Under the SM&CR, solo-regulated firms are categorised as Enhanced, Core or Limited Scope. Find out which category your firm is in and how you can review this.
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The Senior Managers part of the SM&CR applies differently to solo-regulated firms depending on which category they sit in; the aim is to ensure the regime applies proportionately to the size of the firm.
There are 3 categories for solo-regulated firms under the SM&CR:
- Enhanced: this applies to a small number of firms whose size, complexity and potential impact on consumers or markets warrant more attention. Additional requirements apply to this category of SM&CR firms.
- Core: firms in this category have to comply with the baseline requirements.
- Limited Scope: these firms are exempt from some baseline requirements and will typically have fewer Senior Management Function
You are responsible for determining which category you fall into, based on the rules. It is important to make sure you are correctly categorised, as your category determines how the SM&CR applies to you.
Firms are responsible for determining which category they fall into based on the rules. It is important that they make sure they are correctly categorised, as their category determines how the SM&CR applies.
Reviewing your SM&CR categorisation
There are six thresholds which will result in a firm being classified as Enhanced. Four of these are based on thresholds related to business size as reported on various returns.
| SM&CR Category | Reason | System | Source |
|---|---|---|---|
| Enhanced | Assets under management of £50 billion or more calculated as a 3-year rolling average. | RegData | FSA 038 field 1A |
| Enhanced | Total intermediary regulated business revenue of £35 million or more per annum calculated as a 3-year rolling average. | RegData | RMA B field 4E Or; If you are in retail intermediary who does not complete RMA-B please refer to the further information below |
| Enhanced | Annual revenue generated by regulated consumer credit lending of £100 million or more calculated as a 3-year rolling average. | RegData | CCR002 column B rows 1-6, 8, and 13-14 |
| Enhanced | Mortgage lender or administrator (that is not a bank) with 10,000 or more regulated mortgages outstanding at the latest reporting date. | RegData | MLA-E Section E (2) Row E4.5 column c3 Plus; MLA-G Row G1.1 (d) column c1 |
There are 2 other thresholds under the Enhanced SM&CR categorisation:
- Certain types of Significant SYSC Firm are Enhanced, as set out in this Handbook Notice[1] and SYSC 23 Annex 1 9.3[2].
- CASS Large firms are Enhanced.
Please review our Handbook Glossary[3] to ensure you are aware of what each classification covers. If, after doing this, you still believe you have been categorised incorrectly, please contact us[4].
Working out whether a firm is Limited Scope or Core
The criteria for determining whether a firm is Limited Scope is set out in Part 6 of SYSC 23 Annex 1[5] in the FCA Handbook.
A sole trader is a limited scope firm. There are various other types of firm which can fall into the category if certain conditions are met (see the Handbook link above for further details).
Changing your SM&CR category
Some firms may choose to be categorised in the Enhanced or Core regime (‘opt up’), even if they are not automatically categorised in that regime under our rules. Although a firm does not need any particular reason to opt up, we might see this where, for example, a Core firm is a subsidiary of an Enhanced firm and they want the SM&CR to apply consistently across both entities.
Opting up will result in a firm being subject to the requirements of the higher category; the firm cannot be selective about which requirements will apply. For instance, a Core firm that has opted up to Enhanced would be treated in the same way as a firm that is automatically Enhanced.
More information is available in section 12 of the SM&CR Guide for solo-regulated firms[6] (PDF).
To opt up, firms need to submit a Form O on Connect, (Notification of change to firm classification under the Senior Managers & Certification Regime). If a firm changes their decision and wants to return to their original SM&CR category, they should submit another Form O notification, revoking their previous opt-up.
If a firm decides to revoke their notification, they can only return to their original SM&CR category – for example, a Limited Scope firm that has opted up to Enhanced cannot ‘opt down’ to Core. If they wanted to become Core, they would have to revoke their original Form O and submit a new one, opting up to Core.
More information for specific firm types
We have provided additional information below for some firm types:
- Oil Market Participants and Energy Market Participants
- Retail investment intermediaries who do not complete RMA-B
- Sole Traders
Oil Market Participants and Energy Market Participants
Oil Market Participants (OMPs) and Energy Market Participants (EMPs) are generally categorised as Core if their principal purpose is to carry on regulated activities, or if they are a MiFID investment firm.
If the firm’s principal purpose is to carry on activities other than regulated activities, and it is not a MiFID investment firm, it may be a Limited Scope firm. Where this applies, firms that believe they are Limited Scope should contact us.
Retail intermediaries that do not complete RMA-B
One of the cases in which a firm is a SM&CR Enhanced firm is when its total intermediary regulated business revenue is of £35 million or more per annum calculated as a 3-year rolling average.
Firms with the relevant permissions that do not complete RMA-B are required to self-assess annually and notify us if they have (as a 3-year rolling average) over £35m in regulated revenue from the activities undertaken using the permissions below:
- retail investment activities
- advising on P2P agreements (except when carried on exclusively with or for professional clients)
- advising on pensions transfers & opt-outs
- arranging (bringing about deals) in retail investments
- home finance mediation activity
- insurance mediation activity (non-investment insurance contracts)
If a non-RMA B firm no longer meets the £35m 3-year rolling average revenue threshold, it must also notify us of this.
Notifications can be sent by email to [email protected].
Sole traders
Sole traders are Limited Scope firms. A sole trader without employees does not need to hold SMF29 (the Limited Scope function). Depending on the firm’s permissions/activities, SMF16 (the Compliance Oversight function) may be required. A sole trader must hold SMF29 if they employ anyone who is required to be approved or who falls under the Certification Regime[7].
A few sole traders with employees may have a governance structure. In this case, the same SMFs apply as for firms in the Core category.
The Certification Regime does not apply to a sole trader as an individual but may apply to any employees. So, the Certification Regime does not apply to a sole trader with no employees.
Most sole traders will not need to conduct a fit and proper assessment on themselves. This is because neither the governing SMFs nor the Certification Regime apply to a sole trader themselves, though these functions can apply to their employees.
Sole traders don’t need to get references about themselves from previous employers to perform a Senior Management Function as a sole trader. Firms do not need to request a regulatory reference for a candidate if they were previously a sole trader.
Sole traders do not need to conduct criminal records checks on themselves.