Who, what, where? The extra-territorial scope of the new FCA and PRA Senior Managers Regime

 ‘To what extent will senior individuals located outside the UK need to be Senior Managers?’ This is probably one of the most common points we have been asked to advise on by firms that are in the process of implementing the new regime.

Set out below are some key questions that firms may wish to ask when considering the extra-territorial scope of the new regime, which incorporate some guidance issued by the FCA in relation to UK branches of overseas firms earlier in August.

#1: What Senior Managers will you have based in the UK?

It is tempting to jump straight to thinking about whether any senior individuals who are based outside the UK may need to become Senior Managers. But before you do, take a step back and think: Who will be your firm’s Senior Managers in the UK. What roles and responsibilities will they fulfil?

Given the purpose of the new Senior Managers regime, it is most likely that the regulators would prefer to have individuals based in the UK approved as Senior Managers. As a result, it is only possible – not guaranteed – that your firm may need to have senior individuals located outside the UK approved as Senior Managers.

#2: To what extent will senior individuals based overseas be involved in running the UK business of your firm?

The key concept behind the Senior Managers Regime is responsibility, i.e. does an individual have overall responsibility for a particular area or aspect of a firm’s business in the UK that falls within the scope of the new regime? This is the central question to ask when determining whether any senior individuals within your firm (including those based outside the UK) may need to become Senior Managers.

#3: What guidance has been given by the regulators as to when senior individuals located outside the UK may need to be Senior Managers?

Unfortunately, very little. This is understandable to some extent – firms are likely to require bespoke advice on this issue, which takes into account their specific arrangements.

However, the FCA has said a few words on this topic:

• To the extent that a group committee based outside the UK directs a UK board committee, it is likely to be the chair of the group committee (even if that person is located outside the UK) who will need to be a Senior Manager.

• For UK branches of overseas firms, the FCA has confirmed that it would not typically expect senior individuals located overseas to be Senior Managers simply on the basis that they are involved in setting the strategy for their firm’s UK business. However, such an individual may need to be a Senior Manager if they are actually involved in implementing this strategy in the UK.

Although brief, this guidance reinforces an important principle. The regulators are most interested in those senior individuals who are actively involved in directing and/or running operations in the UK being Senior Managers.

#4: How should arrangements involving Senior Managers located overseas be documented?

Statements of Responsibilities will need to be produced for all Senior Managers, including those based overseas. In addition, firms’ Management Responsibilities Maps will need to reflect where Senior Managers based overseas fit within the overall governance structure of an entity that falls within the scope of the new regime. Job descriptions and policies and procedures may also need to be checked to ensure that they are consistent with your firm’s Senior Manager arrangements.

Need more information?

We recently reported on the final rules for the new Senior Managers and Certification Regime for UK institutions that were published by the FCA earlier in the summer. We will also be publishing further updates about the new Senior Managers and Certification Regime on Investigations Insight in due course.

In addition, Allen & Overy has created a microsite dedicated to the Senior Managers and Certification Regime, which includes links to key documents published by the regulators, as well as commentary on them produced by Allen & Overy's Regulatory and Employment Teams.