Senior managers and certification regime - now in effect


The regime generally carves a firm’s population into three categories: senior managers, certified staff and conduct staff, but applies to all employees of the firm. For this purpose ‘employee’ has a broader definition than that in the wider employment law context and includes anyone working under the supervision, direction or control of the firm, potentially including secondees, consultants and agency staff.

Two key aspects of the regime are not yet fully in effect, being new rules relating to regulatory references and whistleblowing.

In relation to whistleblowing, from 7 March 2016 firms must appoint a ‘whistleblowers’ champion’, responsible for a firm’s response to the new whistleblowing rules which firms must comply with by 7 September 2016. These responsibilities include overseeing the effectiveness of whistleblowing policies and providing training.

In relation to regulatory references, the FCA and PRA have recently published policy statements explaining that, following consultation feedback from various stakeholders, many of their proposals in this area are being postponed. Concerns included data protection issues and the process of updating references previously provided.

The interim position requires FCA regulated firms to apply the referencing requirements under the existing approved persons regime to senior managers in relevant firms. From 7 March 2016 PRA regulated firms must, when considering the appointment of anyone within the scope of the senior managers or certification regime, (i) provide a reference to another regulated firm as soon as reasonably practicable and (ii) take reasonable steps to obtain appropriate references covering at least the past five years of service – this also applies when an individual is being promoted to a position covered by the senior managers or certification regime. A joint policy statement in relation to the new rules, which are expected to require references covering six years, is likely to be published this summer.

What should you be doing now?

Training – Train staff who are subject to the new rules, as well as identifying and training appropriate staff with responsibility for assessing others as fit and proper.

Assessment as fit and proper – Firms must issue certificates of fitness and propriety to certified staff by March 2017. Firms should consider whether this will be done through annual appraisals or an alternative process.

Documentation – Consider whether key employment documents such as template service agreements and settlement agreements need to be updated to take account of a firm’s obligations under the new regime.

Policies and procedures – Firms should review their HR policies to ensure, for example, that they comply with the whistleblowing rules coming into effect in September and allow firms to deal with any performance or disciplinary issues in relation to senior managers and certified staff.

Recruitment – Firms should ensure that recruitment teams understand the current references requirements and are aware of developments over the coming months.

The Treasury’s intention is that from 2018 the regime will be extended to all other firms authorised by the Financial Services and Markets Act 2000, such as investment firms and insurers. HR teams and other key individuals in such firms should start thinking about the implications of the regime in advance.

We will keep you up-to-date on relevant developments. In the meantime, the CMS employment team continues to work with a number of banks to support them in dealing with the legal and practical impact of the new regime. If you would like any assistance, please do get in touch with a member of the team.