Application of the SM&CR to claims management companies
Application of the SM&CR to claims management companies

The following Financial Services guidance note provides comprehensive and up to date legal information covering:

  • Application of the SM&CR to claims management companies
  • Introduction
  • Background
  • Applying the SM&CR to CMCs
  • Consequences of breaching SM&CR
  • Transitional arrangements
  • Conclusion

Introduction

The Financial Conduct Authority (FCA) took over regulation of the claims management sector from the Claims Management Regulator (CMR) on 1 April 2019. Consequently, the sector is subject to the FCA’s rules on professionalism, conduct and governance, otherwise known as the Senior Managers and Certification Regime (SM&CR). The SM&CR was extended to FCA solo-regulated firms, including claims management companies (CMCs), on 9 December 2019, or for those CMCs operating on a temporary permission on 9 December 2019, the SM&CR rules apply from the date the CMC is fully FCA-authorised. The FCA considers that the SM&CR ensures individuals in CMCs are personally accountable for considering customers’ interests, and for treating them fairly. This in turn should strengthen protections and reduce harm for customers of CMCs, allowing customers to access redress without harassment or intimidation.

Key points to note are:

  1. CMCs must obtain FCA approval for individuals performing Senior Management Functions (SMFs)

  2. Senior Managers have a statutory Duty of Responsibility to prevent or stop breaches of FCA rules in their area of responsibility

  3. CMCs must ensure individuals performing SMFs and Certification Functions (CFs) are fit and proper

  4. all but auxiliary CMC staff are subject to the FCA’s Conduct Rules

This Practice Note sets out the FCA’s final rules applying the SM&CR to the CMC sector, the transitional arrangements, and the steps which