Allocating Prescribed Responsibilities by Firm Type

Allocation of Prescribed Responsibilities: practical examples by firm type

Prescribed Responsibilities are specific regulatory obligations that the FCA requires to be allocated to a named Senior Manager in every FCA-regulated firm. Unlike the Senior Manager Functions themselves — which define the areas a senior manager is responsible for — Prescribed Responsibilities are individual accountability items that must be formally owned by a specific individual. The FCA’s intent is to ensure that no significant regulatory obligation falls into a governance gap where everyone is nominally responsible and therefore no one is specifically accountable.

Getting the allocation of Prescribed Responsibilities right matters both for regulatory compliance and for the firm’s actual governance. A firm that allocates all Prescribed Responsibilities to a single senior manager to simplify the documentation has created a governance structure that the FCA will question. A firm that allocates responsibilities thoughtfully across its senior management population, so that each responsibility sits with the person best placed to discharge it, has built an accountability framework that is both compliant and functional.

The Prescribed Responsibilities under SMCR

The FCA requires all firms in scope of SMCR to allocate a set of Prescribed Responsibilities across their senior manager population. The responsibilities include: overall responsibility for the firm’s SMCR framework; responsibility for the firm’s performance of the obligations under the regulatory system that apply to the firm; oversight of the firm’s systems and controls; responsibility for whistleblowing arrangements; responsibility for the firm’s UK regulatory reporting; responsibility for the firm’s compliance with the senior managers conduct rules training obligations; and — for firms subject to the financial crime elements of the regime — responsibility for the firm’s financial crime arrangements.

For firms subject to the Senior Managers Regime with enhanced requirements — typically banks, building societies and the largest investment firms — additional Prescribed Responsibilities apply, including responsibility for the firm’s recovery plan and resolution pack, responsibility for the firm’s intraday liquidity management, and responsibility for the firm’s stress testing.

The full list of Prescribed Responsibilities applicable to a specific firm depends on its FCA regulatory status — whether it is an enhanced scope firm, a core scope firm, or a limited scope firm under the SMCR categorisation. Enhanced scope firms have the most extensive Prescribed Responsibility requirements. The first step in allocating Prescribed Responsibilities is therefore confirming which Prescribed Responsibilities apply to the firm’s specific scope.

The allocation principles

The FCA does not prescribe which Prescribed Responsibilities should be allocated to which Senior Manager Function. It requires only that every Prescribed Responsibility is allocated to a named individual, that the allocation is documented in the firm’s management responsibilities map and reflected in the relevant individual’s Statement of Responsibilities, and that the individual actually has the capability and oversight to discharge the responsibility.

The allocation should follow the substance of the responsibility, not the convenience of documentation. Allocating a Prescribed Responsibility to a senior manager who has no practical involvement in the area it covers, purely because they are available to be named, defeats the purpose of the framework. The FCA will assess whether the responsibility allocation reflects genuine accountability by interviewing senior managers about the areas for which they are responsible — a senior manager who cannot discuss the specifics of their Prescribed Responsibilities is evidence of an allocation that exists on paper but not in practice.

Practical allocation examples: investment firm

An FCA-regulated investment firm with four senior managers — the CEO (SMF1), the CFO (SMF2), the Head of Compliance (SMF16) and the Chief Operations Officer (SMF24) — might allocate Prescribed Responsibilities as follows.

The responsibility for the firm’s SMCR framework and the regime’s overall obligations appropriately sits with the CEO (SMF1) because this is the senior manager with the broadest view of the firm’s regulatory position and ultimate accountability for how the regime operates across the firm. Allocating this to the Head of Compliance might seem logical — compliance runs the SMCR regime day-to-day — but the Prescribed Responsibility for the regime itself should sit with the most senior individual, not the person who administers it.

The responsibility for the firm’s regulatory reporting obligations appropriately sits with the CFO (SMF2), because the firm’s regulatory returns on financial and prudential matters are the CFO’s primary area. The responsibility for the firm’s financial crime arrangements appropriately sits with the Head of Compliance (SMF16), who oversees the AML programme. The responsibility for the firm’s operational resilience framework and the firm’s systems and controls oversight appropriately sits with the COO (SMF24), because operational infrastructure is the primary domain of that function.

Whistleblowing responsibility is frequently allocated to the Compliance function (SMF16) because compliance typically manages the whistleblowing process, but it can also appropriately sit with the CEO where the firm wants the most senior individual to own this accountability.

Practical allocation examples: payment institution

A payment institution with a smaller senior management population — CEO (SMF1) and Head of Compliance (SMF16/SMF17 combined) — faces the challenge of a thin management layer. All Prescribed Responsibilities must still be allocated to named individuals, but with only two senior managers the allocations will be more concentrated than in a larger firm.

In this scenario, the responsibility for the SMCR framework and the regime’s obligations sits with the CEO. The responsibility for regulatory reporting can also sit with the CEO if no one else is available — though as the firm grows and either a finance director or a dedicated regulatory reporting function is added, this should be transferred. The financial crime and AML obligations sit with the Head of Compliance/MLRO who holds both SMF16 and SMF17. Systems and controls oversight sits with the CEO by default, but this is an area where the FCA will assess whether the CEO is genuinely exercising that oversight or whether it is a nominal allocation.

Payment institutions in growth phases often find their Prescribed Responsibility allocations become progressively more concentrated as the CEO absorbs responsibilities that should sit with dedicated function holders who do not yet exist. This is appropriate as a temporary arrangement, but the firm should have a documented plan for how responsibility allocations will evolve as it grows and adds senior management capacity.

Practical allocation examples: bank

A regulated UK bank with a full senior management population — CEO (SMF1), CFO (SMF2), CRO (SMF4), Head of Internal Audit (SMF5), Head of Compliance (SMF16), COO (SMF24) and a board-level Chair — has the resource to allocate Prescribed Responsibilities at a granular level. The challenge here is avoiding over-allocation to any single individual and ensuring that the SMF holders with board-level reach are assigned the responsibilities that require board-level accountability.

For banks, the enhanced Prescribed Responsibilities for recovery and resolution planning appropriately sit with the CEO and CFO jointly, with the primary designation typically with the CEO given the strategic nature of the obligation. Intraday liquidity management sits with the CFO. Stress testing and ICAAP ownership sits with the CRO, who has the broadest view of the firm’s risk profile. ILAAP sits with the CFO. The whistleblowing regime at a bank is most appropriately held by the board Chair or an independent NED, not by the CEO or CFO, because the whistleblowing mechanism must provide protection from executive leadership as well as from other staff.

Documentation and the management responsibilities map

The firm’s management responsibilities map is the document that records the full picture of senior manager functions and Prescribed Responsibility allocations. It must be maintained and updated whenever there is a change to the firm’s senior management population or to the allocation of responsibilities, and it must be available to the FCA on request.

The most common documentation failure in this area is a management responsibilities map that is accurate at the time of initial SMCR implementation but has not been updated to reflect subsequent changes. New senior managers join without their responsibilities being formally documented. Existing senior managers take on additional responsibilities informally without the documentation being updated. Senior managers leave and their responsibilities are distributed without the map being revised. The result is a map that no longer reflects the actual accountability structure of the firm.

The responsibility for maintaining the management responsibilities map should itself be documented — typically as a Prescribed Responsibility of the Head of Compliance or the Chief of Staff equivalent function. A quarterly review cycle for the map, combined with a mandatory update process whenever an SMF change notification is submitted to the FCA, is the minimum governance standard.

FD Capital places senior managers across the full range of FCA-regulated firm types and advises on the practical implications of SMCR accountability allocation during the recruitment and appointment process. The Prescribed Responsibility framework is one of the most important areas we discuss with both firms and candidates during senior appointments — understanding the accountability you are accepting is as important as understanding the role you are taking on.

Related Guides

• SMCR: A Complete UK Guide
• SMF2 vs CFO: When the FCA Function Differs from the Title
• SMF16 — Compliance Oversight Function Guide
• SMF24 — Chief Operations Function Guide
• Senior Manager Handover: Best Practice When SMFs Leave