CP2/23 – Moving Senior Managers Regime forms from the PRA Rulebook

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Responses are requested by 28 February 2023.

The PRA prefers all responses to be sent by email to: CP2_23@bankofengland.co.uk

Alternatively, please address any comments or enquiries to:
John Cunningham, Authorisations Policy Team
Prudential Regulation Authority
20 Moorgate
London
EC2R 6DA

1. Overview

1.1 This Consultation Paper (CP) sets out the Prudential Regulation Authority’s (PRA) proposals to remove certain Senior Managers and Certification Regime (SM&CR) forms from the PRA Rulebook and to extend the length of employment history required in the long form A.

1.2 The proposals in this CP would result in changes to the Senior Managers Regime –Applications and Notifications Parts of the PRA Rulebook (Appendix 1).

1.3 The PRA’s proposal to remove certain SM&CR forms from the PRA Rulebook would mean that when the PRA needs to make administrative or other non-material changes to these forms it would not be required to follow the statutory consultation process for rule changes. These forms would be available on the Connect system in the same manner as other regulatory transaction forms.

1.4 The PRA’s proposal to increase the length of employment history requested in long form A would bring the form in-line with MiFID requirements. This would ensure a consistent user experience with all Senior Managers Function (SMF) applicants providing the same minimum length of employment history.

1.5 This CP is relevant to all PRA-authorised firms, including credit unions. Forms submitted before the proposed changes take effect would be unaffected.

1.6 The PRA has a statutory duty to consult when changing rules (FSMA s138J), or new standards instruments (FSMA s138S). When not making rules, the PRA has a public law duty to consult widely where it would be fair to do so. 

1.7 In carrying out its policy making functions, the PRA is required to comply with several legal obligations. Appendix 4 lists the statutory obligations applicable to the PRA’s policy development process. The analysis in this CP explains how the proposals have had regard to the most significant matters, including an explanation of the ways in which having regard to these matters has affected the proposals.

Implementation

1.8 The PRA proposes that the implementation date for the changes resulting from this CP would be May 2023.

Responses and next steps

1.9 This consultation closes on Tuesday 28 February 2023. The PRA invites responses on the proposals set out in this consultation. Please address any comments or enquiries to CP2_23@bankofengland.co.uk. Please indicate in your response if you believe any of the proposals in this consultation paper are likely to impact persons who share protected characteristics under the Equality Act 2010, and if so, please explain which groups and what the impact on such groups might be.

1.10 Unless otherwise stated, any remaining references to EU or EU-derived legislation refer to the version of that legislation which forms part of retained EU law.^{footnote [1]}

2. The PRA’s proposals

Removing Senior Managers Regime forms from the PRA Rulebook

2.1 The PRA proposes to amend the Senior Managers Regime - Applications and Notifications Part of the PRA Rulebook to remove links to forms A (long form), A (shortened form), B, E, I, J, and the statement of responsibilities (see Appendix 2 for a list of the purpose of these forms). The PRA would continue to direct firms to submit an application using the online notification and applications (ONA) system. Forms C and D would remain in the PRA Rulebook as these forms are made by rules.

2.2 The proposed changes would align the Senior Managers Regime application forms with other regulatory transactions (such as Variation of Permission),^{footnote [2]} where forms already sit outside of the PRA Rulebook. The PRA considers its proposal is also consistent with the approach taken by the Financial Conduct Authority (FCA).

2.3 As a result of this proposed change, when the PRA would need to make administrative or other non-material changes to its forms, it would be clear that it would not be required to follow the statutory consultation process for rule changes. The PRA considers this would reduce administrative costs for both the PRA and regulated firms, and reduce the time required to make non-material changes, allowing the PRA to improve the forms and provide clarifying materials promptly. It would also support any future changes to forms that may result from the review announced by HM Treasury in December 2022 of the Senior Managers and Certification Regime. The PRA would; however, publish a notice on the Senior Managers Regime pages on its website to inform users of the amendments that have been made.

2.4 Where amendments to the Senior Managers Regime forms are significant or represent a change to policy that has not separately been consulted on, the PRA would continue to undertake a consultation in line with its obligations under public law requirements to discharge its functions as transparently as possible.

2.5 The PRA is further proposing to change the length of employment history required in the form A (long form) from 5 years to 10 years.

2.6 By increasing the requested length of employment history to 10 years, Form A (long form) would be consistent with the length of employment history required by MiFID related forms. This would help to ensure a consistent user experience with all SMF applicants providing the same minimum length of employment history. It would also help to ensure that the PRA receives the information it needs to assess applications, helping to reduce the need to request further information once an application has been received.

PRA objectives analysis

2.7 The PRA considers its proposals would allow it to improve the usability and function of forms more quickly, and improve consistency across forms, making it easier for PRA-regulated firms to provide the information necessary to make decisions on Senior Managers Regime applications. In turn, this would help to maintain the safety and soundness of firms.

2.8 The PRA has assessed whether the proposals in this CP facilitate effective competition. The PRA considers improving the usability of the Senior Managers Regime forms would make it easier for all firms to submit quality applications, thereby helping to facilitate a level playing field.

Cost benefit analysis (CBA)

2.9 The PRA considers that its proposals would have a minimal cost to firms. As employment history is provided in an applicant’s CV accompanying the application, the costs of increasing the length of employment history requested in the long form A to 10 years would be minimal.

2.10 The PRA considers that the proposals would provide benefits to the users of the forms and the PRA. By removing the need to consult on minor, non-policy making changes to the Senior Managers Regime forms, the PRA expects that the proposals would:

• improve the usability of the forms;
• reduce the need for additional requests for information once an application or notification had been submitted; and
• reduce the burden of making minor, non-policy making changes to the Senior Managers Regime forms.

‘Have regards’ analysis

2.11 In developing these proposals, the PRA has had regard to the FSMA regulatory principles and the aspects of the Government’s economic policy set out in the HMT recommendation letter from 2022. The following factors, to which the PRA is required to have regard, were significant in the PRA’s analysis of the proposal:

1. The principle to use the resources of the PRA in the most efficient and economic way (FSMA regulatory principle): The PRA considered whether it would be more efficient to remove the Senior Mangers Regime forms from the rules or to maintain the status quo, and continue to consult on form changes of minor significance. Consulting on minor form changes can require a disproportionate amount of time and resource from the PRA and firms reviewing the proposals. The proposed changes would remove this resource requirement while making it easier for the PRA to make improvements to the forms and consequently the Senior Managers Regime. The PRA would still have a duty to consult on changes to the Senior Managers Regime forms that are significant, increase the burden on applicants or make new policy.
2. The principle that the PRA should exercise its functions transparently (FSMA regulatory principle): The PRA has considered that if it does not consult on minor form changes, then transparency may be reduced. To address this, the PRA would inform users of the amendments to the forms by publishing a notice on the Senior Managers Regime pages on its website.
3. Supporting the government’s objective of medium to long-term economic growth in the interests of consumers and businesses and supporting the government’s objective to promote the international competitiveness of the UK (PRC recommendations letter): The proposals in this CP would allow the PRA to make minor improvements to the Senior Managers Regime forms more quickly supporting an effective Senior Managers Regime, and in turn supporting growth and competitiveness.

2.12 The PRA has had regard to other factors as required. Where analysis has not been provided against a ‘have regard’ for these proposals, it is because the PRA considers that ‘have regard’ to not be a significant factor for these proposals.

Impact on mutuals

2.13 The PRA considers that the impact of the proposed rule changes on mutuals is expected to be no different from the impact on other firms. The reason for this is that the forms are the same for all firm types.

Equality and diversity

2.14 The PRA considers that the proposals do not give rise to equality and diversity implications.