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13 October 2018

The FCA published guidance on the creation of statements of responsibilities and, for enhanced firms

 

Core

Statement of Responsibilities

The purpose of a SoR is to make clear what a Senior Manager is responsible and accountable for, under the ultimate accountability of a firm’s governing body.

It should be clear and easy for regulators, the Senior Manager and others in the firm to understand it. The SoR should contain enough information to clearly describe the Senior Manager’s actual responsibilities and accountabilities, but without unnecessary detail. A SoR needs to be self-contained and not refer to other documents.

A SoR is not the same as a job profile, so it should not describe the competencies and skills required for the role or how the responsibilities should be discharged. It should focus on what the role holder is accountable for.

Preparing and maintaining an up to date SoR is a legal requirement for individuals who are Senior Managers.

Ask yourself:

Could someone who understands the type of business that you do, but doesn’t know how your firm is organised, understand what the individual Senior Manager is accountable for by reading their SoR?

Handbook references

Rules and guidance around SoRs themselves can be found in SUP 10C.11.

The SoR sections refer to the ‘Statement of responsibilities for solo-regulated SM&CR firms’ form in 10C Annex 10D of the FCA Handbook.

Prescribed Responsibilities

This section is used to allocate one or more Prescribed Responsibilities. A Senior Manager may not necessarily have any Prescribed Responsibilities.

  • Are the Prescribed Responsibilities that you have allocated appropriate to this role?
  • If any of these Prescribed Responsibilities are shared with another Senior Manager, are they shared appropriately (eg because of a job share)? Has the rationale been explained? Is it clear that these are allocated to the Senior Manager who is ultimately responsible?
  • If any of these Prescribed Responsibilities are divided, is there a good reason for this and have they been divided in a way that is manageable?
  • Are the allocated Prescribed Responsibilities applicable to this legal entity?

Handbook references

Handbook rules and guidance for allocating Prescribed Responsibilities can be found in SYSC 24. Handbook rules and guidance for allocating overall responsibilities can be found in SYSC 26.

Other responsibilities

This section is used to describe the Senior Manager’s other responsibilities. This could be anything not covered by the Prescribed Responsibilities but will usually cover business functions and activities for which they are accountable (e.g. sales, customer service, information technology).

  • Have these responsibilities been described clearly so that they can be understood by someone who is not familiar with them?
  • Where other Senior Managers are responsible for similar areas, is the distinction clear?
  • Are these responsibilities relevant to this legal entity?

Enhanced Firms

Prescribed Responsibilities

This section is used to allocate one or more Prescribed Responsibilities. A Senior Manager may not necessarily have any Prescribed Responsibilities.

  • Are the Prescribed Responsibilities that you have allocated appropriate to this role?
  • If any of these Prescribed Responsibilities are shared with another Senior Manager, are they shared appropriately (eg because of a job share)? Has the rationale been explained? Is it clear that these are allocated to the Senior Manager who is ultimately responsible?
  • If any of these Prescribed Responsibilities are divided, is there a good reason for this and have they been divided in a way that is manageable?
  • Are the allocated Prescribed Responsibilities applicable to this legal entity?

Overall Responsibilities

This section in the SoR is used to describe responsibilities for the main functions and activities of the business. They are just as important as Prescribed Responsibilities.

The purpose of the Overall Responsibilities is to ensure that an SMF manager is responsible and accountable for every area of a firm’s activities so that there are no gaps. You can find more details about what the Overall Responsibilities mean on p.25- 26 of the Guide.

  • What activities, business areas and functions does my firm undertake or have?

Firms need to consider all their financial services activities and identify which individuals are accountable for what.

  • Does every activity, business area and management function at this legal entity have a Senior Manager with Overall Responsibility for it?

If a responsibility is included in any of the SMF roles (e.g. Chief Risk function) or the Prescribed Responsibilities that apply to the firm, then firms should not also allocate that responsibility as an Overall Responsibility.

  • Have you clearly described each Overall Responsibility for the relevant individual in their SoR?
  • If any other Senior Managers are accountable for a similar area of responsibility, have you clearly described the dividing line between them (e.g. which product lines or customers each is accountable for)?
  • If any of these responsibilities are shared with another Senior Manager, are they shared appropriately (e.g. because of a job share)?
  • Have you checked you have not allocated an Overall Responsibility to a second or third line function (e.g. risk, compliance or internal audit) which is actually only accountable for oversight or monitoring? (For example, the Compliance Oversight function should not be given responsibility for sales where its only function is in its oversight role).

Handbook Reference

You may find it useful to use the indicative list in the Handbook (SYSC 25 Annex 1 G) as a starting prompt to help you to think about responsibilities and how your business is organised, but this is not mandatory or exhaustive (SYSC 25.7). Each firm will have its own set of Overall Responsibilities reflecting their business and activities.

Other Responsibilities

This section can be used to describe responsibilities for other activities which are not covered by a prescribed responsibility or that have been allocated under the rules about overall responsibility. Most SMF managers will have covered everything they are responsible for under the sections above and do not need to complete this section.

However, there may be things which have not been covered such as new strategic initiatives, business transformation programmes or mergers.

  • Have you used this section for responsibilities that are part of the normal course of business and should be Overall Responsibilities? If so, these should be included in that section.
  • Have these responsibilities been described clearly so that they can be understood by someone who is not familiar with them?

Supplementary Information

This section provides space for additional information.

For example, it can be helpful to provide some further detail about the scope of activities of a role-based Senior Management Functions such as the SMF4 – Chief Risk, which vary in detail between businesses.

Limited Scope Firms

Prescribed Responsibilities

This section is not relevant to Limited Scope firms.

Other Responsibilities

This section is used to describe the Senior Manager’s responsibilities. This will usually cover business functions and activities for which they are accountable (eg sales, customer service, information technology).

  • Have these responsibilities been described clearly so that they can be understood by someone who is not familiar with them?
  • Are these responsibilities relevant to this legal entity?

Supplementary Information

This section provides space for additional information.

 

Enhanced Firms

Responsibilities Maps

A Responsibilities Map provides an overview of how a firm is managed and governed. It should be a practical document that is clear and easy for regulators and people who work for the firm to understand.

Your Responsibilities Map should contain key information about governance bodies, senior management reporting lines and Senior Managers’ responsibilities. We require that this key information is presented at a legal entity level but if your firm is part of a group, it should show clearly how the firm relates to its group.

Good Responsibilities Maps usually have a mixture of graphics and text and are easy to navigate and comprehend. Ask yourself:

  • Would someone who didn’t know your firm be able to understand how it was governed and who was accountable for its business activities?
  • Is it easy to understand the governance structure of the firm and who is responsible for strategic decisions? For example, are these made by individuals or through committees? Is it easy to understand who has oversight of delivery of these decisions?
  • Can the reader understand who is responsible for implementing these decisions, including the key responsibilities of Senior Managers?
  • Is information on responsibilities provided at a summary level? If not, consider moving detailed information into SoRs.
  • Is it easy to understand who reports to whom?
  • If there are multiple reporting lines, is the distinction between them clear?

For firms in groups:

  • Is it clear how the firm relates to others in its group, especially other UK regulated firms?
  • Are the key group level individuals with influence over the firm identified?
  • Does the map show how they connect with key individuals and governance bodies of the firm?
  • If the firm relies on group-level governance committees (eg group RiskCo), are these shown and can the reader understand how this works?
  • If governance decisions are made by group management committees (eg EMEA Operations Committee), is the remit and membership of these committees clear?
  • If group committees influence the governance of the firm, is it clear how these relate to each other and to the formal governance of the firm (eg its Board of Directors)?

Neither very long, complex maps nor very minimal ones are likely to meet this purpose.

The requirement to have a Responsibilities Maps applies only to Enhanced firms.

Handbook Reference

Handbook rules and guidance are in SYSC 25.

By David Petty

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