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FCA Publishes finalised SMCR guidance for Solo Regulated Firms on Statements of Responsibility and Management Responsibilities Maps

Posted on 01 March 2019

FCA Publishes finalised SMCR guidance for Solo Regulated Firms on Statements of Responsibility and Management Responsibilities Maps

As readers will know, we have regularly covered developments in respect of the Senior Managers and Certification Regime (SMCR).  The FCA has now published finalised guidance in respect of Statements of Responsibility (SoR) and Management Responsibilities Maps (MRM) for firms authorised by the FCA only (Solo Regulated Firms).  Solo Regulated Firms will fall within the scope of SMCR from 9 December 2019.  The requirement to prepare and file SoR will apply to all Solo Regulated Firms whether defined according to FCA criteria as Limited Scope, Core or Enhanced.  The requirement to additionally prepare and file MRM applies to Enhanced firms only. 

We have not yet properly seen the interaction between SoRs, MRMs and enforcement action.  The case brought against James Staley (See Enforcement Watch 25: PRA and FCA Fine Barclays' CEO James Staley Over Handling of Whistleblowing) whilst touted by the FCA as the first SMCR enforcement case, would probably have been decided the same way before SMCR.  However, because SoRs and MRMs provide FCA Enforcement with a clear, documented road map of responsibilities there can be little doubt that they will be centrally important for future cases.  All Solo Regulated Firms should therefore remind themselves of the purpose and importance of these documents (see below), consider the finalised guidance carefully and then (if they have not already) plan carefully for the run up to 9 December 2019. 

To recap, the SoR is a statement of the "prescribed", "overall" and "other" responsibilities that a Senior Manager holds.   The MRM is an overview of how the firm is managed and governed.  Viewed through an enforcement lens, for Firms, they will help the FCA establish how and where a failure has occurred.  For individuals, they will direct the new statutory duty of responsibility, which requires Senior Managers to take "reasonable steps" to prevent failures in their areas of responsibility.  

In advance of 9 December 2019, all Solo Regulated Firms have to prepare an SoR for each of its prospective Senior Managers.  However, only Enhanced Firms are required to file their SoR's with the FCA.  Whilst the requirement to prepare MRM's applies only to Enhanced Firms, Core and Limited Scope Firms may elect to prepare and maintain an equivalent document that helps them map how Senior Management roles and responsibilities cohere. 

There is an SoR Form that Firms must use and the contents of "prescribed responsibilities" (set out the FCA Handbook) must not be altered or amended.  Key aspects of the new FCA Guidance on the content of the Form are:

  • The SoR must be clear and easy to understand.  It must not refer to external documents, but must be a complete "road-map" of responsibilities.
  • Where prescribed responsibilities are shared this must be clearly stated and a reason given (for example a job-share).
  • For Enhanced Firms only, overall responsibilities (which cover a firm's business activities not otherwise the subject of a "prescribed responsibility" or covered by a Senior Management Function), must be clearly defined and differentiated from other similar prescribed or overall responsibilities.  These cannot be shared.
  • Overall responsibilities should be allocated to the individual who is accountable to the Enhanced Firm board in respect of that issue.  They should not be allocated to individuals who merely have oversight. 
  • The SoR form includes space for "other responsibilities".  This covers to responsibilities held by Senior Managers that are neither "prescribed" or "overall" responsibilities, but which are nonetheless important to the Firm. The FCA gives the example of responsibility for particularly important projects. 

For MRM's whilst there is no standard template, the FCA has provided examples in its guidance that Enhanced Firms should consider.  Key aspects of the new FCA Guidance are:

  • MRMs should be clear as to which individual(s) or bodies make strategic decisions and who is responsible for implementation and oversight.  The FCA recommends a mix of graphics and text to communicate all MRM information. 
  • Lines of reporting should be clear, especially if there are multiple reporting lines. 
  • Where the Enhanced Firm is part of a group, it should be clear how it interacts with the group.  For example, group-wide committees should be included as should individuals elsewhere in the group who influence the Firm. 

Firms should start to consider and prepare their SoR and (as appropriate) MRM now.  This will not always be straightforward. The exercise will no doubt help clarify the process of designating Senior Managers and allocating responsibilities.  Senior Managers should also be engaging with these documents.  For them, whilst enhanced accountability may not itself be welcome, greater clarity in terms of roles and responsibilities should certainly be.

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