UK FCA Benchmark Administrator SMR

On Nov. 29, FCA proposed applying SMR benchmark administrator.

  • Consulted on how to extend senior managers regime to benchmark administrators.
  • Background
  • Senior managers regime (SMR) will apply to most FCA-regulated firms from Dec. 2019.
  • As benchmark administrators are a new category of authorized firms they have been granted a one-year extension from the wider roll out of the SMR, see #62493.
  • The new rules will come into force for benchmark administrators on Dec. 7, 2020.
  • Benchmark Administrators
  • Consultation sets out how FCA propose to apply the senior managers regime to benchmark administrators that do not undertake any other regulated activities.
  • Propose that all benchmark administrators are automatically classified as core firms.
  • This classification means that they will have to apply up to 4 senior manager functions (SMFs) and allocate 2 prescribed responsibilities to the relevant senior managers.
  • Recognizing that benchmark administrators vary in size and complexity, allow these to use existing waiver process to apply for limited scope categorization if appropriate.
  • Only 1 type of SMF, limited scope function, will apply to firm which has such waiver.
  • Limited Scope firms will not be required to implement any prescribed responsibilities.
  • FCA is not proposing to apply the certification regime to benchmark administrators.
  • For core and limited scope firms, conduct rules will apply to almost all employees.
  • This approach should increase awareness of conduct issues across firms.
  • Commodity Benchmark Administrators
  • Proposing to tailor the conduct rules for certain commodity benchmark administrators.
  • E.g. those that are subject to Annex II of the Benchmarks Regulation (Annex II firms).
  • Most of conduct rules will only apply to a firm's regulated financial services activities.
  • This includes the rules on disclosure to regulators, in line with how FCA Principles for Business (PRIN) apply to these firms and reflect their specific treatment under BMR.
  • Approved Persons Regime
  • After Dec. 9, 2019, the existing approved persons regime (APR) will no longer apply to firms authorized under FSMA, and will only apply to appointed representatives.
  • Consultation proposes some consequential changes to FCA rules to make this clear.
  • Outcomes Sought
  • Benchmark administrators play an important role in financial markets, it is important these administrators have healthy cultures and high standards of personal conduct.
  • Proposals seek to ensure appropriate accountability for senior managers at such firms.
  • Should encourage, empower senior managers to ensure healthy firm cultures by being more precise about individual responsibilities, strengthening governance structures.
  • This should in turn improve decision-making and make it easier to identify misconduct.
  • Conduct rules which introduce basic standards for how employees should behave.
  • E.g. acting with due skill, care/diligence, observing proper standard of market conduct.
  • Applying these rules widely to most employees in financial services firms should improve individual accountability and increase awareness of conduct issues.
  • Effectiveness
  • Open for comment to Feb. 28, 2020, FCA aiming to finalize approach by Q3 2020.
  • Until new rules come into force in Dec. 2020, APR will still apply in full to benchmark administrators, FCA will continue to process applications for controlled functions.
  • Jun. 2020 Finalized Rules
  • On Jun. 2, 2020, UK FCA published policy statement on extending SMR to benchmark administrators, with the final rules and guidance, responses to consultation feedback.
  • Applies to benchmark administrators authorized in the UK that do not undertake any other regulatory activities, appointed representatives and their principals.
  • The new rules will come into force for benchmark administrators on Dec. 7, 2020.
  • Jun. 26, 2020 Handbook Notice 78
  • On Jun. 26, 2020, UK FCA issued final notice 78 on extending SMR to administrators.
  • Issued Individual Accountability (FCA-Authorised Benchmark Firms) Instrument 2020.
  • Board has made changes to following handbook sections: Glossary; SYSC 22.1, 22.8, 23.2, 23.3, 23 Annex 1, 25.2, 27.6, 4.1, 4.4, TP 7.1 and TP 7.4; COCON 1.1, 4.1, 4.2 and TP 1; COND 2.5; APER 1.1A and 3.1; FIT 1.1, 1.2, 1.3, 2.1, 2.2 and 2.3; MAR 8.5.
  • SUP 6.3, 6.4, 10A.1, 10A.4, 10A.5, 10A.6, 10A.9, 10A.10, 10A.12, 10A.13, 10A.14, 10A.15, 10A.16, 10A.17, 10A Annex 1G, 10A Annex 2G, 10A Annex 4D, 10A Annex 8D, 10A Annex 10D, 10C.1, 10C.3, 10C.4, 10C.6, 10C.12, 10C.16, 10C Annex 1, 10C Annex 3D, 10C Annex 4R, 10C Annex 5R, 10C Annex 6R, 10C Annex 7D, 12.6, 13A Annex 1G, 15.1, 15.3, 16.26, TP 11A.1 and TP 11A.26; PROF 5.3; BENCH 2.1.
  • Instrument also adds the following new sections to the handbook: SUP 15.17.
  • In summary, instrument extends the Senior Managers Regime (SMR) to benchmark administrators (BMAs) that do not undertake any other regulated activities.
  • This instrument comes into force on Jun. 3, 2020 and Dec. 7, 2020.
  • Feedback has been published in a separate policy statement set out above.

Regulators UK FCA
Entity Types B/D; Bank; Depo; Exch; Fiduciary; IA
Reference PR, HB78, FCA 2020/23, 6/26/2020; Gd, PR, FS PS20/5, 6/2/2020; CP CP19/31, PR 11/29/2019; BMR Reg 2016/1011; SMR
Functions Compliance; C-Suite; HR; Legal; Operations; Registration; Reporting
Countries United Kingdom
Products Banking; Clearing; Commodities; Corporate; Derivatives; Fixed Income; Loan; Mortgage; Repo/Reverse; Securities
Regions EMEA
Rule Type Final
Rule Date 11/29/2019
Effective Date 12/7/2020
Rule Id 68222
Linked to Rule :62493
Reg. Last Update 6/26/2020
Report Section UK

Last substantive update on 06/30/2020