The Senior Managers and Certification Regime (the “SM&CR”) was extended in December 2019 to include solo-regulated firms. The FCA predicts around 47,000 firms will be impacted by the regime. In order to adhere to the regime firms must first establish which type of firm they are. To ensure the SM&CR requirements are applied proportionally, the FCA introduced a firm classification system which is based on the size and complexity of a firm. The categories are as follows:
Examples of the following types of firms will fall in this category:
Firms who need further information about which category they belong to can also use the flow diagram under SYSC 23, Annex 1.1R to confirm which SM&CR firm type they are.
Having confirmed which category they fall within, firms can then establish which requirements will apply to them. Due to their size, complexity and the risk they present to the market, enhanced scope firms are subject to the greatest burden under the SM&CR. Core firms are exempt from some of the requirements applicable to enhanced scope firms (including those relating to Management Responsibility Maps, Handover Procedures and the “Overall Responsibility” requirement). Limited scope firms are subject to the fewest number of requirements under the SM&CR
Once classified, a firm can opt to change its status if it wishes. This may be desirable so as to allow affiliated firms falling into different categories to apply a single standard across an entire group. Firms can apply to change their category by giving the FCA notice of their desire to ‘opt-up’ using using form O.