The FCA has addressed that by changing the qualifying criteria so that the relevant figures are calculated on a three-year rolling average basis.
For many firms, however, it will still make sense to look ahead and understand the likelihood of needing to transition from Limited Scope to Core status (or, for the biggest organisations, from Core to Enhanced).
And the best way for firms to do that and protect themselves from falling between two categories - and so incurring a potentially hefty penalty - may well be to assume a higher bar of regulatory standard.
The FCA has implemented an online process - using Form O - through which firms can notify it of their intention to voluntarily apply a higher regime tier to their business, whether they are moving from Limited Scope to Core or from Core to Enhanced.
It is essential to note that a firm opting into a higher tier will have to meet all of the requirements for that tier from three months after Form O is submitted.
In other words, a Limited Scope firm would not be able to assume that because their move is voluntary, they only need to apply some of the Core regime rules - if they do this, the regulator will consider it a breach of rules.
There are, inevitably, several big differences between Limited Scope and Core, and a range of additional requirements. For example, Core (but not Limited Scope) firms have to allocate certain Prescribed Responsibilities among senior managers, with a statement of responsibilities clarifying which responsibilities have been allocated to the relevant senior manager.
Similarly, Limited Scope firms need between one and three Senior Managers Functions (SMFs), depending on the type of firm, whereas Core firms may require up to six (depending on specific permissions and activities).
So the move into a higher tier will likely mean having to meet a wider range of requirements. But for firms who are at the top end of the Limited Scope criteria, planning for where they are going - as opposed to where they are now - could be a wise move in the long run.
In which tier does your firm belong?
The regulator, through the SM&CR, requires firms to ensure they have the right people in the right roles with the right skills, and to have in place a broad framework for all business activities that sets minimum standards for conduct and behaviour for all key staff members.
The onus is therefore on firms to understand which tier they fall into - Limited Scope, Core or Enhanced - and the precise requirements they need to meet.
