Next we consider what is probably the most straightforward group of material risk takers (“MRT”) to identify: those who are performing one or more of the (what we call) “hot seat” functions at so called “non-SNI” firms.
Essentially, any firm in the trading world that can trade as principal, hold client money or safeguard and administer client assets is not “small and non-interconnected” (“non-SNI”). Agency brokers and asset managers can also be non-SNIs if they exceed certain thresholds.
MRT Pointer # 2: If you are performing one of the following roles at a non-SNI firm then you are ‘deemed’ to be an MRT by the new remuneration rules (contained in FCA Policy Statement PS21/9 (July 2021)):
(1) you are a member of the senior management body (for most firms likely to be the board), e.g. as either as an executive or non-executive director;
(2) you are a member of senior management, e.g. you might be a Chief Operating Officer who is approved to perform the SMF 24 function but do not serve on your firm’s board;
(3) you have managerial responsibility for a ‘front office’ business unit, e.g. the head of the soft commodities desk or head of an agency securities execution desk;
(4) you have managerial responsibilities for the activities of a control function, e.g. head of compliance, head of internal audit, head of risk;
(5) you have managerial responsibilities for the prevention of money laundering and terrorist financing, e.g. as money laundering reporting officer;
(6) you are responsible for managing a ‘material risk’ within your firm. We’ll consider what the FCA might deem to be a ‘material risk’ in upcoming posts;
(7) you manage IT, information security or material outsourcing; and/or
(8) you have authority to approve or veto new product launches, e.g. you are voting member of the firm’s product governance committee.
Some readers may hold deputy functions in firms and might be wondering if the FCA is likely to view “managerial responsibilities” as being wide enough to capture them as a ‘deemed’ MRT. The revised FCA Glossary definition provides help here, stating that “managerial responsibility” refers to: “a situation in which a staff member heads a business unit or a control function and is directly accountable to the management body as a whole, to a member of the management body or to senior management”. However, as the FCA is keen to stress further on in its rules, these ‘deemed’ categories are “intended to be a starting point only”…
The identification of additional MRTs based on a firm’s specific risk profile is where things get really interesting. Stay tuned for our thoughts!