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FCA’s conduct regime will cover vast majority of claims management company staff

  • 21/09/2018
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FCA’s conduct regime will cover vast majority of claims management company staff
The Financial Conduct Authority (FCA) plans to extend its Senior Manager and Certification Regime to all claims management companies (CMCs) it regulates when it takes over from the Claims Management Regulator in April.


It expects the rules to impact “the conduct of nearly everyone who works in a CMC” and will see the sector held to the same standard as financial services firms it regulates.

CMCs will need to apply for a temporary permission under the Senior Manager and Certification Regime (SM&CR) before regulation passes to the FCA on 1 April, its CP18-26 consultation proposed.

After this date all CMCs will need to apply for re-authorisation while new firms entering the market will also need to apply to the FCA for authorisation.

A survey of CMCs conducted in November 2017 suggested around 20% of firms may not seek FCA authorisation.

Overall, the FCA estimates applying the regime will cost the sector around £1m to implement with ongoing costs to be in the range of £97,000 – £330,000 per year.

The regulator said this would imply that on average firms would incur around £1,200 in one‑off costs and between £130 – £445 in annual ongoing costs from implementing the SM&CR for their claims management activity.

The scale of these costs will depend on how many firms seek authorisation and if any are already fulfilling other FCA regulatory commitments.


Fit and proper individuals

At least once a year CMCs will need to make sure that the individuals performing senior management and certification functions are “fit and proper” to do their jobs.

Conduct rules will also apply to employees who have interactions with customers in the process of the business functions – but will exclude those doing unrelated tasks, such as receptionists, caterers and cleaners.

“We propose to introduce standards for the conduct of nearly everyone who works in a CMC,” the FCA said.

“These are basic rules that will apply to almost every person who works in a firm regulated by the FCA.”


FCA approved people

The regulator will need to approve the individuals performing what it classifies as a senior management function before a CMC can hire them.

CMCs must maintain a document saying what senior managers are responsible and accountable for.

Senior managers will also have a Duty of Responsibility, with the FCA considering whether they took reasonable steps to prevent something going wrong in an area they are responsible for when incidents occur.

CMCs will also be required to report conduct rule breaches to the regulator and the move broadens the scope for the FCA to take disciplinary action.

“We think applying SM&CR to CMCs will lead to benefits in the form of driving up culture and standards through increased accountability at the senior level,” the regulator said.

“This is the key driver for introducing the SM&CR to all our FSMA-authorised firms.

“A robust individual accountability regime can reinforce acceptable standards of behaviours and be a critical factor in deterring misconduct,” it added.





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