The regulator says the proposals will not yet affect approved persons at appointed representative firms, so, for example, firms in adviser networks, with a consultation paper on this market segment due later this year.
It adds: “Principal firms, including the senior managers of principal firms, remain fully responsible for ensuring that their Appointed Representatives and networks comply with our rules.”
The regulator says that under SMCR, its five conduct rules will apply to all financial services staff at FCA authorised firms, meaning that individuals must act with integrity, due care, skill and diligence, be open and cooperative with regulators, pay due regard to customer interests and treat them fairly, and observe proper standards of market conduct.
Some experts say this could represent a big extension of regulation because previously these principles applied only at firm level and to controlled functions but not to all staff.
Considering advisers and investment managers specifically, David Morrey, partner and head of investment management at Grant Thornton UK, says: “The implication of the consultation paper is that most advisers and portfolio managers would not be Senior Managers, unless they are effectively managing a business division.
“They would definitely be part of the Certification population so while they would not need to be directly approved by the FCA they would need have their fitness and probity and competence tested and evaluated by the firm itself.
“Where advisers/managers are partners or directors, they may be senior managers but the FCA are allowing firms to decide they are not in genuine executive roles, i.e. they are primarily client facing, and this would take them out of being SMFs.”
Financial Inclusion Centre director and former chair of the FCA’s external risk and strategy committee, Mick McAteer, says that some adviser firms may have to submit an organogram to the regulator mapping out responsibilities.
He says: “Advisers will not escape the regime completely but the full weight of the responsibility won’t be on every adviser. Bigger adviser firms may have to submit an organogram mapping the main operational responsibilities at executive level – what officers are responsible for what – and that will help them determine who will be a senior manager and who would be under certification.
“For smaller organisations, the detail won’t be the same. It does entail greater personal responsibility. In some ways it is tougher regulation, in some ways it is transferring more responsibility to the firm. It is a definite improvement.”
Linda Gibson, director of regulatory change and compliance risk at BNY Mellon’s Pershing, says: “In preparation for the changes wealth management and advisory companies should be reviewing their governance structures, committees and identifying those individuals who are material risk takers or who have the potential to cause ‘significant harm’ to the firm or its customers.
