On 3 April 2020, the FCA and the PRA issued a joint statement concerning their expectations of dual regulated firms as regards the senior managers and certification regime in light of the COVID-19 pandemic. The FCA and PRA recognise that firms directly affected by the pandemic will need to keep their governance arrangements under review. Where they can, the FCA and PRA intend to provide flexibility to dual-regulated firms.
The statement goes on to discuss:
- notifications about changes to senior manager responsibilities;
- temporary arrangements for senior management functions (SMFs);
- notifications about temporary arrangements (including allocating prescribed responsibilities to unapproved individuals acting up as SMFs under the 12-week rule);
- allocating responsibility for coordinating firms’ responses to coronavirus among SMFs;
- furloughing SMFs; and
- certification requirements for dual regulated firms.
The FCA and PRA state that they do not require or expect firms to designate a single SMF to be responsible for all aspects of their firm’s response to the pandemic. The regulators add that it is important for firms to have a clear framework for allocating responsibilities to various SMFs for different aspects of their response to the pandemic but they do not prescribe a ‘one-size-fits-all’ approach. However, the exception to this is the identification of ‘key workers’ which should be allocated to the SMF1.
The PRA and FCA continue by stating that where firms have an SMF24, certain aspects of a firm’s response to the pandemic may naturally sit with this SMF. For instance, compliance with PRA and FCA requirements and expectations on: business continuity; information security; and outsourcing. Other aspects of firms’ responses to the pandemic may, however, sit naturally with other SMFs. For instance, managing liquidity in the current market, may naturally fall to the CFO. Moreover, given the likelihood of SMFs becoming suddenly, temporarily absent, the PRA encourages firms to consider how they may respond to unexpected changes to current contingency plans (contingencies upon contingencies).
On the same date the FCA published another statement setting out its expectations to help solo-regulated firms apply the senior managers and certification regime. The statement covers:
- senior management responsibilities;
- statements of responsibilities and ‘significant changes’ to senior manager responsibilities;
- temporary arrangements for SMFs;
- notifications about temporary arrangements;
- furloughed staff; and
- reallocating prescribed responsibilities