FCA Handbook - SYSC 24 Annex 2 Preferred allocations of FCA-prescribed senior management responsibilities

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SYSC 24 Annex 2 Preferred allocations of FCA-prescribed senior management responsibilities

Purpose

This annex sets out detailed guidance on the FCA’s expectations about what designated senior management function an SMF manager should and not should not hold if a firm wishes to allocate particular FCA-prescribed senior management responsibilities to them. It should be read together with SYSC 24.3.2G and SYSC 24.3.3G (The SMF managers to whom FCA-prescribed senior management responsibilities should be allocated), and SYSC 24.3.4G and SYSC 24.3.5G (Exceptions for small non-complex firms).

General material

(1) The ‘SMF most likely to be appropriate’ column in the tables in this annex covers the combinations of designated senior management functions and FCA-prescribed senior management responsibilities that the FCA considers are likely to be appropriate.
(2) The ‘Would generally consider harder to justify’ column in the tables in this annex covers combinations of designated senior management functions and FCA-prescribed senior management responsibilities that the FCA considers to be generally inappropriate and which the FCA may question if a firm proposes to adopt one.

However, ultimately, an FCA-prescribed senior management responsibility should be allocated to the most suitable SMF manager. This will depend on the individual circumstances of each firm.

Therefore:

(1) a combination in the ‘SMF most likely to be appropriate’ column may be inappropriate in the circumstances of a particular firm; and
(2) a combination in the ‘Would generally consider harder to justify’ column may be appropriate in the circumstances of a particular firm (or may be appropriate for a specific period) if the firm has good reason for it, although even then the FCA may wish to explore those reasons with the firm.

As an example of the principle in SYSC 24 Annex 2.3G, the FCA accepts that it may not be practical for a small non-complex firm (see SYSC 24.3.4G (Exceptions for small non-complex firms)) to comply with the tables in this annex.

(1) This annex does not cover every possible combination of designated senior management function and FCA-prescribed senior management responsibility.
(2) In particular, some designated senior management functions may appear in neither the ‘SMFs most likely to be appropriate’ nor the ‘Would generally consider harder to justify’ columns in a row of one of the tables in this annex dealing with a particular FCA-prescribed senior management responsibility.
(3) Paragraphs (1) and (2) do not mean that a firm should not allocate that FCA-prescribed senior management responsibility to an SMF manager performing that designated senior management function.
(4) Instead, in such a case, the FCA does not consider that it is possible to give any generalised guidance. The most important consideration will be whether the SMF manager is the most senior employee or officer responsible for managing that area, as set out in SYSC 24.3.1G (Seniority and authority).

If no one performs the chief executive function for a firm, it will usually be most appropriate for those FCA-prescribed senior management responsibilities that are listed in the tables in this annex as being appropriate for SMF 1 to go instead to the most suitable SMF manager:

(1) approved to perform the executive director function or the partner function; or
(2) (in the case of a PRA-authorised person) into whose designated senior management function the functions in (1) have been absorbed under the arrangements in SUP 10C.9 (Minimising overlap with the PRA approved persons regime).

Allocations for core SMCR firms

The tables in SYSC 24 Annex 2.10G and SYSC 24 Annex 2.11G cover core SMCR firms.

The table in SYSC 24 Annex 2.11G covers FCA-prescribed senior management responsibilities that only apply to overseas SMCR firms.

Table: Combinations of designated senior management functions and FCA-prescribed senior management responsibilities for core SMCR firms

(1) FCA-prescribed senior management responsibility	(2) SMFs most likely to be appropriate	(3) Would generally consider harder to justify
(a) (Responsibility for performance of obligations under senior managers regime)	SMFs 1, 19	SMFs 9, 16, 17
(b) (Responsibility for performance of obligations under certification regime)	SMFs 1, 19	SMFs 9, 16, 17
(b-1) (Responsibility for conduct rules)	SMFs 1, 19	SMFs 9, 17
(d) (Financial crime)	See the Financial Crime Guide, particularly FCG 2.2.1G (Governance) and FCG 2.2.3G (Structure).	SMF 9
(z) (CASS)	See CASS 1A.3 (Responsibility for CASS operational oversight).	SMF 9
(za) (COLL)	SMF 9 There are also rules governing the allocation of this function (see COLL 6.6.27R, COLL 8.5.22R and COLL 15.7.24R).	SMFs 1, 3, 16, 17, 27
(1) The letter and alphanumeric references in column (1) are to the codes in the column headed ‘Reference letter’ in SYSC 24.2.6R (Table: FCA-prescribed senior management responsibilities). (2) The numbers in columns (2) and (3) identify an FCA-designated senior management function by reference to the number assigned to it in the column headed ‘SMF’ in SUP 10C.4.3R (Table of FCA-designated senior management functions for SMCR firms).

Table: Combinations of designated senior management functions and FCA-prescribed senior management responsibilities only applicable to core SMCR firms that are overseas SMCR firms

(1) FCA-prescribed senior management responsibility	(2) SMFs most likely to be appropriate	(3) Would generally consider harder to justify
(aa) (UK management processes)	SMF 19	SMF 17
(ee) (Escalating correspondence)	SMF 19	SMF 17
(ff) (Compliance with UK regulatory system)	SMF 19	SMF 17
See the notes to the table in SYSC 24 Annex 2.10G for the meaning of the numerical and alphanumerical references in this table.

Allocations for all other firms

The table in SYSC 24 Annex 2.13G covers all SMCR firms required to allocate FCA-prescribed senior management responsibilities, other than core SMCR firms.

Table: Combinations of designated senior management functions and FCA-prescribed senior management responsibilities for all other SMCR firms

(1) FCA-prescribed senior management responsibility	(2) SMFs most likely to be appropriate	(3) Would generally consider harder to justify
(a) (Responsibility for performance of obligations under senior managers regime)	SMFs 1, 19, 25, 26	SMFs 5, 9-15, 16, 17, 18, 20, 20a, 22, 23
(b) (Responsibility for performance of obligations under certification regime)	SMFs 1, 19, 25, 26	SMFs 5, 9-15, 16, 17, 18, 20, 20a, 22, 23
(b-1) (Responsibility for conduct rules)	SMFs 1, 19, 25, 26	SMFs 5, 9-15, 17, 18, 20, 20a, 22, 23
(c) (Management responsibilities map)	SMFs 1, 19	SMFs 5, 9-15, 17, 18, 20, 20a, 22, 23
(d) (Financial crime)	See the Financial Crime Guide, particularly FCG 2.2.1G (Governance) and FCG 2.2.3G (Structure).	SMFs 2, 5, 6, 9-15, 18, 20, 20a, 22, 23
(f) (Training of governing body)	SMFs 9, 19	SMFs 1-6, 15-18, 20-24
(g) (Training of senior management)	SMFs 1, 19	SMFs 2, 4, 5, 9-15, 18, 20, 20a, 22, 23, 24
(j) (Independence and oversight of internal audit)	SMF 11	SMFs 1-6, 16, 17, 18, 22, 24,
(j-2) (Outsourced internal audit where certain PRA rules apply)	SMF 11	SMFs 1-6, 12-18, 20, 20a, 22, 23, 24
(j-3) (Outsourced internal audit)	SMF 11	SMFs 1-5, 12, 13, 16, 17, 18, 22, 24
(k) (Independence and oversight of compliance)	SMF 10	SMFs 1-6, 16, 17, 18, 22, 24
(l) (Independence and oversight of risk function)	SMF 10	SMFs 1-6, 16, 17, 18, 22, 24
(m) (Remuneration policy and practices)	SMF 12	SMFs 1-6, 16, 17, 18, 20, 20a, 22, 23, 24
(n) (Whistleblowing)	See SYSC 18.4.1G(4)	SMFs 1-6, 16, 17, 18, 20, 20a, 22, 23, 24
(s) (Stress tests)	SMFs 2, 4	SMFs 5, 9-14, 16, 17, 18, 22, 24
(t) (Development and maintenance of business model)	SMFs 1, 25, 26	SMFs 5, 9-12, 14, 16, 17, 18, 20, 20a, 22, 23, 24
(z) (CASS)	See CASS 1A.3 (Responsibility for CASS operational oversight).	SMFs 5, 9-15, 20, 20a, 23
(za) (COLL)	SMF 9 There are also rules governing the allocation of this function (see COLL 6.6.27R, COLL 8.5.22R and COLL 15.7.24R).	SMFs 1-5, 7, 16, 17, 18, 19, 22, 24
(aa) (UK management processes)	SMF 4	SMFs 5, 17, 22, 24
(ee) (Escalating correspondence)	SMF 19	SMFs 2, 4, 5, 9-12, 14, 17, 20, 20a, 22, 23, 24
(ff) (Compliance with UK regulatory system)	SMF 19	SMFs 2, 4, 5, 9-12, 14, 17, 20, 20a, 22, 23, 24
(1) The letter and alphanumeric references in column (1) are to the codes in the column headed ‘Reference letter’ in SYSC 24.2.6R (Table: FCA-prescribed senior management responsibilities). (2) The numbers in columns (2) and (3) identify the FCA-designated senior management function by reference to the number assigned to it in the column headed ‘SMF’ in SUP 10C.4.3R (Table of FCA-designated senior management functions for SMCR firms). In the case of a PRA-authorised person, the numbers refer, where applicable, to the corresponding PRA-designated senior management function or, where there is no equivalent FCA-designated senior management function, to the number and letter used by the PRA. (3) SYSC 24.2.3R (Allocation of FCA-prescribed senior management responsibilities) means that (with the exception set out in that rule) only an enhanced scope SMCR firm may allocate an FCA-prescribed senior management responsibility to an SMF manager who is only approved to perform the other overall responsibility function or the other local responsibility function for that firm. References to SMF 18 and SMF 22 in this table should be interpreted accordingly.