characteristics; required by general rules made by the FCA. 1.2.1C G The key general rules relating to the criteria listed in FIT 1.2.1B 1.2.1BG include:
(1) in the case of very senior employees, SYSC 4.2 (persons who effectively direct the business) and SYSC 4.3A.3R (management body); (2) for employees personnel of firms generally, SYSC 5.1.1R (the competent employees rule); and (3) in relation to retail activities, TC 2.1.1R, TC 2.1.5BR and TC 2.1.12R (employees’ competence); and (4) for those who are employees of insurance firms, SYSC 3.1.6R. …

FCA 2018/XX
1.2.3A G Under section 63(1) of the Act (Withdrawal of approval), the FCA may withdraw an approval under section 59 given by the FCA or the PRA in relation to the performance by a person of a function if it considers that the person is not a fit and proper person to perform the function.
1.2.4 G The Act does not prescribe the matters which the FCA should take into
account when determining fitness and propriety. However, section 61(2) states that the FCA may have regard (among other things) to whether the candidate or approved person:
(1) has obtained a qualification; or
(2) has undergone, or is undergoing, training; or (3) possesses a level of competence; or (4) has the personal characteristics; required by general rules made by the FCA. 1.2.4A G (1) Under Article 21(1)(d) of the MiFID Org Regulation and articles 34 and 35 of MiFID, the requirement to employ personnel with the knowledge, skills and expertise necessary for the discharge of the responsibilities allocated to them is reserved to the firm’s Home State. Therefore, in assessing the fitness and propriety of:
(a) a person to perform a controlled function; or (b) a certification employee; solely in relation to the MiFID business of an incoming EEA firm, the FCA will not have regard to that person’s competence and capability. (2) Where the function relates to:
(a) matters outside the scope of MiFID; or (b) business outside the scope of the MiFID business of an incoming EEA firm, for example insurance distribution activities in relation to life policies; or (c) matters within the responsibility of the FCA as the Host State regulator, for example money laundering responsibilities (see the money laundering reporting function (CF11 and SMF17)) or (3) below; the FCA will have regard to a person’s competence and capability as well as their honesty, integrity, reputation and financial soundness. (3) The FCA will have regard to a natural person’s competence and capability to the extent they give a personal recommendation or

FCA 2018/XX information about financial instruments, structured deposits, investment services or ancillary services on behalf of a UK branch of:
(a) an investment firm authorised under MiFID; (b) an AIFM investment firm carrying out activities under article 6(4) of the AIFMD (provision of additional services); (c) a UCITS investment firm carrying out activities under article 6(3) of the UCITS Directive (provision of additional services); or (d) a credit institution. (4) (3) is the result of the combined effect of articles 25(1) (Assessment of suitability and appropriateness and reporting to clients) and 35(8) (Establishment of a branch) of MiFID. (5) (1) to (4) are also relevant to the matters an EEA relevant authorised person EEA SMCR firm should take into account when assessing any staff being assessed under FIT. Where, under (1) to (4):
(a) the FCA will have regard to a person’s competence and capability, so should a firm when assessing any staff being assessed under FIT; and (b) the FCA will not have regard to a person’s competence and capability, a firm need not do so either when assessing any staff being assessed under FIT. 1.2.4B G Where the application relates to a function within a Solvency II firm and is for an FCA controlled function which is also a Solvency II Directive ‘key function’ as defined in the PRA Rulebook: Glossary, then the FCA will also have regard to the assessment made by the firm as required in article 273 of the Solvency II Regulation (EU) 2015/35 of 10 October 2014; Rules 2.1 and
2.2 of the PRA Rulebook: Solvency II Firms: Insurance - Fitness and
Propriety, and other factors, as set out in EIOPA Guidelines on system of governance dated 28 January 2015 (see Guideline 16).
1.3 Assessing fitness and propriety
1.3.1 G The FCA will have regard to a number of factors when assessing the fitness
and propriety of a person to perform a particular controlled function, as more particularly described in FIT 2 (Main assessment criteria). 1.3.1A G The FCA would expect firms that are required to assess the fitness and propriety of staff being assessed under FIT to have regard to substantially the same factors as those outlined in FIT 2. 1.3.1B G In the FCA’s view, the most important considerations will be the person’s:

FCA 2018/XX
(1) honesty, integrity and reputation;
(2) competence and capability; and
(3) financial soundness.
1.3.2 G In assessing fitness and propriety, the FCA will also take account of the
activities of the firm for which the controlled function is or is to be performed, the permission held by that firm and the markets within which it operates. 1.3.2A G A relevant authorised person An SMCR firm assessing the fitness and propriety of staff being assessed under FIT should consider:
(1) the nature, scale and complexity of its business, the nature and range of financial services and activities undertaken in the course of that business; and (2) whether the candidate or person has the knowledge, skills and experience to perform the specific role that the candidate or person is intended to perform. 1.3.2B G A relevant authorised person An SMCR firm is reminded that, in assessing a candidate for a position within the management body of the firm, SYSC 4.3A.3R(3) requires the firm to ensure that the management body, as a collective, possesses adequate knowledge, skills and experience to understand the firm’s activities.
1.3.3 G The criteria listed in FIT 2.1 to FIT 2.3 are guidance and will be applied in
general terms when the FCA is determining a person’s fitness and propriety. It would be impossible to produce a definitive list of all the matters which would be relevant to a particular determination. A relevant authorised person An SMCR firm assessing the fitness and propriety of staff being assessed under FIT should be guided by substantially the same criteria in FIT 2.1 to FIT 2.3 (to the extent applicable to the firm), recognising that this is not intended to be a definitive list of matters to be considered.
1.3.4 G If a matter comes to the FCA’s attention which suggests that the person
might not be fit and proper, the FCA will take into account how relevant and how important it is. In the same way, if a matter comes to the attention of a relevant authorised person an SMCR firm which suggests that any staff being assessed under FIT might not be fit and proper, the firm should take into account how relevant and how important that matter is. 1.3.4A G A relevant authorised person An SMCR firm assessing the continuing fitness and propriety of an approved person is required to notify the FCA under section 63(2A) of the Act if it forms the opinion that there are grounds on which the FCA could withdraw its approval (see SUP 10C.14.24R). In discharging its obligation to notify the FCA, a relevant authorised person an SMCR firm should take into account how relevant and how important the matter is that comes to its attention which suggests an approved person

FCA 2018/XX might not be fit and proper before determining that a notification should be made. 1.3.4B G A relevant authorised person An SMCR firm assessing the continuing fitness and propriety of staff being assessed under FIT should assess the role that the individual is actually performing at the time the assessment is done. For this purpose, the assessor(s) should be provided with an up-to-date job description for that individual in advance of the assessment.
1.3.5 G During the application process for a controlled function, the FCA may
discuss the assessment of the candidate’s fitness and propriety informally with the firm making the application and may retain any notes of those discussions. 2 Main assessment criteria
2.1 Honesty, integrity and reputation
2.1.1 G In determining a person’s honesty, integrity and reputation, the FCA will
have regard to all relevant matters including, but not limited to, those set out in FIT 2.1.3G which may have arisen either in the United Kingdom or elsewhere. The FCA should be informed of these matters (see SUP 10A.14.17R and SUP 10C.14.18R), but will consider the circumstances only where relevant to the requirements and standards of the regulatory system. For example, under FIT 2.1.3G(1), conviction for a criminal offence will not automatically mean an application will be rejected. The FCA treats each candidate’s application on a case-by-case basis, taking into account the seriousness of, and circumstances surrounding, the offence, the explanation offered by the convicted person, the relevance of the offence to the proposed role, the passage of time since the offence was committed and evidence of the individual’s rehabilitation. 2.1.1A G A relevant authorised person An SMCR firm determining the honesty, integrity and reputation of staff being assessed under FIT, should consider all relevant matters, including those set out in FIT 2.1.3G, which may have arisen either in the United Kingdom or elsewhere. Firms should inform themselves of relevant matters, including checking for convictions for criminal offences (where possible) and contacting previous employers who have employed that candidate or person. If any staff being assessed under FIT has a conviction for a criminal offence, the firm should consider the seriousness of and circumstances surrounding the offence, the explanation offered by that person, the relevance of the offence to the proposed role, the passage of time since the offence was committed and evidence of the individual’s rehabilitation. …
2.1.2 G In considering the matters in FIT 2.1.1G, the FCA will look at whether the
person’s reputation might have an adverse impact upon the firm for which the controlled function is or is to be performed and at the person’s responsibilities.

FCA 2018/XX
2.1.2A G In considering the reputation of staff being assessed under FIT 2.1.1AG a relevant authorised person an SMCR firm should have regard to whether that person’s reputation might have an adverse impact upon the firm for which the function is to be performed and the person’s responsibilities.
2.1.3 G The matters referred to in FIT 2.1.1G to which the FCA will have regard,
and to which a relevant authorised person an SMCR firm should also have regard, include, but are not limited to:
(1) whether the person has been convicted of any criminal offence; this must include, where provided for by the Rehabilitation Exceptions Orders to the Rehabilitation of Offenders Act 1974 or the Rehabilitation of Offenders (Northern Ireland) Order 1978 (as applicable), any spent convictions; particular consideration will be given to offences of dishonesty, fraud, financial crime or an offence under legislation relating to companies, building societies, industrial and provident societies, credit unions, friendly societies, banking, other financial services, insolvency, consumer credit companies, insurance, consumer protection, money laundering, market manipulation and insider dealing, whether or not in the United Kingdom; (2) whether the person has been the subject of any adverse finding or any settlement in civil proceedings, particularly in connection with investment or other financial business, misconduct, fraud or the formation or management of a body corporate; (3) whether the person has been the subject of, or interviewed in the course of, any existing or previous investigation or disciplinary proceedings, by the appropriate regulator, by other regulatory authorities (including a previous regulator), clearing houses and exchanges, professional bodies, or government bodies or agencies; (4) whether the person is or has been the subject of any proceedings of a disciplinary or criminal nature, or has been notified of any potential proceedings or of any investigation which might lead to those proceedings; (5) whether the person has contravened any of the requirements and standards of the regulatory system or the equivalent standards or requirements of other regulatory authorities (including a previous regulator), clearing houses and exchanges, professional bodies, or government bodies or agencies; (6) whether the person has been the subject of any justified complaint relating to regulated activities; (7) whether the person has been involved with a company, partnership or other organisation that has been refused registration, authorisation, membership or a licence to carry out a trade, business or profession, or has had that registration, authorisation, membership or licence

FCA 2018/XX revoked, withdrawn or terminated, or has been expelled by a regulatory or government body; (8) whether, as a result of the removal of the relevant licence, registration or other authority, the person has been refused the right to carry on a trade, business or profession requiring a licence, registration or other authority; (9) whether the person has been a director, partner, or concerned in the management, of a business that has gone into insolvency, liquidation or administration while the person has been connected with that organisation or within one year of that connection; (10) whether the person, or any business with which the person has been involved, has been investigated, disciplined, censured or suspended or criticised by a regulatory or professional body, a court or Tribunal, whether publicly or privately; (11) whether the person has been dismissed, or asked to resign and resigned, from employment or from a position of trust, fiduciary appointment or similar; (12) whether the person has ever been disqualified from acting as a director or disqualified from acting in any managerial capacity; (13) whether, in the past, the person has been candid and truthful in all his their dealings with any regulatory body and whether the person demonstrates a readiness and willingness to comply with the requirements and standards of the regulatory system and with other legal, regulatory and professional requirements and standards.
2.2 Competence and capability
2.2.1 G In determining a person’s competence and capability, the FCA, in
accordance with FIT 1.1.2G, will have regard to all relevant matters including but not limited to:
(1) whether the person satisfies the relevant FCA training and competence requirements in relation to the controlled function the person performs or is intended to perform; (2) whether the person has demonstrated by experience and training that they are suitable, or will be suitable if approved, to perform the controlled function; (3) whether the person has adequate time to perform the controlled function and meet the responsibilities associated with that function. 2.2.1A G In determining a person’s competence and capability to perform an FCA designated senior management function or an FCA-specified significant-

FCA 2018/XX harm FCA certification function, a relevant authorised person an SMCR firm, in accordance with FIT 1.1.2G, should have regard to all relevant matters including but not limited to:
(1) whether the person satisfies any applicable training and competence requirements (in relation to the function that the person performs or is intended to perform); (2) whether the person has demonstrated by experience and training that they are suitable to perform the function they are intended to perform; (3) whether the person has adequate time to perform the function in question and meet the responsibilities associated with that function.
2.2.2 G A person may have been convicted of, or dismissed or suspended from
employment for, drug or alcohol abuses or other abusive acts. This will be considered by the FCA only in relation to a person’s continuing ability to perform the particular controlled function for which the person is or is to be employed. 2.2.2A G The FCA would expect a relevant authorised person an SMCR firm determining the competence and capability of staff being assessed under FIT to consider convictions, dismissals and suspensions from employment for drug or alcohol abuses or other abusive acts only in relation to a person’s continuing ability to perform the particular FCA designated senior management function or an FCA-specified significant-harm FCA certification function for which the person is, or is to be, employed.
2.3 Financial soundness
2.3.1 G In determining a person’s financial soundness, the FCA will have regard,
and a relevant authorised person an SMCR firm should also have regard, to any factors including, but not limited to:
(1) whether the person has been the subject of any judgment debt or award, in the United Kingdom or elsewhere, that remains outstanding or was not satisfied within a reasonable period; (2) whether, in the United Kingdom or elsewhere, the person has made any arrangements with his their creditors, filed for bankruptcy, had a bankruptcy petition served on him them, been adjudged bankrupt, been the subject of a bankruptcy restrictions order (including an interim bankruptcy restrictions order), offered a bankruptcy restrictions undertaking, had assets sequestrated, or been involved in proceedings relating to any of these.
2.3.2 G The FCA will not normally require a candidate to supply a statement of
assets or liabilities. The fact that a person may be of limited financial means

FCA 2018/XX will not, in itself, affect their suitability to perform a controlled function. The FCA would expect a relevant authorised person an SMCR firm to take a similar view in assessing whether staff being assessed under FIT, are fit and proper.

FCA 2018/XX
Annex H
Amendments to the Training and Competence sourcebook (TC) In this Annex, underlining indicates new text and striking through indicates deleted text. 2 Competence
2.1 Assessing and maintaining competence
…
Notification requirements
2.1.31 R A firm must notify the FCA as soon as reasonably practicable after it
becomes aware, or has information which reasonably suggests, that any of the following events has occurred or may have occurred in relation to any of its retail investment advisers, and the event is significant:
…
(3) a retail investment adviser has failed to comply with a Statement of Principle APER or COCON (as applicable) in carrying out their controlled function or has failed to comply with COCON (as applicable); and … … App 6 Accredited bodies App 6.1 Accredited bodies
6.1.1 G …
…
Carrying out effective verification services … …
12. The FCA will expect an accredited body to have in place effective
procedures for carrying out its verification activities. These should include:
(1) verifying that each retail investment adviser who is a member of or subscriber to the accredited body’s verification

FCA 2018/XX service has made an annual declaration in writing that the retail investment adviser has, in the preceding 12 months, complied with APER or, for a relevant authorised person, complied with COCON (as applicable) and completed the continuing professional development required under TC 2.1.15R; … …
14. …
(b) a false declaration in relation to a retail investment adviser’s compliance with APER or COCON (as applicable). ; or (c) for a relevant authorised person , compliance with COCON. … Having appropriate systems and controls in place and providing evidence to the FCA of continuing effectiveness …
17. The FCA will expect an accredited body to have a code of ethics
and to ensure that its code of ethics and verification service terms and conditions do not contain any provisions that conflict with APER or COCON (as applicable). … … Sch 2 Notification requirements Sch 2.1 G Handbook reference Matter to be notified Contents of notification Trigger event Time allowed … … … … … TC 2.1.31R … … … … … … … … … (3) a retail investment

FCA 2018/XX adviser has failed to comply with a Statement of Principle in carrying out his controlled function or, in the case of a relevant authorised person, has failed to comply with APER or, as applicable, COCON; and …

FCA 2018/XX
Annex I
Amendments to the General Provisions (GEN) In this Annex, striking through indicates deleted text. Sch 4 Powers exercised … Sch 4.2 G Powers to make rules The following powers and related provisions in or under the Act have been exercised by the FCA to make the rules in GEN:
…
Section 60A (Vetting of candidates by relevant authorised
persons)
…
…
Sch 4.7 G Powers to direct, require or specify The following powers and related provisions in the Act have been exercised by the FCA in GEN to direct, require or specify:
…
Section 63ZA (Variation of senior manager’s approval at request
of relevant authorised person)
…
Section 63E (Certification of employees by relevant authorised
persons)
Section 64C (Requirement for relevant authorised persons to
notify regulator of disciplinary action) …

FCA 2018/XX
…

FCA 2018/XX
Annex J
Amendments to the Prudential sourcebook for Investment Firms (IFPRU) In this Annex, underlining indicates new text and striking through indicates deleted text. 2 Supervisory processes and governance …
2.4 Reporting of breaches
…
2.4.2 G SYSC 18 (Whistleblowing) contains requirements on UK relevant authorised
persons SMCR banking firms and certain insurers (see SYSC 18.1.1AR) in relation to the adoption and communication of appropriate internal procedures for handling reportable concerns as part of an effective risk management system. SYSC 18.1.1CG provides that firms not otherwise subject to SYSC 18 may nonetheless wish to adopt the provisions in that
chapter as best practice.
…

FCA 2018/XX
Annex K
Amendments to the Prudential sourcebook for Mortgage and Home Finance Firms, and Insurance Intermediaries (MIPRU) In this Annex, underlining indicates new text and striking through indicates deleted text. 2 Insurance and MCD mediation activity: responsibility, knowledge, ability and good repute …
2.2 Allocation of the responsibility for insurance distribution activity or MCD
credit intermediation activity
…
2.2.2 R The firm may allocate the responsibility for its insurance distribution
activity or MCD credit intermediation activity to an approved person (or persons) who is:
(1) (if the firm is not a relevant authorised person):
(a) performing:
(i) an FCA governing function; or
(ii) a PRA governing function;
(other than a person who is a non-executive director of the firm); or (b) performing the apportionment and oversight function; or (c) performing the significant management function in so far as it relates to dealing in investments as principal, disregarding
article 15 of the Regulated Activities Order (Absence of
holding out etc) (or agreeing to do so) or an activity which is not designated investment business; (2) (if a firm is a relevant authorised person) a director of the firm who:
(a) is not a non-executive director; and (b) is an approved person of that firm. [deleted]
2.2.3 G (1) Typically a firm will appoint a director who is an approved person
of that firm to direct its insurance distribution activity or MCD credit

FCA 2018/XX intermediation activity. A firm that is not a relevant authorised person may also appoint a person performing another FCA governing function or PRA governing function. (1A) A firm should not appoint someone performing one of the FCA’s or PRA’s non-executive director controlled functions or any other nonexecutive director. (1B) Where responsibility for a firm’s insurance distribution activity or MCD credit intermediation activity is allocated to a person performing a controlled function that is not in paragraph (1), the firm must ensure that the firm’s insurance distribution activity or MCD credit intermediation activity is appropriately allocated. If the apportionment and oversight function applies to the firm, the person performing the apportionment and oversight function with responsibility for the apportionment of responsibilities should carry out the allocation. (2) The descriptions of significant influence functions, other than the required functions, do not extend to activities carried on by an insurance intermediary with permission only to carry on insurance distribution activity and whose principal purpose is to carry on activities other than regulated activities (see SUP 10A.1.18 R). In this case, the firm may allocate the responsibility for the firm’s insurance distribution activity to one or more of the persons performing the apportionment and oversight function who will be required to be an approved person. (2A) Paragraph (2) does not apply to a relevant authorised person. (3) In the case of a sole trader, the sole trader will be responsible for the firm's insurance distribution activity or MCD credit intermediation activity, as applicable. [deleted] …

FCA 2018/XX
Annex L
Amendments to the Conduct of Business sourcebook (COBS) In this Annex, underlining indicates new text and striking through indicates deleted text. 19 Pensions supplementary provisions …
19.5 Independent governance committees (IGCs)
…
19.5.8 G (1) A firm should consider allocating responsibility for the management
of the relationship between the firm and its IGC to a person at the firm holding an FCA significant-influence function or designated senior management function. … …

FCA 2018/XX
Annex M
Amendments to the Client Assets sourcebook (CASS) In this Annex, underlining indicates new text and striking through indicates deleted text. Where a cross-reference is amended by paragraph F of this instrument, that change is not shown. 1A CASS firm classification and operational oversight … 1A.3 Responsibility for CASS operational oversight 1A.3.1 R … (2) A CASS small firm that is not a relevant authorised person an SMCR firm must make the allocation in (1) to a director or senior manager who is approved to perform a significant influence function for that firm. … 1A.3.1-A G The material in CASS 1A.3.1BG about how CASS 1A.3 fits into the FCA approved persons senior managers and certification regime for relevant authorised persons SMCR firms also applies to a CASS small firm that is an SMCR firm and the function in CASS 1A.3.1R. However:
(1) the function in CASS 1A.3.1R is not an FCA specified significantharm a separate FCA certification function; and (2) the person performing that function will not necessarily be subject to the employee certification regime described in SYSC 27 (Certification Regime) (Senior managers and certification regime:
Certification regime).
…
1A.3.1B G (1) (a) CASS 1A.3.1AR describes the FCA controlled function known as the CASS operational oversight function (CF10a). The table of FCA controlled functions in SUP 10A.4.4R together with SUP 10A.7.9R specify the CASS operational oversight function as an FCA required function for a firm to which CASS 1A.3.1AR applies. (b) The CASS operational oversight function does not apply to a relevant authorised person an SMCR firm. For an SMCR firm, the function in CASS 1A.3.1AR is not a separate controlled function and performing that function does not

FCA 2018/XX require approval as an approved person. Paragraphs (1A) to (4) describe how CASS 1A.3.1AR applies to SMCR firms. (c) However, nothing in paragraphs (1A) to (4) affects the requirement for the function in CASS 1A.3.1AR to be allocated to a single director or senior manager of sufficient skill and authority in accordance with CASS 1A.3.1AR and CASS 1A.3.2AR. (1A) There are three elements of the regime for SMCR firms that are particularly relevant to CASS 1A, although they do not all apply to all SMCR firms:
(a) a firm’s obligation to allocate certain responsibilities to its SMF managers (see SYSC 24 (Senior managers and certification regime: Allocation of prescribed responsibilities)); (b) a firm’s obligation to ensure that one or more of its SMF managers have overall responsibility for each of its activities, business areas and management functions (see SYSC 26 (Senior managers and certification regime: Overall and local responsibility)); and (c) the certification regime (see SYSC 27 (Senior managers and certification regime: Certification regime)). (2) (a) For a firm that is a UK relevant authorised person, the function in CASS 1A.3.1AR is not a separate controlled function and performing that function does not require approval as an approved person. This paragraph (2) explains how CASS 1A.3.1AR applies to an SMCR firm to which SYSC 24 and SYSC 26 both apply. (b) A UK relevant authorised person The firm must allocate overall responsibility for the firm’s compliance with CASS to one of its SMF managers (see SYSC 4.7.5R SYSC 24.2.1R). That responsibility is an “FCA-prescribed senior management responsibility”. The full list of FCA-prescribed senior management responsibilities is in the table in SYSC 24.2.6R. (c) A UK relevant authorised person Although the CASS function in SYSC 24.2.1R is different from the function in CASS 1A.3.1AR, the firm may allocate the function in CASS 1A.3.1AR to the SMF manager in (b). (d) A UK relevant authorised person The firm may allocate the CASS FCA-prescribed senior management responsibility described in (b) to an SMF manager who does not perform any other function coming within the FCA approved persons

FCA 2018/XX regime for relevant authorised persons SMF managers in SMCR firms. See SUP 10C.7 (Other overall responsibility function (SMF18)) and SUP 10C.8.1R (Other local responsibility function (SMF22)) for details. Where this is the case, the manager will be performing the other overall responsibility function or the other local responsibility function. (e) A UK relevant authorised person The firm may choose to allocate the function in CASS 1A.3.1AR to someone who is not an approved person and SMF manager. If so:
(i) that person will be subject to the employee certification regime described in SYSC 27 (Senior managers and certification regime: Certification regime); (ii) that person will be subject to supervision by the SMF manager in (b); and (iii) the function in CASS 1A.3.1AR will be the CASS oversight FCA specified significant-harm FCA certification function in SYSC 27.8.1R. (3) Broadly speaking, paragraph (2) applies to a third-country relevant authorised person, with certain differences In relation to an SMCR firm to which SYSC 24 applies but SYSC 26 does not apply, the guidance in sub-paragraphs (2)(b), (2)(c), and 2(e) applies, but the guidance in sub-paragraph (2)(d) does not apply. (a) SYSC 4.8.6R and SYSC 4.8.9R apply instead of SYSC 4.7.5R and SYSC 4.7.7R; (b) SUP 10C.8 applies instead of SUP 10C.7; (c) the other local responsibility function (SMF22) applies in place of the other overall responsibility function (SMF18). (4) (a) The position of an incoming EEA firm that has a top-up permission SMCR firm to which neither SYSC 24 nor SYSC 26 apply is slightly different. (b) The firm may choose to allocate the function in CASS 1A.3.1AR to an SMF manager. (c) The firm may instead choose to allocate the function in CASS 1A.3.1AR to someone who is not an SMF manager. (d) Where (c) applies, the person performing the function in CASS 1A.3.1AR will fall into the certification regime. The

FCA 2018/XX function in CASS 1A.3.1AR will be the CASS oversight FCA certification function in SYSC 27.8.1R. (e) FCA-prescribed senior management responsibilities do not apply to an incoming EEA firm that has a top-up permission. There is no requirement in SYSC 4.7 or SYSC 4.8 that an SMF manager in an incoming EEA firm should have overall responsibility for CASS. (f) Having responsibility for CASS may fall within the scope of the EEA branch senior manager function (SMF21). (g) However, having responsibility for CASS may not fall into any controlled function. 1A.3.1C R If, at the time a firm that is not a relevant authorised person an SMCR firm becomes a CASS medium firm or a CASS large firm in accordance with CASS 1A.2.12 R(1) or CASS 1A.2.12 R(2), the firm is not able to comply with CASS 1A.3.1AR because it has no director or senior manager who is an approved person in respect of the CASS operational oversight function, the firm must:
…
1A.3.1D G (1) CASS 1A.3.1CR provides a grace period for a firm that is not a relevant authorised person an SMCR firm to apply for someone to be approved to perform the CASS operational oversight function. (2) There is no equivalent to CASS 1A.3.1CR for a relevant authorised person an SMCR firm, because a person does not need specific FCA approval before carrying out the function. This is explained in (3) to (5), below. (3) As explained in CASS 1A.3.1BG(2), the function in CASS 1A.3.1AR is not, by itself, a controlled function. (4) Therefore, if an approved person is to perform the function for a relevant authorised person an SMCR firm, it can be allocated to any director or senior manager who is already an approved person who is suitable to carry it out. (5) If the function is to be carried out by a certification employee:
…
(b) the firm should:
(i) either issue them with a certificate under SYSC 27 (Senior managers and certification regime:
Certification regime) before the firm becomes a CASS medium firm or a CASS large firm; or

FCA 2018/XX
…
…
11 Debt management client money chapter
…
11.3 Responsibility for CASS operational oversight
CASS small debt management firm other than a not-for-profit debt advice body
11.3.1 R …
(2) A firm that is not a relevant authorised person an SMCR firm must make the allocation in (1) to a director or senior manager approved to perform a significant influence function in relation to that firm. 11.3.1A G CASS 11.3.3G(5) to (11) also apply to a CASS small debt management firm that is an SMCR firm and the function in CASS 11.3.1R. However:
(1) the function in CASS 11.3.1R is not an FCA specified significantharm a separate FCA certification function; and (2) the person performing that function will not necessarily be subject to the employee certification regime described in SYSC 27 (Senior managers and certification regime: Certification Regime regime). … CASS large debt management firm: the CASS operational oversight function (CF10a)
11.3.3 G …
(3) In the case of a firm that is not a relevant authorised person an SMCR firm, the director or senior manager in (2) should be an approved person under the approved persons regime provided for in SUP 10A (FCA Approved Persons). (4) However, the CASS operational oversight function does not apply to a relevant authorised person an SMCR firm. (4A) For an SMCR firm, the function in CASS 11.3.4R is not a separate controlled function and performing that function does not require approval as an approved person. Paragraphs (5) to (11) describe how CASS 11.3.4R applies to such firms. (4B) There are three elements of the regime for SMCR firms that are particularly relevant to CASS 11.3, although they do not all apply to all SMCR firms:

FCA 2018/XX
(a) a firm’s obligation to allocate certain responsibilities to its SMF managers (see SYSC 24 (Senior managers and certification regime: Allocation of prescribed responsibilities)); (b) a firm’s obligation to ensure that one or more of its SMF managers have overall responsibility for each of its activities, business areas and management functions (see SYSC 26 (Senior managers and certification regime: Overall and local responsibility)); and (c) the certification regime (see SYSC 27 (Senior managers and certification regime: Certification regime)). (5) For a firm that is a relevant authorised person, the function in CASS 11.3.4R is not a separate controlled function and performing that function does not require approval as an approved person. Paragraphs (6) to (9) explain how CASS 11.3.4R applies to an SMCR firm to which SYSC 24 and SYSC 26 apply. (6) A relevant authorised person The SMCR firm must allocate overall responsibility for the firm’s compliance with CASS to one of its SMF managers (see SYSC 4.7.5R SYSC 24.2.1R). That responsibility is an “FCA-prescribed senior management responsibility”. The full list of FCA-prescribed senior management responsibilities is in the table in SYSC 24.2.6R. (7) A relevant authorised person Although the CASS function in SYSC 24.2.1R is different from the function in CASS 11.3.4R, the SMCR firm may allocate the function in CASS 11.3.4R to the SMF manager in (6). (8) A relevant authorised person The SMCR firm may allocate the CASS FCA-prescribed senior management responsibility described in (6) to an SMF manager who does not perform any other function coming within the FCA approved persons regime for relevant authorised persons SMF managers in SMCR firms. See SUP 10C.7 (Other overall responsibility function (SMF18)) and SUP 10C.8.1R (Other local responsibility function (SMF22)) for details. (9) A relevant authorised person The SMCR firm may choose to allocate the function in CASS 11.3.4R to someone who is not an approved person and SMF manager. If so:
(a) that person will be subject to the employee certification regime described in SYSC 27 (Certification Regime Senior managers and certification regime: Certification regime); (b) that person will be subject to supervision by the SMF manager in (6); and

FCA 2018/XX
(c) the function in CASS 11.3.4R will be the CASS oversight FCA specified significant-harm FCA certification function in SYSC 27.8.1R. (10) Broadly speaking, paragraphs (1) to (9) apply to a third-country relevant authorised person, with certain differences: In relation to an SMCR firm to which SYSC 24 applies but SYSC 26 does not apply the guidance in paragraphs (6), (7) and (9) applies, but the guidance in paragraph (8) does not apply. (a) SYSC 4.8.6R and SYSC 4.8.9R apply instead of SYSC 4.7.5R and SYSC 4.7.7R; (b) SUP 10C.8 applies instead of SUP 10C.7; (c) the other local responsibility function (SMF22) applies in place of the other overall responsibility function (SMF18). (11) (a) The position of an incoming EEA firm that has a top-up permission SMCR firm to which neither SYSC 24 nor SYSC 26 apply is slightly different. (b) The firm may choose to allocate the function in CASS 11.3.4R to an SMF manager. (c) The firm may instead choose to allocate the CASS function to someone who is not an SMF manager. (d) Where (c) applies, the person performing the function in CASS 11.3.4R will fall into the certification regime. The function in CASS 1A.3.1AR will be the CASS oversight FCA certification function in SYSC 27.8.1R. (e) FCA-prescribed senior management responsibilities do not apply to an incoming EEA firm that has a top-up permission. There is no requirement in SYSC 4.7 or SYSC 4.8 that an SMF manager in an incoming EEA firm should have overall responsibility for CASS. (f) Having responsibility for CASS may fall within the scope of the EEA branch senior manager function (SMF21). (g) However, having responsibility for CASS may not fall into any controlled function. …
11.3.5 R If, at the time a CASS debt management firm that is not a relevant
authorised person an SMCR firm becomes a CASS large debt management firm in accordance with CASS 11.2.8R, the firm is not able to comply with CASS 11.3.4R because it has no director or senior manager who is an

FCA 2018/XX approved person in respect of the CASS operational oversight function, the firm must:
…
11.3.5A G (1) CASS 11.3.5R provides a grace period for a firm that is not a relevant authorised person an SMCR firm to apply for someone to be approved to perform the CASS operational oversight function. (2) There is no equivalent to CASS 11.3.5R for a relevant authorised person an SMCR firm, because a person does not need specific FCA approval before carrying out the function. This is explained in (3) to (5), below. (3) As explained in CASS 11.3.3G, the function in CASS 11.3.5R is not, by itself, a controlled function. (4) Therefore, if an approved person is to perform the function for a relevant authorised person an SMCR firm, it can be allocated to any director or senior manager who is already an approved person who is suitable to carry it out. (5) If the function is to be carried out by a certification employee:
…
(b) the firm should:
(i) either issue them with a certificate under SYSC 27 (Senior managers and certification regime:
Certification regime) before the firm becomes a CASS large debt management firm; or … …

FCA 2018/XX
Annex N
Amendments to the Supervision manual (SUP) In this Annex, underlining indicates new text and striking through indicates deleted text. Where a cross-reference is amended by paragraph F of this instrument, that change is not shown.
Part 1: Comes into force [ ] 2018 [shortly after instrument is made]
10C.13 Variation of conditional and time-limited approvals Purpose 10C.13.1 G … 10C.13.2 G (1) … (2) This section does not deal with the FCA’s policies on varying a condition on its own initiative. DEPP 8 deals with that. However this section gives a short description of the FCA’s powers to impose such variations. Variation of a conditional approval at the request of the firm: general description 10C.13.3 G A firm may apply to the FCA to change a conditional or time-limited approval. The changes for which a firm may apply are:
(1) a variation of the condition;
(2) removal of the condition; and
(3) the imposition of a new condition; or (4) where the approval is time-limited:
(a) varying the time limit; or
(b) removing the time limit.
10C.13.4 G (1) If a firm is applying for a change of the type described in SUP 10C.13.3G(1) or SUP 10C.13.3G(2), There are requirements about whether the firm applying for a change described in SUP 10C.13.3G should apply to the FCA if the FCA imposed that condition, even if the approval was given by or the PRA. Paragraphs (2) to (3) summarise these requirements.

FCA 2018/XX
(2) If the firm is applying for the imposition of a new condition, the firm should apply to the FCA if the approval to which the application relates was given by the FCA. (2A) If a firm is applying for a change of the type described in SUP 10C.13.3G(1) or SUP 10C.13.3G(2), the firm should (subject to (2C)) apply to the FCA if the FCA imposed that condition, even if the approval was given by the PRA. (2B) If a firm is applying for a change of the type described in SUP 10C.13.3G(4), the firm should subject to (2C)) apply to the FCA if the FCA imposed that time limit, even if the approval was given by the PRA. (2C) Where the time limit or condition has been varied before and the FCA was the last to vary it, the firm should apply to the FCA. This applies whether the variation was made on the application of the firm or on the initiative of the FCA or the PRA. (3) In other cases, the application should be to the PRA. 10C.13.5 G The power right to apply for a variation does not apply to include the right to apply for a time limitation where the current approval has effect for an unlimited period. 10C.13.5A G The procedures described in this section for the variation of an approval at the request of a firm do not apply where the condition or time limit has effect by virtue of section 66 of the Act (Disciplinary powers). … 10C.13.24 G The FCA may vary an approval by:
(1) imposing a condition;
(2) varying a condition;
(3) removing a condition; or
(4) limiting the period for which the approval is to have effect; or (5) removing or varying a time limit on an approval. …
Part 2: Comes into force 10 September 2018

FCA 2018/XX
After SUP TP 10 (Benchmarks Regulation Transitional Provisions) insert the following new SUP TP 11. The text is not underlined. TP 11 Bank of England and Financial Services Act 2016: Approved persons in insurers
11.1 Application and purpose
11.1.1 R (1) SUP TP 11 applies to SMCR insurance firms.
(2) SUP TP 11.15 applies to every firm.
11.1.2 G (1) SUP TP 11 has transitional provisions relating to the changes to the
approved persons regime made by Part 2 of the Bank of England and Financial Services Act 2016 and the Individual Accountability (Dual-Regulated Firms) Instrument 2018. (2) In particular, it has procedures for converting existing approvals for the performance of controlled functions into approvals for the corresponding designated senior management functions.
11.1.3 G (1) The main time period for which SUP TP 11 operates is 2018.
(2) There are transitional provisions that can apply beyond that period. They are based on events occurring during that period.
11.1.4 G Most of SUP TP 11 relates SUP 10C.
11.1.5 G SUP TP 11.22 has a glossary of terms used in SUP TP 11 which have
meanings that only apply in SUP TP 11. These terms appear in bold type in SUP TP 11.
11.2 Conversion of existing approvals
11.2.1 R If the conditions set out in SUP TP 11.2.2R are met, a pre-implementation
approval in relation to a particular approved person (AP) and a particular SMCR insurance firm (F) has effect on and after the commencement date as if it had been given in relation to the FCA-designated senior management function or FCA-designated senior management functions specified in SUP TP 11.2.2R(2) and (3).
11.2.2 R Those conditions are:
(1) the pre-implementation approval is in effect in relation to F:
(a) (in the case of a notifying firm) at the firm specific date; and (b) immediately before the commencement date;

FCA 2018/XX
(2) AP is performing an FCA-designated senior management function in relation to F on the commencement date; (3) the pre-implementation approval in (1) is potentially convertible into approval for the FCA-designated senior management function in (2); and (4) (in the case of a notifying firm) F has notified the FCA:
(a) between the first notification date and the commencement date; (b) that it considers that the pre-implementation approval will be converted into approval for the FCA-designated senior management function in (2) under SUP TP 11.2.
11.2.3 R (1) A pre-implementation approval is potentially convertible into
approval for an FCA-designated senior management function if a single row within the applicable part of the mapping table in SUP TP 11.2.5R contains both:
(a) the pre-implementation controlled function for which that pre-implementation approval was given; and (b) that FCA-designated senior management function. (2) An approval for a pre-implementation controlled function excluded from SUP TP 11 by SUP TP 11.4.2R is not potentially convertible into approval for any FCA-designated senior management function. (3) An approval for a pre-implementation controlled function is not potentially convertible into approval for an FCA-designated senior management function in relation to a firm if either that preimplementation controlled function or that FCA-designated senior management function does not apply to the firm.
11.2.4 R (1) Part One of the table in SUP TP 11.2.5R applies to a non-notifying
firm.
(2) Part Two of the table in SUP TP 11.2.5R applies to a notifying firm.
11.2.5 R Mapping table: Potential conversion of approval for existing controlled
functions into approval for designated senior management functions

FCA 2018/XX
Part One (non-notifying firms)
(1)
Pre-Implementation Controlled
Function
(2)
New FCA-designated senior management function Executive functions Director function Executive director function Chief executive function Executive director function Director of unincorporated association function Executive director function Small friendly society function Executive director function Required functions Compliance oversight function Compliance oversight function Money laundering reporting function Money laundering reporting function
Part Two (notifying firms)
(1)
Pre-Implementation Controlled
Function
(2)
New FCA-designated senior management function Executive functions Director function (a) Executive director function (b) Conduct risk oversight (Lloyd’s) function Director of unincorporated association function Executive director function Small friendly society function Executive director function Oversight functions Chair of the nomination committee function Chair of the nomination committee function Chair of the with-profits committee function Chair of the with-profits committee function Systems and controls

FCA 2018/XX
Systems and controls function Other local responsibility function Required functions Compliance oversight function Compliance oversight function Money laundering reporting function Money laundering reporting function CASS operational oversight function (a) Other overall responsibility function (b) Other local responsibility function Significant management function Significant management function (a) Other overall responsibility function (b) Other local responsibility function (c) EEA branch senior manager function Note for Parts One and Two of this table All references to a new FCA-designated senior management function are to FCAdesignated senior management functions brought into force for the firm concerned by the Individual Accountability (Dual-Regulated Firms) Instrument 2018.
11.2.6 G If a pre-implementation controlled function does not apply to a firm
immediately before the commencement date, the applicable row of the
table in SUP TP 11.2.5R does not apply to it either.
11.2.7 G (1) The general principle is that a pre-implementation approval cannot
be converted to approval for an FCA-designated senior management function if that FCA-designated senior management function will not apply to the firm or to the particular approved person on the commencement date. (2) For example, if none of the FCA-designated senior management functions in a row of the table in SUP TP 11.2.5R apply to a firm on the commencement date, that row does not apply to the firm.
11.2.8 G Another example of the principle in SUP TP 11.2.7G is that if:
(1) the result of SUP TP 11.2 would be that an approved person is deemed to be approved to perform the other overall responsibility function or the other local responsibility function; and

PS18/15: Extending the Senior Managers and Certification Regime to insurers

Lineage: In force

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