Coronavirus forces FCA to relax 12-week rule and clarify process for furloughing senior managers

On 3 April 2020 the FCA published its expectations on the way in which firms subject to the SM&CR should respond to the coronavirus pandemic.  The basic message from the FCA is that ‘you don’t need keep us up-to-date with all aspects of your response to Covid-19, but you need to keep your own house in order’.  More specifically, three points are addressed by the FCA:

’12-week’ emergency appointment rule is relaxed

The ‘12-week rule’ allows a firm to provide cover for an absent senior manager, without the replacement requiring FCA approval, provided that the appointment is for less than 12 consecutive weeks.  In a relaxation of the rule, firms can now regard this as a ’36-week rule’, provided that they notify the FCA that they intend to take advantage of this accommodation.  In addition, if it is not possible to do otherwise, the prescribed responsibilities of an absent senior manager can be allocated to the replacement (under normal circumstances, prescribed responsibilities can only be allocated to an approved senior manager).

Furloughing of senior managers

In the current climate, it may be necessary for firms to furlough senior managers.  If they do so, they should notify the FCA by phone or email.  However, the FCA makes clear that senior managers performing FCA required functions (being SMF16 Compliance Oversight, SMF17 Money Laundering Reporting Officer and SMF29 Limited Scope Function) should only be furloughed “as a last resort”.

Any senior manager furloughed as a result of the coronavirus will not need re-approval by the FCA when they return (although the firm is still responsible for ensuring that the senior manager is fit and proper to perform his/her role).

No requirement for a single senior manager with responsibility for coronavirus response

The FCA does not expect any firm to have a single senior manager with responsibility for its coronavirus response.  However, senior managers should look at their own areas of responsibility and consider:

  1. Where the current situation might lead to emerging risks; and
  2. How it affects existing risks, along with the controls used to manage them.

Requirement to update FCA of Covid-19 enforced changes is relaxed

The FCA will not require firms to notify it of any temporary arrangements (using Form D) or submit updated Statements of Responsibilities (SoRs) in response to emergency senior manager appointments to cover absences caused by the coronavirus or due to other temporary changes made in response to the pandemic.  However, the FCA still require firms to maintain an internal ‘running commentary’ of their senior manager population and their responsibilities by keeping Statements of Responsibilities, role profiles and Responsibilities Maps (if applicable) up to date.