This will potentially place an enormous administrative burden on firms who are also required to provide a lot more detail about the individuals that will appear in the directory than currently appears on the Register including what role they carry out within the firm – for example, financial adviser.
Allocating and describing senior managers’ responsibilities
Approved senior managers will need to complete (and file with the FCA) a new regulatory form called a Statement of Responsibilities.
Aside from the few regulatory responsibilities which are prescribed by the FCA (called ‘prescribed responsibilities’), approved senior managers will need to write down the universe of areas that they are accountable for within the advisory firm.
This is regardless of whether the advisory firm is enhanced or core. Describing the full scope of an area of accountability correctly can be challenging as the FCA has previously commented to the market that simply stating a job title (for example, CFO) or noting responsibility for a particular department (for example, the Finance Department) is not sufficient, so a full description will be needed to explain what is within, and excluded from, that area.
The difficulty is increased given that there is a 300 word limit on describing the responsibility so, on one view, there is limited space, and there is a desire by the FCA (most recently expressed in their current consultative guidance on SORs) not to have too much detail.
Management Responsibilities Map and difficulties with the ‘no gaps’ principle
For enhanced firms (but not core firms), there is a requirement to draft and maintain a management responsibilities map which is a single document/suite of documents that together provide the FCA’s supervisors with a standalone view of the entire organization, governance, senior manager responsibilities and systems and controls of a firm.
The challenge for firms will be in ensuring that it accurately reflects the firm and in keeping it up to date. In some banks, this was almost the full time job of one person. Alongside the map, the ‘no gaps’ principle applies for enhanced firms.
This is the principle that across all of the Statements of Responsibilities (and as recorded in the map), every area/activity/function of the firm must be the overall responsibility of one or more senior managers and there must not be any overlaps or gaps.
While complying with this principle sounds relatively straight forward, in practice it can be challenging. Advisory firms will need to map, end-to-end, all the processes in the value chain of the advice service and identify which parts of the process the different senior managers are accountable for and where the perimeter of their responsibility is delineated.
