What SMCR tier does your company belong to?
Depending on your organisation’s size and profile, it will be either a Core, Enhanced or Limited scope firm.
Limited has fewer requirements than Core and Enhanced. It applies to smaller firms with limited licence activities, e.g. sole traders, internally managed AIFs, and limited-permission consumer credit firms.
Your business will probably be a Core firm. Core applies to the majority of solo-regulated firms. This is a baseline regime – a sort of pared-back version of SMCR for banks. You’ll still need to deal with Senior Managers, Certified Members and Conduct Rules, but there’ll be fewer functions and responsibilities to fulfil for the organisation and fewer ongoing requirements for the Senior Managers themselves.
Enhanced has the most requirements and applies to larger, more risky or complex businesses:
- Significant IFPRU firms
- CASS Large firms
- Asset managers with AUM of £50 billion or more (calculated as a three-year rolling average)
- Firms with total intermediary regulated business revenue of £35 million or more per annum (calculated as a three-year rolling average)
- Firms with annual revenue generated by regulated consumer credit lending of £100 million or more (calculated as a three-year rolling average)
- Mortgage lenders and administrators (that are not banks) with 10,000 or more regulated mortgages outstanding
Other requirements for Enhanced firms:
- Additional Senior Management Functions
- Additional Prescribed Responsibilities
- Overall Responsibility requirement: additional responsibilities aligned to particular markets and departments
- Responsibilities Maps: a diagrammatic view of all the Senior Managers and their assigned functions and responsibilities
- Reasonable Steps: Senior Managers will need to document their decision-making to demonstrate reasonable action in line with their assigned responsibilities and the Conduct Rules
- Handover notes: Senior Managers will need to maintain up-to-date documentation on the activities in their remit of responsibility so that successors are able to transition into the role smoothly.
NOTE: Enhanced firms will need to ensure that every activity, business area and management function has a Senior Manager with overall responsibility for it.
Which SMCR tier applies to me?
It’s best to assume you’re in the Core tier unless you meet a threshold for one of the others. The FCA estimates that less than 1% will fall under Enhanced requirements, while those under the limited application of APER will move across to the Limited regime. Use this diagram to help you work out which regime you fall under:
See you next week for our fifth instalment in the blog series: “Your SMCR queries answered.”