Following considerable discussion on the issue, including the FCA’s now rather dated discussion paper from September 2016 (DP16/4), the FCA has confirmed that it will not require the registration, as an SMF18 or SMF22, of any person with overall responsibility for the Legal function.
This is still conditional further consultation in CP19-04 https://www.fca.org.uk/publication/consultation/cp19-04.pdf.
The decision to reject the Legal function from the scope of the SMR is mainly driven by the FCA reasoning that legal privilege would likely limit the FCA’s ability to supervise and exercise its powers in regard to a Head of Legal.
The FCA observes that Heads of Legal will actually need to adhere to individual conduct rules and the Certification Regime (as quite possibly a Material Risk Taker or Significant Management Function or both), but has proposed amendments to its rules to make things crystal clear that this is its expectation.
The FCA has made clear that this exclusion will not be applicable to individuals performing dual roles (e.g. where the Head of Legal is also the Head of Compliance, that individual will still need to be registered as an SMF for their Compliance responsibilities).
The FCA also explains that this conclusion does not alter Senior Managers’ responsibilities to comply with their own obligations, involving conduct rule SC4, which requires SMs to disclose matters of which the regulators would expect notice; this may require matters to become escalated through appropriate channels to the FCA even though the matter is the subject of escalation to, or discussion with, the legal function.
It is worth keeping in mind that the FCA’s proposed modifications to reflect this approach (proposed at SYSC 26.4.9-15G) are complex, maybe overly so, they include a recommended definition of a legal function, and clarify also that responsibility for functions directly supporting and subordinate to the legal function which are also the responsibility of the Head of Legal will similarly not need to be allocated to a Senior Manager.
You May Also be interested in;
For assistance in your SMCR preparations, please contact us.
Tel: 0207 097 1434
Lee Werrell Chartered FCSI FISM.
Head of Marketing.