FCA Senior Manager Applications: Common Mistakes And How To Avoid them

As the FCA’s updated approach to supervision beds in, the regulator has recently indicated their intention to more closely scrutinise Senior Manager Applications. A statement, published on 15 March 2022, highlighted a number of key areas that it will be focusing on in the decision to approve heads of compliance and MLROs, around applicant competency and capability. Although the two SMFs in question require a specific skill set and knowledge, our recent work on approval applications suggests that the Regulator is not limiting scrutiny only to MLROs and heads of compliance.

The importance of making sure an application is comprehensive, accurate and clear enough cannot be understated. Applications need to be approved by the FCA before the Senior Manager can take up their post. A lack of evidence – or lack of clarity – can lead to significant delays, a request for an interview to test skills and competencies, or outright refusal of an application.

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The FCA publication highlighted that individuals in important roles will need to have and clearly demonstrate the “necessary skills and knowledge, from training and experience, to be effective.” Crucially, the level of skills and knowledge should be proportionate to the size of the firm and its risk of harm. Helpfully, the publication hints at evidence provided by successful applications, including the completion of relevant training prior to applying, relevance of training courses to the business and role, recent and up-to-date training, and training of sufficient depth and length to support the work of the role. In terms of experience, the FCA would not expect that applicants have previously held head of compliance and MLRO positions before, and successful applicants have had a range of backgrounds including in compliance and legal teams and as accountants and consultants. Those who have only worked in front-line roles, however, are unlikely to be able to use that experience to demonstrate they have the necessary skills.

While the publication concentrates on the specific experience and knowledge needed for the skilled SMFs in question, there are a number of takeaways for anyone applying for FCA approval.

Applications that do not sufficiently demonstrate that the individual has the right experience and skills for the function are likely to be asked to an interview to test this. The rules around applying for approval make very clear that the regulator requires applications to be ‘completed fully and honestly;’ where there is anything within the application that could call this into question, even where this is unintentional, the FCA will ask questions or call the candidate to interview and this will set the application back by a number of weeks, effectively pausing the three-month deadline.

Applicants for Senior Manager Functions should make the extent, regularity and timing of their qualifications and ongoing training very clear. Applications are more likely to be successful where the training is relevant to the role, and the size and nature of the firm and its business.

It goes without saying that the consequences for supplying false or misleading information are more severe than some might think. Applying to undertake a FCA controlled function using false or misleading information may be a criminal offence and the individual could face prosecution under section 398 of the Financial Services and Markets Act 2000, regardless of the status of their application.

Clarity is a major issue. Undoubtedly applicants should proof-read the submission several times from the perspective of someone outside of the business and who does not know the individual. This seems obvious; but it is surprising how many applications do not take this into account. Something that might seem routine and simple to the applicant, and therefore not in need of any further explanation might be unfathomable to an external reader, particularly one that is scrutinising the application with a critical eye. Again, where the FCA feels that an issue needs to be explained, they can put the application on hold while they seek further information. The same goes for an error in the statement. The importance of proofreading cannot be overstated. A single error can have serious consequences for both the application and the candidate, and ultimately, the running of the business.

The FCA publication highlights the usefulness of third-party support in the completion of Senior Manager applications. External support can help with highlighting errors, mis-statements or lack of clarity, and advising how best to represent the candidate’s skills and knowledge, as well as any gaps in competency or experience and how best to deal with these. We offer a dedicated application support service. Our experience in supporting successful FCA applications – both for firms and individuals – throughout the FCA’s tenure as regulator means that we know exactly what the FCA wants to see.

For more information, see our Services webpage, or contact Rob Bell for more information: robert.bell@rbcompliance.co.uk.