Section 3 Flashcards
Senior manager and certification regime: two distinct categories
: Senior Management Functions (SMFs)
and Certification Functions (AKA “Significant Harm Functions”).
Fitness and propriety assessed for [what?] by the regulator
SMFs
Fitness and propriety assessed for [what?] by the firm. Verification sent to the regulator every year.
Certification employees
Code of Conduct …
governs the conduct of all relevant employees (i.e. excludes ‘ancilliary staff’.)
The Certification Regime
The Certification Regime requires firms to assess, both at the recruitment stage and on an annual basis thereafter, the fitness and propriety of certain employees within the firm who could pose a risk of significant harm to the firm or any of its customers. Such employees include material risk-takers, those performing risk of significant harm functions, and anyone supervising a certified person.
Fit and proper test
- Honesty, integrity and reputation • Employment history (six years) • Criminal convictions (no time limit) • Breaches of FCA/PRA rules • Complaints - Competence and capability • Exam success • Experience and training - Financial soundness • Bankruptcy
Insufficient information
If the FCA/PRA receives insufficient information about the applicant they will continue to process the application, but will ask for further clarification.
The Directory
The Directory replaces the old Financial Services Register. It contains a range of information about key individuals, e.g. Senior Managers and Certified Persons. It is a searchable database available to the public.
Senior management functions prescribed responsibility:
- Given to the Senior Manager who is the most senior person responsible for that
activity or area - Set out in a Statement of Responsibilities (SoR)
Senior managers will have a Duty of Responsibility
- The regulators can take action against a Senior Manager where they can show that:
• There was misconduct by the Senior Manager’s firm
• The Senior Manager was responsible for the management of the firm’s related activities
• The Senior Manager did not take such steps to avoid the misconduct - The burden of proof lies with the FCA
Prescribed responsibility examples
• Responsibility for implementation and oversight of:
̵ Senior Manager Regime and Certification Regime
̵ Training and notifications for Conduct Rules
• Responsibility for policies and procedures on countering the risk of financial crime
Responsibilities map
Designed to give a collective view of the allocation of responsibilities across a firm. This will assist the regulator identify who to speak to about particular issues and who is accountable if something goes wrong.
• Individual (‘First Tier’) Conduct Rules
- You must act with integrity
• A breach would be to deliberately mislead by act or omission - You must act with due skill, care and diligence
• A breach would be to act without full understanding, without adhering to processes or where regulatory approval has not been gained - You must be open and co-operative with the FCA, the PRA and other regulators
• A breach would be a failure to inform the FCA of anything of a nature that it would reasonably
expect to be informed - You must pay due regard to the interests of customers and treat them fairly
• This effectively extends responsibility for TCF to individuals - You must observe proper standards of market conduct
• A breach would be a failure to comply with the Code of Market Conduct
Second Tier – Senior Manager Conduct Rules
SM1: You must take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively.
SM2: 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.
SM3: 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.
SM4: You must disclose appropriately any information of which the FCA or PRA would reasonably expect notice.
CISI professional code of conduct
personal accountability, client focus, conflict of interest, respect for market partners, professional development, aware of capabilities, respect others and the environment, speak up and listen up.
