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Regulators clarify expectations around long-term leave under the SM&CR

On 28 May 2021 the FCA published Handbook Notice No 88.  On 1 June 2021, the PRA published Policy Statement PS11/21 “Strengthening accountability: Temporary, long-term absences”.  Both documents clarify regulator expectations regarding temporary leave for a period longer than 12 weeks under the SM&CR (known as “long-term leave”).  Both are aligned in terms of the guidance they provide.

The PRA and FCA guidance on long-term leave for Senior Managers (“SMs”) is summarised in this table:

Nature of long-term leave Complete Form C? [1] Complete Form D? [2] Complete Form J? [3] Seek re-approval on return Appoint interim replacement? Submit revised SoR? Update MRM?
SM intends to return
No
Yes
If re-allocation of PRs required
No
Yes
Yes, if significant changes [4]
Yes
SM DOES NOT intend to return
Yes [5]
Yes
If re-allocation of PRs required
N/A
Yes
Yes, if significant changes
Yes

The TYPE of long-term leave being taken by the individual is not a relevant consideration for the FCA or the PRA.  The most obvious consequence of this approach relates to parental leave.  In theory, this could mean that firm have to submit four notifications with respect to an individual taking parental leave – two to notify that a Senior Manager will be absent for more than 12 weeks and a further two notifications on the Senior Manager’s return.  As part of streamlining the process more generally, an additional field will be included in Form D to enable firms to notify the FCA and PRA that the relevant individual is taking (or returning from) leave.

Both the PRA and the FCA recognise that it may not be possible for an individual to participate in a fitness and propriety assessment when the individual is on long-term leave – noting that it may be necessary to refresh any aspects of the assessment upon the individual’s return.

[1] Form C – Notice of ceasing to perform controlled functions including senior management functions

[2] Form D Notification – Changes to personal information/application details and conduct breaches/disciplinary action related to conduct

[3] Form J: Notification of significant changes in responsibilities of a person performing a senior management function

[4] A Senior Manager going on long-term leave and not performing their role, with responsibilities being allocated to other Senior Managers, is regarded as a “significant change”

[5] Use Form E if the reason the Senior Manager is not returning to his/her role is due to an internal transfer

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