The FCA published PS19/9: Applying the Senior Managers and Certification Regime (SM&CR) to Claims Management Companies setting out the policy statement and near final rules that will apply the SM&CR to CMCs.
Claims Management Compliance have been through the policy statement and set out a summary of the key considerations for CMCs.
Objectives
The FCA has a single statutory objective which is to ensure that relevant markets function well. The FCA seeks to achieve its statutory objectives through three operational objectives, namely the promotion of effective competition in the interest of consumers, the protection and enhancement of market integrity and ensure consumer protection.
The SM&CR directly seeks to increase consumer protection by addressing the consumer harms that were identified to exist in the claims management sector following the Brady review including distress caused by poor service and delays, harassment and aggressive sales practices and directors closing one CMC and taking over an existing authorised CMC to avoid fulfilling their obligations (known as ‘phoenixing’). The SM&CR seeks to reduce the prevalence of these consumer harms by creating a step-change in standards for individual accountability and governance.
Senior Management Functions
A key shift from CP18/26: Claims management companies: how we propose to apply the Senior Managers and Certification Regime is the FCA’s decision to not prohibit Senior Management Function holders at CMCs from holding both the Limited Scope Function (SMF27) and Compliance Oversight Function (SMF16).
The FCA’s rationale for removing the previously proposed prohibition is that it understands that a firm could have good reason for appointing the same individual to perform both Senior Management Functions. Also, the FCA noted that it does not generally have rules that prohibit a person from holding more than one SMF position the same firm.