Back in July, the FCA confirmed the extension of its Senior Managers and Certification Regime (“SM&CR”) to all solo-regulated firms (i.e., those regulated by the FCA alone), with a commencement date of 9 December 2019.
Following MiFID II going live at the start of this year, we see SM&CR as the next big regulatory challenge for UK firms. We expect that most firms will want to have a clear SM&CR implementation plan in place by the end of the first quarter of 2019. In this note, we explain how ACA can help you with that task.
Some basics on SM&CR
Back in 2015, in its proposal to extend it across the whole financial services industry, HM Treasury memorably described SM&CR as the replacement for “the discredited Approved Persons Regime” – a sparsely veiled reference to the failure to prosecute the main villains of the 2007-8 financial crash. The stated objective of the new regime is “to reduce harm to consumers and strengthen market integrity by creating a system that enables firms and regulators to hold people to account”.
The SM&CR will have three main components which apply to all FCA regulated firms:
- Senior Managers Regime: requiring FCA approval of senior managers prior to starting their roles and Statements of Responsibility to establish clear lines of accountability;
- Certification Regime: placing the obligation on firms to check and confirm (“certify”) the fitness and propriety of employees capable of significant harm to the firm, its customers or market integrity;
- Conduct Rules: a minimum set of standards for all individuals working in financial services aimed at improving accountability and awareness of conduct issues (plus associated reporting obligations for firms).
The majority of FCA-regulated firms are categorised under SM&CR as “Core” firms. This in essence means a lighter version of the regime that which has applied to the banking sector since March 2016, and which henceforth will also apply to “Enhanced” firms.
How can I find out more on SM&CR?
Click here for a longer introduction to SM&CR and some of the specific issues facing our clients.
Those with overall or project responsibility for SM&CR will almost certainly want to consult the FCA’s own Guide for FCA solo-regulated firms.
ACA is also planning a programme of events and alerts on SM&CR during 2019. These commence with a webcast dedicated to SM&CR implementation on 22 January (further details to follow).
What are the key steps to implementing SM&CR and how can ACA assist?
We see four essential elements to help you ensure that your business is fully compliant with the new regime, along with some of the key deliverables:
- Understanding the issues and gap analysis: we will review and brief senior management on the key impact areas and requirements on the firm.
- Project planning: we will help you prepare an SM&CR implementation framework, including allocations of responsibility and prioritisation of work flows.
- Upgrading of compliance framework and supporting documentation: we will review and update your existing compliance framework documents, as well as assist with the preparation of new collateral such as Statements of Responsibility and Fitness and Propriety assessments.
- Training of staff on Conduct Rules: we will provide bespoke training on the new SM&CR Conduct Rules, including case studies and examples of good and bad conduct.