17Apr

In many respects, the Financial Conduct Authority places a large burden on senior managers, and firms’ response to the coronavirus crisis is no exception, with this recent instruction from the regulator being one example.

The FCA does not expect every firm to nominate a senior individual to take control of their Covid-19 response – if a firm wants to do this, it is entirely their choice. However, the senior management team as a whole still shoulders overall responsibility.

Risk management is one of the ongoing responsibilities of a management team, and with specific reference to coronavirus, the FCA says managers should consider:

  • How the current emergency might lead to emerging risks
  • How the situation affects the firm’s existing risk areas

All authorised firms are expected to have Statements of Responsibilities (SoRs) that document the responsibilities of their senior managers. In normal circumstances, the firm should inform the FCA and submit updated SoRs where certain responsibilities are transferred from one manager to another. However, the regulator recognises that the current situation may require firms to change senior manager responsibilities at short notice, for example a manager may be forced into self-isolation because they are displaying symptoms, or a family member falls ill.

With this in mind, the FCA has said that there is no need for an affected firm to submit an updated SoR to the FCA where the following criteria are satisfied:

  • The changes have been made in response to the pandemic
  • The changes are of a temporary nature and, in the longer term, the firm expects to revert back to its previous arrangement

However, while firms don’t have to send the updated SoR to the FCA, they are expected to document the change in responsibility that has occurred, and to retain a copy of this document internally. The FCA says it is vital that everyone within the firm understands which areas individual managers are responsible for.

The regulator goes on to say that the ideal position is that, if a senior manager is unable to work due to Covid-19, it would be another senior manager or managers who would assume their responsibilities until they were able to return. Individuals in senior management roles should have all received specific approval from the FCA.

If a senior manager is absent and the firm decides it is not feasible to transfer all of their-responsibilities to other FCA-approved senior managers, then there exists something called the “12-week” rule. The 12-week rule allows an individual to cover for a Senior Manager without being approved, where the absence is temporary or reasonably unforeseen, and the appointment is for less than 12 consecutive weeks. The FCA has indicated that the coronavirus outbreak may require these temporary arrangements to be extended for up to 36 weeks.

If a firm decides to appoint someone under the 12-week rule, then it is their responsibility to ensure the individual in question has the skills, qualifications, experience and competence to deputise for the Senior Manager.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article