The UK’s Financial Conduct Authority (FCA) has released a consultation on how to apply the Senior Managers Regime (SMR) to benchmark administrators.
SMR, which is part of the Senior Managers and Certification Regime (SM&CR) regulation, outlines standards for governance and accountability in firms. The core principles of the regulation are to create cultures of staff members taking responsibility for bad behaviour and enable firms to pinpoint where accountability lies for processes.
For most firms, these rules will come into force from December 7 2019.
However, benchmark administrators have only recently been added to the regulation and will therefore have a one-year extension to the rules.
Benchmark administrators supply critical market infrastructure and pricing of many financial instruments and contracts. This means high standards and accountability are needed to ensure no harm is dealt to consumers, the FCA stated.
The FCA has proposed all benchmark administrators are automatically classified as ‘Core’ in the regime. This would mean they need to apply up to four senior manager functions (SMFs) and allocate two prescribed responsibilities to relevant senior managers.
Due to the differing size of administrators, the FCA has suggested benchmark administrators could use its waiver process to apply for ‘Limited Scope’ categorization. This would mean they are subject to fewer requirements.
FCA executive director of strategy and competition Christopher Woolard, said, “Benchmark administrators play an important role in financial markets. As with all other firms offering regulated financial services, it is important that benchmark administrators have healthy cultures and high standards of personal conduct. Our proposals seek to ensure appropriate accountability for senior managers at these firms.”
The FCA is welcoming feedback on the proposals and aims to finalise its approach by Q3 2020.
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