Mark Greenwood: Putting the fun in SM&CR functions

It has rarely - if ever - been said that compliance suffers from a lack of acronyms. However, I've decided to introduce a few more in this article by taking a look at the HR within SM&CR.  And, I warn you in advance, this is where it starts to get really exciting!

I'll begin by defining what, in the context of SM&CR, the difference is between a new hire and a change of role. 

When an existing Senior Manager is moving between two FCA authorised firms (that are not part of the same group), this is considered to be a new hire, even where similar duties will be carried out.  Where a person is promoted within a firm, for example, to a director of the firm, this would be considered a change in role.

Firms may find that the job role of a Senior Manager or a Certified Person changes from time to time, perhaps as a result of taking on or relinquishing new responsibilities, or a change in direction in the type of services or regulated activities carried out by the firm.

In this article, I hope to offer guidance on some common ‘change of role' scenarios that a firm might encounter now that the regime has commenced.

Whenever a firm adds or removes a Senior Manager Function from a Senior Manager, it must notify the FCA. This is done by completing either one of, or a combination of, the following forms:

FORM A - Application to perform Senior Management Functions

FORM C - Notice of ceasing to perform controlled functions including Senior Management Functions

FORM E - Internal transfer of a person performing a controlled function

FORM J - Notification of significant changes in responsibilities of a person performing a Senior Management Function.

Now, I will explore a number of different scenarios and confirm which of the above forms would require completion and submission to the FCA and where approval needs to be granted.

Changing A Senior Management Function (SMF)

In cases where an existing Senior Manager is going to take over a Function from another Senior Manager, the FCA must be notified of the change in role and approval must be granted before the change is implemented. The firm will need to complete Form A on behalf of the manager being appointed to the function and Form C for the manager removing the function.

In circumstances where two Senior Managers are swapping Senior Management Functions within a firm, Form E should be completed on behalf of both parties and submitted for approval before the change of roles occurs. Form E should only be completed where an individual is relinquishing a SMF and obtaining a new SMF.

Submission of application to the FCA for approval (Form A & E)

When submitting either of the above forms, the firm will need to ensure a criminal records check has been obtained under the individual's name. This is not sent with the application, but it is required as part of the fitness and propriety (FIT) assessment of the individual to carry out that role.

When sending the application under either Form A or E, the application must be accompanied with a revised Statement of Responsibilities (SoR) which will include the responsibility of the function being applied for and, in the case of Form E, the function being removed. In addition to this, the FCA will also request other documentation specifically in relation to the role.

Submission of application for removal of a Senior Management Function (SMF)

When an individual removes a SMF, a Form C must be completed. The removal will result in either of the two following scenarios:

• Other existing SMFs will be held or;

• No SMFs will held (e.g. to continue as a Certified Person only)

Where other existing SMFs are maintained, Form J will also be required. This is due to the fact that a significant change to that person's responsibilities will be made as a result of the removal of the SMF. A copy of the individual's revised Statement of Responsibilities must always be sent to the FCA with the Form J.

Form J is not required where, after submission of Form C, no SMFs will be held by that person.

Change to a Senior Manager's responsibilities

Where there is a significant change to an individual's responsibilities, it should be confirmed in a revised Statement of Responsibilities (SoR). This will not require notification to the FCA, where a copy of the previous SoR has not been sent to them.

Where a ‘Statement' has previously been submitted to the FCA, the revised ‘Statement' must be sent to the FCA with a completed Form J.

So, there you go, pretty heady stuff! I'll end on another high, with a reminder that all these forms should be submitted through the FCA's CONNECT system. 

Mark Greenwood is group director of compliance services at SimplyBiz

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