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    FCA Consults on Application of SMR to Benchmark Administrators

    November 29, 2019

    FCA launched a consultation (CP19/31) on how to apply the Senior Managers Regime (SMR) to benchmark administrators that do not carry out any other regulated activities. The comment period for this consultation expires on February 28, 2020 and FCA expects to finalize its approach by the third quarter of next year. Benchmark administrators are a new category of authorized firms; therefore, they have been granted a one-year extension from the wider roll out of the SMR. The new rules will come into force on December 07, 2020.

    The SMR sets important standards for governance and accountability and will apply to almost all FCA-regulated firms from December 2019. In this consultation, FCA explains how it proposes to:

    • Not apply the Certification Regime to benchmark administrators
    • Categorize benchmark administrators under the SMR as "Core" firms initially, with the option of subsequent waivers
    • Require benchmark administrators to allocate up to four Senior Manager Functions, depending on their governance structure
    • Require benchmark administrators to apply the Conduct Rules to almost all their employees

    FCA proposed that all benchmark administrators be automatically classified as "Core" firms under the regime. However, recognizing that benchmark administrators vary in size and complexity, FCA is proposing that benchmark administrators can use the existing waiver process of FCA to apply for "Limited Scope" categorization, if appropriate. For both Core and Limited Scope benchmark administrators, the Conduct Rules of FCA will apply to almost all employees. This is in line with the extension to all other solo-regulated firms and should increase awareness of conduct issues across firms. However, FCA is proposing to tailor the Conduct Rules for certain commodity benchmark administrators.

    Senior Managers and Certification Regime (SM&CR) will apply to firms that carry out benchmark activities alongside other regulated activities from December 09, 2019. After the SM&CR is extended to FCA-regulated firms in December 2019, the existing Approved Persons Regime will no longer apply to firms authorized under Financial Services & Markets Act (FSMA). The only set of market participants the Approved Persons Regime will apply to is Appointed Representatives. The consultation proposes some consequential changes to the rules.

     

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    Comment Due Date: February 28, 2020

    Effective Date: December 07, 2020

    Keywords: Europe, UK, Securities, Benchmark Administrator, Benchmarks Regulation, SM&CR, SMR, FSMA, CP 19/31, Operational Risk, FCA

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