The FCA’s extended Senior Managers & Certification Regime

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20th December 2017, 8 minute read

The Financial Conduct Authority’s extended Senior Managers & Certification Regime – and what it will mean for marketers in 2019

Whether you’re getting those last minute 2017 marketing campaigns out in time for Xmas or locked in a room with your Commercial team colleagues planning for 2018, you may not have yet heard of the FCA’s extended Senior Managers & Certification Regime, which will be in place in mid-to-late 2019.

Yes, you read it right – 2019. Seems a while away doesn’t it? But once you’ve made your way through the first quarter of next year, you’re likely to be only 18 months away from the new rules – and with plenty of preparation to do before then. Get knowledgeable now and find out how it’s going to affect the key members of your team.  This blog focuses specifically on people who are not Approved Persons but who are, e.g. “Heads of Marketing” and will be brought into individual regulation by the Regime. Although we focus on the marketing angle, the same can equally be applied to ‘Heads of’ roles elsewhere in a firm.

So, read on and find out what’s likely to be expected of you – and it’s a lot more than the old tick-box-share-the-answers-with-your-colleagues-charade that might have passed for OK for the last few years.

I’m the Head of a Marketing department in a mid-sized Financial Services firm, but not currently an Approved Person. Will the proposed extended Senior Managers & Certification Regime apply to me?

Yes.  First, as with most other members of staff, you will become personally subject to compliance with five Conduct Rules:

  • Rule 1: You must act with integrity
  • Rule 2: You must act with due skill, care and diligence
  • Rule 3: You must be open and cooperative with the FCA, the PRA and other regulators
  • Rule 4: You must pay due regard to the interests of customers and treat them fairly
  • Rule 5: You must observe proper standards of market conduct

So as a Head of Marketing, what does this mean for you in your daily duties? You’ll need to undertake the necessary training to ensure that you have a broad understanding and regular awareness of the rules, and a proven deep understanding of the practical application of the rules which are specific to your job.

The change that will really make you sit up is that if you breach any of these rules, your firm may be required to take disciplinary action against you – and further, it will need to notify that action to the Financial Conduct Authority.

Such a notification could have very serious implications on your ability to continue to work in the authorised financial services sector.  

Secondly, as the Head of your Marketing team, you will be regarded by FCA as a person heading up a “significant business unit” and therefore as somebody who will (under the new Regime) be undertaking an “FCA-specified significant-harm function” - basically a role which does, or might involve, a risk of significant harm to your firm or any of its customers. In these circumstances you will become subject to a requirement for annual ‘certification’ as a fit and proper person to undertake your role. What this certification might entail is still up for discussion but it’s unlikely to be prescribed by the FCA, meaning firms will need to build the certification process themselves – but the level of “fitness” will be prescribed and will be equivalent to that already expected of Approved Persons.

I don’t think that I’ll be undertaking an “FCA-specified significant-harm function” because lawyers and/or compliance teams sign off on all outputs from my Department

You and your team would not be able to hide behind your compliance team and their sign-off. Remember FCA Principle 7, one of the fundamental pillars upon which your firm’s lawful conduct of business is based: ‘Your firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading’. The FCA expects your firm to be structured in a manner where responsibility for FCA Principle 7 is taken by a person who is central to the development and generation of communications strategy – i.e. the Head of Marketing. 

What is clear from the rules is that the FCA is looking for firms to proactively generate commitment to, and responsibility for, its regulatory principles, culture and outcomes. That means firms being structured and managed in a manner that clearly allocates responsibility, which prompts engagement with the regulatory regime at all levels. To reiterate the point made earlier, passing final ‘sign-off’ of your marketing materials from one ‘Head of’ one department to another will not be viewed as meeting the spirit of the rules.

Of course, after reading all this and you have (or wish not to have) no responsibility for this area of work within your firm, then your job title should not be as ‘Head’ of an independent business unit. Instead, your work should form part of a department headed by a person who does take personal responsibility.

OK, you’ve convinced me that I may become subject to ‘Certification’. What does that imply for me from 2019 onwards, other than meeting those Conduct Rules?

Your firm must annually issue a certificate, to and in respect of, every person performing a significant-harm function. This must:

  • state that the firm is satisfied that the named person is fit and proper to perform the function(s) to which the certificate relates; and
  • set out the aspects of the affairs of the firm in which the named person will be involved in performing the function.

That doesn’t sound too bad. What will this practically mean for me?

Well, it will involve your firm issuing a certificate (which is subject to verification by the FCA) that you:

  • have obtained any required qualification;
  • have undergone, or are undergoing, training;
  • possess a level of competence; or
  • have the personal characteristics as are required by the FCA.

You’ll have to meet those levels of certification. You firm will be expected to evidence certification by reference to a rigorous examination of FCA specified levels of fitness to undertake certification roles and to be able to demonstrate that:

  • you’re fully ‘on message’;
  • you’re deeply engaged with the FCA’s expectations on firms; and
  • you understand the required outcomes for consumers which the FCA demands.

These issues will be verified, not only by your current firm but, via regulatory reference rules, by any future or from any past employer – so don’t be under the illusion that previous misdemeanours will go unseen.

So, the rules under the new regime don’t sound too bad - so long as you’re deeply engaged with the FCA’s expectations on firms, you understand the required outcomes for consumers which the FCA demands from your role as Head of Marketing, and you relish a deep examination of this commitment on an annual basis… if not then it may be time to consider roles outside the financial services industry!

Many thanks to Malcolm Padgett of who assisted in the creation of this article.

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