SMCR - Senior Managers Certification Regime
Senior Managers & Certification Regime (SM&CR) – are you ready?
The SM&CR introduces changes to how the Financial Conduct Authority (FCA) regulates people working in financial services. It will replace the existing Approved Persons Regime. SM&CR seeks to improve accountability and conduct at a senior level by holding the key decision makers accountable for their decisions. The requirements will apply from 9th December 2019.
The FCA has created three new classifications categories of firms: Enhanced firmswho will be subject to similar requirements to the Banking industry; Core firms(this will be the majority of firms) and will be subject to a silver standard and Limited Scope firms who will be subject to a “SM&CR-lite” approach.
Your firm will need to determine which of the above three categories you will fall into, which will then dictate the requirements you will need to meet. At a high level all firms will need to apply:
Senior Management Functions
A Senior Management Function (SMF) is a new type of controlled function under FSMA (Financial Services and Markets Act 2000). The people who hold these functions are called Senior Managers. They are the most senior people in the organisation and need to be approved by the FCA to perform their roles. This will typically include the CEO and the senior management team.
Every Senior Manager will have a Duty of Responsibility under FSMA. This means that if a firm breaches one of our requirements, the Senior Manager responsible for that area could be held accountable if they didn’t take reasonable steps to prevent or stop the breach.
Certification covers specific functions that aren’t Senior Management Functions, but can have a significant impact on customers, the firm and/or market integrity. The FCA will not approve these indivdiuals. Instead these individuals need to be approved by the firm who will need to check and confirm (certify) at least once a year that these people are suitable to do their job.
Fit and Proper Requirements
Senior Managers and certified staff must be fit and proper to do their job. This means they need to be able to demonstrate honesty, integrity and reputation, competence and capability and financial soundness
Conduct Rules apply to staff directly and are intended to improve standards of individual behaviour in financial services from the top down and the bottom up. The Conduct Rules are broken down into two tiers. The first is a general set of rules that applies to most employees and directors in a firm. The second tier consists of rules that only apply to Senior Managers.
First Tier – Individual Conduct Rules
- You must act with integrity
- You must act with due care, skill and diligence
- You must be open and cooperative with the FCA, the PRA and other regulators
- You must pay due regard to the interests of customers and treat them fairly
- You must observe proper standards of market conduct
Second Tier – Senior Manager Conduct Rules
SC1. You must take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively
SC2. You must take reasonable steps to ensure that the business of the firm for which you are responsible complies with the relevant requirements and standards of the regulatory system
SC3. You must take reasonable steps to ensure that any delegation of your responsibilities is to an appropriate person and that you oversee the discharge of the delegated responsibility effectively
SC4. You must disclose appropriately any information of which the FCA or PRA would reasonably expect notice
How we can help
We have a significant amount expertise in this area and have previously worked with Banks helping them to create, implement and embed the SMCR requirements and deal with the FCA paperwork. Call us today for further information.
Our leading SMCR specialist Mo Arshad LLB LLM is offering a FREE technical telephone discussion to discuss your SMCR queries. Mo has worked for ten years in the regulatory sector and has assisted the banking sector with SMCR and has developed working solutions for small insurance brokers.
To arrange your FREE SMCR technical discussion, please use our contact form.