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SM&CR temporary arrangements extended to 9 months for FCA solo-regulated firms

07 April 2020. Published by Jonathan Charwat, Senior Associate

As well as giving general guidance on its expectations on how solo-regulated firms should be complying with SM&CR during the COVID-19 pandemic, the FCA has announced that it will permit unapproved individuals to cover for Senior Managers for up to 36 weeks. In a separate joint statement, the FCA and PRA confirmed that this rule change will not apply to dual-regulated firms but that the position is under review.

In a previous blog post, we considered the challenges posed by COVID-19 in relation to SM&CR compliance and set out some questions that firms might want to consider in addressing these. The FCA Statement and joint FCA and PRA Statement gives further guidance. 

  • '12 week rule' is now the '36 week rule' for FCA regulated firms

In recognition of the heightened need for temporary arrangements to cover absences, firms are now able to appoint an individual (not approved by the FCA) to cover for the temporary absence of a Senior Manager for up to 36 weeks. Temporary absence can include staff that are furloughed (see also below). 

Where a firm needs to rely on this modification of the rules, it should notify the FCA that temporary arrangements are to last longer than 12 weeks and that it consents to the modification. No details are provided on how to notify, but we would suggest getting in touch with your regular contact and/or checking Connect to see if it has the necessary functionality.

Note that this modification to the rules does not currently apply to dual regulated firms but the FCA and PRA are looking into whether it should (see FCA and PRA Statement).

  • No need to submit updated Statement of Responsibilities (SoR)

To minimise the burden on firms at this time, the FCA has confirmed that firms do not need to submit updated SoRs for temporary changes in responsibilities in response to the pandemic. However, firms should still clearly document any changes to responsibilities and functions which may include, as noted last week, updating governance maps and job descriptions.

  • Furloughed staff

Senior managers put on temporary furlough will retain FCA approval during the absence and do not need to be re-approved on their return. 

Note that the FCA expects that certain required functions such as Compliance Oversight, the MLRO, or Limited Scope Function should only be furloughed as a last resort.