New Code of Conduct for Consumer Credit Firms
Earlier this month the FCA released Policy Statement PS18/4. The Statement includes near final rules for the extension of the Senior Managers and Certification Regime (SM&CR) to all FCA regulated firms. This now brings Consumer Credit firms under the same regime as all other financial services firms.
SM&CR will take effect on 9th December 2019. In the first year the new Code of Conduct will only apply to people in Senior Manager or Certification roles. From 9th December 2020 the scope of SM&CR will be extended to all employees, except for a very limited number of people who perform ancillary roles. This phased implementation allows firms time to train all their staff on the new requirements.
The near final rules have changed very little from those initially published in CP17/25. Existing approved persons will be automatically transferred without the need to re-apply, except for non-executive Directors, who are not covered under the new regime. Firms should check now that they have the required approved persons in place. Statements of Responsibilities for these persons must also be created before the new regime commences next year.
There will now be 5 Prescribed Responsibilities that must be allocated to senior managers in Core SM&CR Firms:
1. Performance by the firm of its obligations under the SMR, including implementation and oversight.
2. Performance by the firm of its obligations under the Certification Regime.
3. Performance by the firm of its obligations in respect of notifications and training of the Conduct Rules.
4. Responsibility for the firm’s policies and procedures for countering the risk that the firm might be used to further financial crime.
5. Responsibility for the firm’s compliance with CASS (if applicable).
These Prescribed Responsibilities must be allocated to the most senior manager accountable in each case. Even though most consumer credit firms will not have persons under the Certification Regime they must still have a senior manager with responsibility for performance of its obligations. While this may seem an anomaly, the FCA consider that the firm should review its position each year in case anything has changed.
In addition to those items affecting Core Firms, there are additional Prescribed Responsibilities for Enhanced Firms. However very few consumer credit firms fall into this category. Another category, Limited Scope Firms are not affected.
Under SM&CR firms must notify FCA of any breaches of the Code of Conduct. This must be done within 7 days for breaches by Senior Manager and in an annual return for all other staff. Firms are obliged to report any disciplinary action taken against an individual for a breach of the Conduct Rules. Disciplinary action is that including formal warnings, suspension or dismissal and the reduction or recovery of remuneration. With the FCA encouraging firms to link remuneration to achieving quality standards, a sales agent who fails suffers a commission deduction could become a reportable case. This has the potential to become onerous for firms.
Along with PS18/4 FCA has issued a shorter guide for firms however they still encourage firms to read the full document.