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SMCR: Two months to go

SM&CR: Just over Two months to go!

1st October 2019

The extension of the Senior Managers and Certification regime (SM&CR) is getting closer with just over 2 months left until implementation on 9th December 2019.

For those firms that find themselves falling under the new regime, SMCR Project planning will no doubt be well underway to ensure targets for implementation are met.

As many will know, the aim of the SMCR is to replace the Approved Persons Regime (APER) with a new structure that promotes Individual Accountability, particularly at senior management level, as well as raising standards of governance and encouraging cultural changes within firms within the financial services industry.

Whilst the new regime is often referred to as SMCR or SM&CR, it is in fact made up of three elements, these being:

 the Senior Managers Regime;

 the Certification Regime;  and

 the Conduct Rules

Under the new regime that applies to Solo-Regulated Firms from 9th December, there are three separate categories of firms: limited scope SMCR Firms, core SMCR Firms and enhanced SMCR Firms, with the most onerous of requirements applying to those within the last category (enhanced).

If your firm is in any doubt as to which category you fit into, please do not hesitate to contact us. You can also use the FCA's firm checker tool or find out more in the FCA’s guide to the SMCR for solo-regulated firms.

Conduct Rules

All individuals that fall within the scope of the Senior Managers Regime and the Certification Regime will need to be identified and trained by the firm by implementation on the 9th December 2019.

For all other staff that do not fall within the Senior Managers Regime and Certification Regime, but do fall under the Conduct Rules, there is a twelve month grace period in which to identify and provide them with training, the deadline therefore being 9th December 2020.

For many personnel within firms, this will be a big change as many may have never been accountable to the regulator before. However under the standards imposed by the Conduct Rules, failure to meet these standards or being knowingly involved in a breach by the firm will leave relevant individuals open to FCA disciplinary action.

Senior Management Functions (SMFs)

Those personnel carrying out senior management functions (SMFs) will in particular, find themselves under scrutiny since failings in their area of responsibility could ultimately lead to them being subject to personal action by the regulator.

The FCA require that all managers carrying out designated SMFs are required to have a Statement of Responsibilities (SoR), which should make it clear what that individual is responsible and accountable for, under the ultimate accountability of the firm’s governing body.

Statements of responsibilities

Statements of Responsibility (SoRs) should be clear and easy for the regulator and those within the firm to understand.

It should contain sufficient information to clearly describe the actual responsibilities and accountabilities of the individual, without unnecessary details (such as describing the qualifications or skills required for the role).

It must be self-contained and not refer to any other document.

Each SMF Manager within the firm should have a separate SoR.

Responsibilities Maps

In addition, Enhanced firms are required to have a responsibilities map showing how the firm is managed and governed. Invariably a good responsibilities maps has a mix of text and graphics and should be easy to navigate and understand.

Furthermore they should capture both group-level governance and management committees.

What to do?

It is essential that Firms that will fall within the new regime act fast to be ready for the impending deadline. Your immediate action must be to:

• Identify the category of your firm;
• Identify those individuals that hold key management functions;
• Allocate prescribed responsibilities to the relevant SMFs;
• Draft and finalise statements of responsibilities (SoR);
• Draft and finalise responsibilities maps (if your firm is Enhanced);
• Identify employees who fall under the Certification Regime (including senior managers and non-executive directors) and start training;
• Ensure that any other documentation within the Firm be updated to be SMCR-compliant such as compliance manuals, employee handbooks and employment contracts etc.

SM&CR Practical Support:

If you are preparing your firm for the extension of the SM&CR regime and need any advice or support, our experienced regulatory consultants would be happy to offer their assistance and practical support. Just drop our friendly team a line to discuss how we can help.

SM&CR Related Reading:

• SMCR: Six months to go!
• SMCR Responsibilities: A Comprehensive View & Holisitic Approach
• Starting SM&CR Preparations: What you need to know
• Preparing for SM&CR: Starting Tips
• Finalised Guidance: SM&CR Responsibilities - Statements & Mapping

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