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FCA Clarifies Its Position On ‘Significant SYSC Firm’ Dilemma – Financial Services



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The FCA announced earlier yesterday1 that it will
consult on amending the definition of ‘Significant SYSC
Firm’ to ensure that no firms will be subject to the enhanced
rules of the Senior Managers and Certification Regime (SMCR) as a
result of implementation of the Investment Firm Prudential Regime
(IFPR) that were not already treated as being subject to those
rules under the previous prudential rules (IFPRU).

We noted previously (see here) that, as part of the introduction of
the FCA’s Investment Firm Prudential Regime (IFPR), one of the
consequential changes to the Glossary of the FCA Handbook had been
to introduce a new definition of “significant SYSC firm”
to replace the previously defined term “significant IFPRU
firm”.

As a consequence of the way that the new definition was drafted,
this change potentially had the unwelcome effect of causing a
number of asset management firms currently categorised as
“core SMCR firms” to be recategorised as “enhanced
scope SMCR firms” subject to a higher level of regulatory
oversight under the SMCR.

Following industry feedback, the FCA has now announced that they
will be consulting on making the necessary changes to clarify that
only firms that would have been “significant IFPRU Firms”
and “IFPRU investment firms” under the pre-IFPR
arrangements fall within the new definition of “significant
SYSC firm” for the purposes of SMCR. The effect of this
clarification should be that the scope of the firms that fall
within the scope of the SMCR “enhanced” regime should not
be expanded as a result of the introduction of IFPR.

The FCA has confirmed that, in the meantime, any firms which
have come under the SMCR “enhanced” regime as a result of
these changes need take no action. This is reassuring for the
non-IFPRU firms that have implemented the SMCR as firms in the
‘core’ regime.

This is a welcome change of direction from the FCA. We await
details of the consultation.

Footnote

1. https://www.fca.org.uk/news/statements/ifpr-and-eligibility-enhanced-smcr-status-significant-sysc-firm

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