The regulators are extending the Senior Managers and Certification Regime (SM&CR) to all authorised firms to replace the Approved Persons Regime – this will have a significant impact on a huge number of firms and the rules come into effect from 9th December 2019.
The FCA recognises that it needs to bring in a regime which is proportionate and flexible so there will be different standards for different types of firm:
- Core Regime: This is a baseline requirement which will apply to almost every firm.
- Enhanced Regime: This will apply an additional set of requirements to larger firms (approximately 350) whose size, complexity and potential impact on customers warrants more attention.
- Limited Scope Regime: This will apply to all firms that currently apply the Approved Persons Regime on a limited basis, for example sole traders.
SMCR itself covers three areas:
- Senior Managers: This covers anyone who undertakes a Senior Management Function. Each senior manager will have a Duty of Responsibility and a Statement of Responsibility but there is no need for a responsibilities map or handover procedures.
- Certification Regime: This covers people who are not senior managers but whose job means it is possible for them to cause significant harm to the firm or its customers. For example, algorithmic trading, client dealing, CASS oversight etc. These individuals will not be approved by the FCA but the firm must ensure are certified as fit and proper on at least an annual basis.
- Conduct Rules: These basic rules apply to all employees except ancillary staff who do not perform a role specific to financial services. There are five high level obligations which apply to all, and an additional four obligations for senior managers.
What does SMCR mean for me?
Firms would be well advised to get ahead of the game, and consider how their current internal governance processes stack up against the requirements. For anyone running a financial services firm and who has approved person responsibilities, the implications of non-compliance are severe. So understanding the regulator’s expectations and what this means in practice for your firm is key. Things to consider include:
- Who are your senior managers and what are their core responsibilities?
- Are these properly documented and can you articulate these clearly to the regulator?
- Do your governance arrangements align with the new regime?
We can help guide you through the trickiest areas of SM&CR. For example, we can assist you with your SMCR project, undertake a health check of your current processes and documentation, provide training on senior management responsibilities, as well as offering practical tips to achieve compliance.