Links to topical Policy Statements and Consultation Papers from the Regulator.

• FRC Consultation on the Proposed Changes to the 2015 CASS Standard and Updated CASS Standard : Following the feedback received by the FRC regarding the ‘Post Implementation Review Providing Assurance on Client Assets to the Financial Conduct Authority’, the FRC recently published a consultation on some proposed revisions to the 2015 CASS Standard. These include the removal of duplicated work that the current standard requires, more focus on Large and Medium CASS firms when they are require a quality control review, the conducting of upfront risk assessments for each CASS firm and acknowledgement of the possible crossover in work between CASS audits and Statutory audits in the systems, governance or controls of an entity.
  
  In addition to the consultation noted above, the FRC has also released a draft amendment of the CASS Standard, which is currently noted to be in effect from January 2020. As noted above, these changes should help to improve both the quality and efficiency with which CASS audits are conducted, and reflect the current regulatory environment with an updated scope.
  
  Please refer to the section below entitled ‘Rosediem response to the FRC’s Call for Feedback regarding the ‘Post Implementation Review Providing Assurance on Client Assets to the Financial Conduct Authority’ to see Rosediem’s response to the original Call for Feedback in December 2018. This was the result of two roundtable sessions co-hosted with the FRC during which Rosediem and several of our clients addressed the questions noted in the Call for Feedback.
 

To access the paper click here : FRC Consultation on the Proposed Changes to the CASS Standard
Providing Assurance on Client Assets to the FCA

• Rosediem response to the FRC’s Call for Feedback regarding the ‘Post Implementation Review Providing Assurance on Client Assets to the Financial Conduct Authority’ : The FRC launched a Call for Feedback regarding the ‘Post Implementation Review Providing Assurance on Client Assets to the Financial Conduct Authority’ to assess the effectiveness of the Client Asset Audit Standard (CASS Standard). Together with the FRC, Rosediem co-hosted two roundtable discussions across a selection of small, medium and large CASS firms. The results of these sessions were summarised for the FRC as a formal response to its Call for Feedback.
  
  Please refer to the links below for a) the Call for Feedback from the FRC and b) Rosediem’s response.
 

To access the paper click here : Rosediem response to the FRC’s Call for Feedback regarding the ‘Post Implementation Review Providing Assurance on Client Assets
to the Financial Conduct Authority’
Post Implementation Review: Providing Assurance on Client Assets to the Financial Conduct Authority - Call for Feedback

• PS19/20 Optimizing the Senior Manager and Certification Regime – Feedback to CP19/4 and Final Rules : With SMCR coming in effect this December for all solo-regulated firms, the FCA has published its final rules on how to optimise the regime based on feedback received from Consultation Paper 19/4 (please see below) in January 2019. This Policy Statement is relevant to all SMCR firms.
  
  The key changes that are noted in this Policy Statement are:
  
  
  • Confirming that the Head of Legal is not required in SMR
  • Amending the intermediary revenue criterion for the Enhanced Regime
  • Clarification of the requirements and scope of the Certification Regime
  • Including the Systems and Controls Function in the Certification Regime
  • Extending the Senior Management Conduct Rile 4 to non-approved Executive Directors at Limited Scope firms.
  
  The above are all discussed in detail in the paper with notes on the feedback received and the FCA’s response to that feedback.
 

To access the paper click here : PS19/20 Optimising the Senior Manager and Certification Regime – Feedback to CP19/4 and Final Rules

• CP19/4 Optimizing the Senior Managers & Certification Regime and feedback to DP16/4 – Overall responsibility and the legal function : Back in July 2018, the FCA issued near-final rules regarding the Senior Managers and Certification Regime. Based on feedback received from these rules, the FCA has issued this Consultation Paper 19/4 with further proposals to address the points noted in the feedback and help provide clarity on some keys aspects of SMCR.
  
  The proposals in this Consultation Paper are summarised as follows:
  
  
  • Clarification of the application of the SMCR to the Legal Function
  • Amending the intermediary revenue criteria for the Enhanced Regime
  • Amending the scope of the Client Dealing Function
  • Including the Systems and Controls Function in the Certification Regime
  • Applying Senior Manager Conduct Rule 4 to non-approved executive directors at Limited Scope firms
  • Minor changes to the regulatory forms and Handbook
  
  For the above, the FCA has also noted which firms these proposals will be applicable to.
 

To access the paper click here : CP19/4 Optimising the Senior Managers & Certification Regime and feedback to DP16/4 – Overall responsibility and the legal function

• FG19/2 Senior Managers and Certification Regime: Guidance on Statements of responsibilities and Responsibilities Maps for FCA firms : In the countdown to the implementation of SMCR for all solo-regulated firms this December 2019, the FCA has published specific final guidance for all solo-regulated firms on the preparing of Statements of Responsibilities (‘SoR”) and Responsibilities Maps. As per SMCR, all Senior Managers must have a SoR in order to evidence their specific responsibilities to the firm. Additionally, all Enhanced firms must have a responsibilities map.
  
  This Final Guidance details some key points of both good and poor practice for SoRs and Responsibilities Maps, although firms must exercise professional judgement in the application of this guidance. This includes taking into account the size, nature and complexity of the firm. Thus this guidance should serve to inform each key individual and firm but is not in any way an exhaustive representation of how a firm should or should not implement SMCR.
 

To access the paper click here : FG19/2 Senior Managers and Certification Regime: Guidance on Statements of responsibilities and Responsibilities Maps for FCA firms

• PS18/14 Extending the Senior Managers and Certification Regime to FCA firms : The FCA has now published its latest and near-final rules relating to the extension of the Senior Managers and Certification Regime to FCA solo-regulated firms from 9 December 2019. The new regime will replace the Authorised Person Regime currently in place at such firms.
  
  The primary aim of the SM&CR is to minimise consumer harm and strengthen market integrity through making individuals more accountable for their conduct and competence. It aims to i) encourage a culture of staff at all levels taking personal responsibility for their actions and ii) make sure firms and staff clearly understand and can demonstrate where responsibility lies.
  
  The FCA has also created a guidance document 'The Senior Managers and Certification Regime: Guide for FCA solo-regulated firms', which contains a summary of the rules and details how firms can manage their transition from the Approved Persons Regime to SM&CR. Within the guidance, the different steps appropriate for Limited Scope, Core Firms and Enhanced Firms are clearly articulated.
 

To access the paper click here : The Senior Managers and Certification Regime: Guide for FCA solo-regulated firms
Extending the Senior Managers and Certification Regime to FCA firms

• PS18/16 – Final Guidance: the Duty of Responsibility for Insurers and FCA solo-regulated firms : This paper goes hand in hand with the PS18/14 extension of the SM&CR. It refers to the Duty of Responsibility held by Senior Managers of banking firms and, following the extension of the SM&CR, will also apply to Senior Managers of insurers (from 10 December 2018 ) and FCA solo-regulated firms (from 9 December 2019).
  
  Under the Duty of Responsibility, the FCA can take enforcement action against Senior Managers if:
  
  
  • There was a contravention of a relevant requirement by the Senior Manager's firm
  • At the time of the contravention or during any part of it, the Senior Manager was responsible for the management of any of the firm's activities in relation to which the contravention occurred
  • The Senior Manager did not take such steps as a person in their position could reasonably have been expected to take to avoid the contravention occurring or continuing
 

To access the paper click here : Final Guidance: The Duty of Responsibility for Insurers and FCA solo-regulated firms

• CP18/19 – Introducing the Directory : The FCA has published this paper to set out their proposals for a directory of relevant individuals who work at regulated firms to sit alongside the authorities' existing Financial Services Register. Following feedback on previous proposals to reduce the number of individuals listed in the Financial Services Register alongside the extension of the SM&CR, this consultation paper details the FCA's new plan to retain and redesign the existing register and launch "The Directory", so that no information is lost from the public arena. It is intended that The Directory and refreshed Financial Services Register will provide information in a user-friendly format, simplifying the process for validating whether individuals work for an authorised firm.
  
  The current intention is for the following individuals or 'Directory Persons' to include:
  
  
  • All Certified staff (those holding a certification function under the Senior Managers and Certification Regime)
  • Directors not holding a Senior Manager Function – executive and non-executive
  • Other individuals who are sole traders or appointed representatives (including those within appointed representatives) where they are undertaking business with clients and require a qualification to do so
 

To access the paper click here : Introducing the Directory

• PS18/8 Asset Management Market Study remedies and changes to the handbook : The FCA published its latest policy statement relating to the asset management industry in April 2018. The policy statement outlines measures and rule changes it believes will deliver better protection for all investors regardless as to whether they are actively engaged with their investments through to individuals who do not follow their investments closely at all.
  
  Areas of focus include; the nature and number of independent directors a firm should have; the use of appropriate benchmarks; how fund objectives are articulated; the introduction of a new prescribed responsibility under SM&CR; and measures to encourage the movement of investors into cheaper share classes where available.
  
  Firms have 18 months' to implement the rules on assessment of value and appointment of independent directors and 12 months' for the rules related to the way in which fund managers profit from investors buying and selling their funds.
 

To access the paper click here : Changes to the rules for Asset Managers

• The FCA's approach to supervision : This publication is the last in the series of documents the FCA committed to produce detailing their stance to supervision within the "Our Mission" series. This paper concentrates on the regulators approach to supervision of the firms it regulates.
 

To access the paper click here : The FCA's approach to supervision

• The FCA's approach to enforcement : This publication is part of the regulators series of 'approach documents' the FCA committed to produce detailing their stance on their key areas of responsibility. Within this paper the FCA outlines its approach to enforcement.
 

To access the paper click here : The FCA's approach to enforcement

• FCA's business plan 2018 : The FCA's Business Plan shows how they intend to deploy their resources to tackle the challenges they feel are most fundamental to the industry and their mission. They flag inevitably preparing for Brexit to be top of their priority list but also express their intent to remain focused on the use of outsource providers and asset management firms.
 

To access the paper click here : The FCA's business plan 2018/9

• DP 18/2 Transforming Culture in Financial Services : This paper is a collection of 28 essays from thought leading academics, industry leaders, international regulators and change practitioners. It is intended to provide a basis for stimulating further debate on transforming culture in the sector. Whilst no request for input has been made associated with this publication, some of the essays provide useful insights to those hoping to improve the culture within our industry, and may prove beneficial in effecting change should the suggestions be put into action.
 

To access the paper click here : Culture in Financial Services

• Call for input re-tech reporting : In February 2018, the FCA began exploring how technology can improve regulatory reporting and reduce the regulatory burden on firms. Related to this initiative, the FCA and industry have held a number of 'TechSprints' and 'Roundtable Sessions', but this consultation allows all firms to have the chance to comment on these potential developments within the industry.
 

To access the paper click here : Tech Reporting – Call for input

• PS18/2: Client money and unbreakable deposits: Following Consultation Paper CP17/29 this Policy Statement proposes changes to the 30-Day Rule and is designed to ensure consumers continue to be appropriately protected by firms holding their client money and that undue delay would not occur in an insolvency situation. The changes became effective from 22 January 2018. In the paper the FCA sets out that firms will be able to make use of 95-day term or notice deposits for a portion of their client money, subject to client disclosure, controls, policies and stress testing procedures. CMAR requirements have also been amended so that balances held in unbreakable deposits must be reported.
 

To access the paper click here : Client money and unbreakable deposits

• CP17/42: The Duty of Responsibility for insurers and FCA solo-regulated firms: This Consultation Paper sets out how the FCA plans to apply the Duty of Responsibility obligations to insurers and solo-regulated firms once the Senior Managers and Certification Regime is extended. Since May 2016 Duty of Responsibility has already applied to Senior Managers at Banks. The deadline for responses to the CP is 21 February 2018.



To access the paper click here : The Duty of Responsibility for insurers and FCA solo-regulated firms

• CP17/40 Individual Accountability: Transitioning FCA firms and individuals to the Senior Managers & Certification Regime: This consultation paper focuses on how the FCA plans to move firms and their senior staff over to SM&CR. The transition process outlined is designed to be automatic for most firms based on a pre-defined SM&CR mapping table against the current Approved Persons Regime (APR) roles. There are also some concessions for organized firms; for example, firms will not be required to seek historic regulatory references for current staff if they are migrated to SM&CR within the transition timeframe. The key point to note for most firms is that in order to ensure a painless transition some reorganization will be needed upfront in order to ensure that management and individuals are within the right roles before conversion takes place. There are some differences in the conversion approach presented which is based on whether a firm is categorized as limited scope, core or enhanced. The deadline for responses to the CP is 21 February 2018.



To access the paper click here : Individual Accountability

• CP17/37: Consultation Paper on - Industry Codes of Conduct and Discussion Paper on FCA principle 5: This Consultation Paper considers the process and impact of the FCA recognizing industry codes of conduct for unregulated markets. The idea behind the consultation is that whilst the FCA isn't proposing regulating these markets, recognizing industry codes should provide a benchmark for the proper standard of market conduct under the SM&CR Conduct Rules. A discussion paper is also included in this publication in which the FCA puts forward the case for extending the scope of Principle 5 (market conduct) to cover the unregulated activities of authorized firms. The deadline for responses to the CP is 5 February 2018.



To access the paper click here : Industry Codes of Conduct and Discussion Paper on FCA principle 5

• Client Money and Unbreakable Deposits CP17/29: In August 2017 the FCA released its Consultation Paper ("CP"), 'Client Money and Unbreakable Deposits'. The CP aims to address the fact that investment firms are experiencing increased difficulty depositing client money at banks in accordance with the existing CASS requirements. The proposals include permitting firms to deposit an appropriate proportion of client money in unbreakable deposits to a maximum period of 90 days subject to specific conditions which are discussed in the CP. The proposals are intended to enhance the existing CASS regime and improve consumer outcomes by ensuring client money continues to be appropriately protected when it is held by firms. The deadline for responses to the CP is 1 November 2017.



To access the paper click here : Client Money and Unbreakable Deposits

• SMCR Consultation Paper CP17/25: The FCA has now released its consultation paper regarding the extension of the Senior Managers and Certification Regime ("SMCR") to all FCA regulated firms. Within the paper the regulator explains how the SMCR will replace the current approved persons regime and what this will mean for the individuals and firms affected including. Most of the affected firms will only need to apply the core requirements of SMCR, however, some (to be known as 'enhanced firms') will have extra requirements imposed upon them. The deadline for responses to the CP is 3 November 2017.



To access the paper click here : SMCR Consultation Paper

• CASS 7A Policy Statement PS 17/18: This Policy Statement summarizes the Feedback the FCA received to their consultation regarding how the client money distribution rules interact with the special administration regime as well as the updates to the CASS 7A rules which came into effect from 26 July 2017. The aim of these changes are to speed up the distribution of client assets, improve consumer outcomes and reduce the market impact of an investment firms failure.



To access the paper click here : CASS 7A Policy Statement

• Strengthening accountability in banking and insurance: optimisations to the SIMR, and changes to SMR forms CP8/17: In June 2017, the PRA released a consultation paper on changes to the Senior Insurance Managers Regime ("SIMR"). The CP also includes a proposal to strengthen governance through requiring insurers to take steps to encourage board diversity as well as proposing consequential amendments to the Senior Managers Regime ("SMR") forms.



To access the paper click here : Strengthening accountability in banking and insurance

• MiFID II Policy Statement 2 PS17/14: This publication follows on from the FCA's first Policy Statement (PS17/5) published regarding MiFID II implementation, in March 2017. This publication sets out the regulators final rules on conduct issues, including research, inducements, client categorisation, best execution, the appropriateness test, taping, client assets and perimeter guidance. It applies to a wide range of authorized and recognized firms.



To access the paper click here : MiFID II Policy Statement 2

• MiFiD II Policy Statement 1 PS17/5: In the FCA's first policy statement on MiFID II the regulator sets out their near final rules for the UK's implementation of MiFID II on 3 January 2018. Areas covered include markets issues, systems and controls, client assets and commodity position limits. It also provides the industry with an update on the FCA's thinking on proposals for the recording of telephone conversations.



To access the paper click here : MiFiD II Policy Statement 1

• Providing Assurance on Client Assets to the Financial Conduct Authority: The Financial Reporting Counsel (FRC) have established a new ‘Client Asset Assurance Standard’ to govern CASS audits for periods beginning on or after 1 January 2016. The Standard outlines the requirements auditors and their clients must meet going forward. The hope is that the new standard will close the expectation gap of what a CASS audit is designed to deliver. Additionally, the new standard calls for enhanced controls testing and rules mapping as well as asking auditors to make an assessment of the CASS culture at their client firms.”



To access the paper click here : Providing Assurance on Client Assets to the Financial Conduct Authority

• EMIR clearing: This web link can be used to find out more about the clearing obligation under Article 4 of EMIR, which took effect from 21 June 2016. Helpfully it outlines some background and the critical phase-in dates based on firms categorisations and derivatives volumes.



To access the paper click here : EMIR clearing