Senior Management Functions

1.1

Unless otherwise stated, this Part applies to every firm that is:

1. (1) a CRR firm;
2. (2) a credit union; or
3. (3) a third country CRR firm in relation to:
1. (a) the activities of its establishment in the UK; or
2. (b) if it does not have an establishment in the UK, its activities in the UK.

1.2

In this Part, the following definitions shall apply:

Chief Executive function

has the meaning given in 3.2.

Chief Finance function

has the meaning given in 3.3.

Chief Operations function

has the meaning given in 3.8.

critical function

has the meaning given in section 3(1) and (2) of the Banking Act 2009.

FCA activities

means a function which would, except for SUP10C.9.8R of the FCA Handbook, be an FCA governing function.

FCA approval

means at any time an approval granted to and in effect for a person by the FCA under section 59 of FSMA (Approval for particular arrangements) for the performance of a controlled function specified by the FCA.

Group Entity Senior Manager function

has the meaning given in 5.2.

Head of Key Business Area function

has the meaning given in 3.6.

Head of Overseas Branch function

has the meaning given in Senior Management Functions 7.2.

Senior Independent Director function

has the meaning given in 4.6.

1.3

This Part does not apply to a function performed by:

1. (1) a person acting as an insolvency practitioner within the meaning of section 388 of the Insolvency Act 1986; or
2. (2) a person acting as a nominee in relation to a voluntary arrangement under Parts I (Company Voluntary Arrangements) and VIII (Individual Voluntary Arrangements) of the Insolvency Act 1986; or
3. (3) a person acting as an insolvency practitioner within the meaning of Article 3 of the Insolvency (Northern Ireland) Order 1989; or
4. (4) a person acting as a nominee in relation to a voluntary arrangement under Parts II (Company Voluntary Arrangements) and VIII (Individual Voluntary arrangements) of the Insolvency (Northern Ireland) Order 1989.

2.1

Each of the functions in 3 to 7 is a controlled function.

2.2

1. (1) A firm (other than a credit union or a third country CRR firm) must ensure that one or more person performs each of the following PRA senior management functions on its behalf:
1. (a) the Chief Executive function;
2. (b) the Chief Finance function; and
3. (c) the Chair of the Governing Body function.
2. (2) If a vacancy arises in respect of one or more of the PRA senior management functions set out in (1), a firm must ensure that it appoints a person to fill that vacancy as soon as practicable.

2.3

To the extent that,

1. (1) a firm appoints a person to perform a function which, but for this rule, would be a PRA senior management function;
2. (2) the appointment is solely to provide cover for a PRA approved person whose absence is:
1. (a) temporary; or
2. (b) reasonably unforeseen; and
3. (3) the appointment is for less than 12 weeks in a consecutive 12-month period,

the description of that PRA senior management function does not relate to those activities of that person.

2.4

1. (1) If a person has been approved to perform a PRA senior management function in relation to a firm and also performs FCA activities, performance of the PRA senior management function will include the performance of those FCA activities, provided the following conditions are met:
1. (a) the PRA’s approval to perform a PRA senior management function has been granted and continues in force;
2. (b) at the time of approval being granted by the PRA, that person was not subject to an FCA approval to perform the particular FCA governing function;
3. (c) the firm made the notification required by SUP10C.9.8 R (4) of the FCA Handbook; and
4. (d) that person performs and is continuing to perform the FCA activities.
2. (2) If a person has been approved to perform a PRA senior management function in relation to a firm which includes performance of FCA activities in the circumstances set out in (1), and that person:
1. (a) ceases to perform the PRA senior management function;
2. (b) within three months of ceasing performance, is approved to perform a new PRA senior management function; and
3. (c) continues to perform the FCA activities,

performance of the new PRA senior management function will include the performance of those FCA activities, provided the conditions in (1) (a)-(d) are met.

2.5

If a PRA approved person who has been performing a PRA senior management function which includes performance of FCA activities in the circumstances set out in 2.4, ceases to perform a PRA senior management function but continues to perform the FCA activities, 2.4 will continue to apply in respect of the performance of the FCA activities until the earlier of:

1. (1) approval by the FCA in respect of the performance by that person of those FCA activities as an FCA governing function in relation to the firm; or
2. (2) three months from the time that the person ceased to perform that PRA senior management function.

2.6

If a PRA approved person:

1. (1) (other than in the circumstances set out in 2.4 or 2.5), performs one or more FCA responsibilities;
2. (2) ceases to perform any PRA senior management function; and
3. (3) that person does not have an FCA approval to perform an FCA controlled function in relation to that firm

the functions in (1) will continue to be part of the PRA senior management function which the person most recently performed for that firm) until the earlier of:

1. (1) approval by the FCA in respect of the performance by that person of an FCA controlled function in relation to the firm; or
2. (2) three months from the time that the person ceased to perform that PRA senior management function.

2.7

1. (1) A firm must take all reasonable steps to ensure that before a person:
1. (a) begins to perform a PRA senior management function; or
2. (b) begins to perform new or revised responsibilities in performance of a PRA senior management function
2. that person is provided with all of the information and materials that the person may reasonably expect in order to perform that PRA senior management function or those new or revised responsibilities effectively and in accordance with the regulatory system.
3. (2) A firm must have a policy about how it complies with (1) including the systems and controls it uses and must maintain adequate records of the steps taken to comply with (1).

3.1

This Chapter does not apply to a credit union.

3.2

The Chief Executive function (SMF1) is the function of having responsibility, under the immediate authority of the governing body, alone or jointly with others, for carrying out the management of the conduct of the whole of the business (or relevant activities) of a firm (other than a third country CRR firm).

3.3

The Chief Finance function (SMF2) is the function of having responsibility for management of the financial resources of a firm and reporting directly to the governing body of the firm in relation to its financial affairs.

3.4

The Chief Risk function (SMF4) is the function of having responsibility for overall management of the risk controls of a firm, including the setting and managing of its risk exposures, and reporting directly to the governing body of the firm in relation to its risk management arrangements.

3.5

The Head of Internal Audit function (SMF5) is the function of having responsibility for management of the internal audit function of a firm and for reporting directly to the governing body of the firm on the internal audit function.

3.6

The Head of Key Business Area function (SMF6) is the function of having responsibility for management of a business area or division of a firm (other than a third country CRR firm), where:

[deleted.]

1. (1A) either:
1. (a) both of the quantitative criteria set out in 3.6A are satisfied in respect of the relevant business area or division of the firm; or
2. (b) one of the quantitative criteria set out in 3.6A is satisfied in respect of the relevant business area or division of the firm and the relevant business area or division of the firm performs a critical function; and
2. (2) the person performing that function does not report to a person performing the Head of Key Business Area function in respect of that same business area or division of the firm.

3.6A

The quantitative criteria referred to in 3.6 are that the relevant business area or division of the firm:

1. (1) has gross total assets equal to or in excess of £10 billion; or
2. (2) accounts for more than 20% of the firm’s gross revenue.

3.7

For the purposes of 3.6, the gross total assets of the business area or division of the firm and the percentage of the gross revenue of the firm or group shall be determined on the basis of either:

1. (1) the assets and revenues for the business area or division, and the firm or group, as the case may be, for the firm’s financial year immediately preceding that in which the person is allocated with the specified responsibilities; or
2. (2) if the threshold amount is not met for that period, on the basis of the annual average amount calculated across a rolling period of five years (calculated by reference to the firm’s annual accounting date). Where the firm or the business area or division has been in existence for less than five years, the calculation will be made on the basis of the annual average amount for the period during which the firm or that business line or division has existed (calculated by reference to the firm’s annual accounting date).

3.8

The Chief Operations function (SMF24) is the function of having responsibility for the internal operations and technology of a firm.

4.1

This Chapter does not apply to a credit union or a third country CRR firm.

4.2

The Chair of the Governing Body function (SMF9) is the function of having responsibility for chairing, and overseeing the performance of the role of, the governing body of a firm.

4.3

The Chair of Risk Committee function (SMF10) is the function of having responsibility for chairing, and overseeing the performance of any committee responsible for the oversight of the risk management systems, policies and procedures of a firm specified in Risk Control 2, including where applicable to the firm, a committee established in accordance with Risk Control 3.1.

4.4

The Chair of Audit Committee function (SMF11) is the function of having responsibility for chairing, and overseeing the performance of any committee responsible for the oversight of the internal audit system of a firm specified in Compliance and Internal Audit 2.

4.5

The Chair of Remuneration Committee function (SMF12) is the function of having responsibility for chairing, and overseeing the performance of any committee responsible for the oversight of the design and the implementation of the remuneration policies of a firm, including where applicable to the firm, a committee established in accordance with Remuneration 7.4.

4.6

The Senior Independent Director function (SMF14) is the function of performing the role of a senior independent director, and having particular responsibility for leading the assessment of the performance of the person performing the Chair of the Governing Body function.

5.1

This Chapter does not apply to a credit union.

5.2

The Group Entity Senior Manager function (SMF7) is the function of having a significant influence on the management or conduct of one or more aspects of the affairs of a firm in relation to its regulated activities (other than in the course of the performance of another PRA senior management function) and which is performed by a person employed by, or an officer of:

1. (1) a parent undertaking or holding company of a firm; or
2. (2) another undertaking which is a member of the firm’s group.

6.1

This Chapter applies only to a credit union.

6.2

The Credit Union Senior Manager function (SMF8) is the function of having responsibility for the conduct of, and/or chairing the committee of management of a credit union.

6.3

1. (1) A credit union must ensure that at least one person performs the Credit Union Senior Manager function on its behalf.
2. (2) If a vacancy arises in respect of the Credit Union Senior Manager function, a credit union must ensure that it appoints a person to fill that vacancy as soon as practicable.

7.1

This Chapter applies only to a third country CRR firm in relation to:

1. (1) the activities of its establishment in the UK; or
2. (2) if it does not have an establishment in the UK, its activities in the UK.

7.1A

1. (1) 7.2 and 7.3(1) do not apply to a third country CRR firm that is a SRO firm.
2. (2) 7.4 and 7.5 apply only to a SRO firm.

7.2

The Head of Overseas Branch Function (SMF 19) is the function of having responsibility alone or jointly with others, for:

1. (1) the conduct of all activities of the UK establishment of a third country firm which are subject to the UK regulatory system; or
2. (2) where the firm does not have an establishment in the UK, the conduct of all activities which are subject to the UK regulatory system.

7.3

1. (1) A third country CRR firm must ensure that at least one person performs the Head of Overseas Branch Function on its behalf.
2. (2) If a vacancy arises in respect of the Head of Overseas Branch Function, a third country CRR firm must ensure that it appoints a person to fill that vacancy as soon as practicable.

7.4

A SRO firm must ensure that at least one person performs the Head of Overseas Branch function on its behalf.

7.5

For the purposes of 7.4, the Head of Overseas Branch Function (SMF 19) is the function of having responsibility to oversee the orderly run-off of the firm’s regulated activities in the UK.

8.1

Except as otherwise provided in this Chapter, a person may perform more than one PRA senior management function on behalf of a firm.

8.2

A firm must ensure that a person who performs the Chair of the Governing Body function on its behalf does not simultaneously perform the Chief Executive function within the same firm.

[Note: Art. 88(1)(e) of CRD]