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Clifford Chance

Clifford Chance

Regulatory Investigations and Financial Crime Insights

Regulators provide further clarity of senior managers' obligations in response to COVID-19

Both the FCA and PRA have recently issued statements providing guidance to senior managers on ensuring that they are supporting the Government's efforts to protect the public during the COVID-19 health emergency.

On 29 March 2020, the FCA clarified that each firm's designated senior manager or equivalent person is responsible for identifying which of their employees may continue to travel to the office or business continuity site.  The FCA states that it does not expect workers such as the following to fall into this category:

  • financial advisers who can offer their services online or by phone;
  • staff who can safely and securely trade shares and financial instruments from home;
  • business support staff, such as those in IT where they can triage issues from home, unless they are looking after specific equipment or technology; and
  • claims management companies and those selling non-essential goods and credit.

The FCA emphasises that the total number of roles requiring an ongoing physical presence in the office or business continuity site is likely to be far smaller than the number of workers needed to ensure all of a firm's business activities continue to function on a business as usual basis.

This clarification follows statements from the FCA and PRA published on 20 March 2020 that the Chief Executive Officer (SMF1), or most relevant member of the senior management team if no SMF1 holder is appointed, be accountable for ensuring an adequate process for regulated firms to identify key financial workers, in the context of Government measures relating to the continued provision of schooling to children.  The regulators have explained that these key workers must fulfil roles which are necessary for the firm to continue to provide essential daily financial services to consumers, or to ensure the continued functioning of markets.  Only roles meeting the definition should be designated.

More generally, the FCA has explained that it does not require firms to have a single senior manager responsible for their coronavirus response, but that firms should allocate these responsibilities in the way which best enables them to manage the risks they face.

The approaches of each regulator above towards senior managers are consistent with the approach more generally indicated by joint FCA and PRA consultation papers published in December 2019 regarding firms' responsibilities to build operational resilience.  These emphasise the need for relevant senior managers and boards to be directly involved with the steps taken by firms to prepare for and respond to disruption events.