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Compliance

Senior Managers & Certification Regime

Posted on 8 Feb 2019

group of red chess pawns and one black one

In the words of Spider-Man, ‘with great power comes great responsibility’, and with the introduction of the Senior Managers & Certification Regime (SM&CR) to solo-regulated firms (firms which are only authorised and supervised by the FCA) on 9 December 2019, the regulator is ensuring that the power and responsibility within firms is allocated appropriately.

Are you ready for SM&CR? Do you know which of the three tiers your firm falls under (Limited Scope, Core or Enhanced)?

With SM&CR, you will need to brainstorm about how it affects your firm and senior managers because the end result is that the FCA will be able to easily identify relevant individuals and their responsibilities within your firm, ultimately leading to greater accountability and ownership of risks.

Here’s a summary of the four key areas of the SM&CR:

1.      How to identify your SM&CR firm type;

2.      The Senior Managers Regime;

3.      The Certification Regime; and

4.      The Conduct Rules.

…And if you’re interested in learning a bit more, see below for more details on the four areas:

1. How to identify your SM&CR firm type

The applicable rules under the SM&CR varies depending upon whether your firm is classified as Limited Scope, Core or Enhanced.

The table below will assist you in identifying your firm type:

SMCR

2. The Senior Managers Regime

The Senior Managers Regime effectively replaces the existing Approved Persons Regime. It will require a firm’s senior managers to be allocated senior management functions (SMF) and to clearly allocate their roles and responsibilities through a document called a ‘Statement of Responsibilities’ (also known as a SOR).

As an SMF, an individual will need to ensure they take reasonable steps to prevent regulatory breaches for the areas which they are responsible for. 

3. The Certification Regime

The Certification Regime puts the onus on a Firm, rather than on the regulator, to identify staff who could cause significant harm to a Firm or its clients. It will also require the Firm to annually ‘certify’ that these staff continue to be fit and proper to perform their certified roles.

4. The Conduct Rules

The Conduct Rules are a set of new rules, which will apply to all ‘Conduct Staff’. Conduct Staff encompasses almost all employees within a Firm, including senior management, certified staff and any other employees whose role is specific to the financial services industry, for example, back-office staff. Conduct Staff are expected to comply with the Conduct Rules, which will be updated in the FCA Handbook for solo-regulated firms closer to the 9 December deadline (COCON 2.1).  

How we can help?

Once you have determined which tier your firm falls in, we can help outline a list of action points that you need to complete in order to be SM&CR compliant, provide training to staff and assist with drafting your SORs and other compliance documentation. We have also incorporated relevant parts of the SM&CR in our Laven compliance software; Laven Tech.

If you would like to know more, get in touch at SMCRteam@lavenpartners.com or call us on +44 (0) 207 838 0010.

Click Here to read our SM&CR June Update.