Tue, Dec 11, 2018

One-Year Countdown to SM&CR: Key Considerations for Firms

The Senior Managers and Certification Regime (SM&CR) will be extended to all Financial Conduct Authority (FCA) regulated firms from December 9, 2019. This will replace the current Approved Persons Regime and will affect around 17,200 investment firms including wealth and asset managers, stockbrokers, financial advisors and insurance intermediaries along with the UK branches of both EEA and non-EEA firms.

How firms and individuals are impacted by the extended SM&CR

One-year countdown to SM&CR

Sources - HM Treasury
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/ attachment_data/file/468328/SMCR_policy_paper_final_15102015.pdf

The extension of the SM&CR aims to drive a culture of greater individual accountability within financial services firms, following its implementation to banks in March 2016 and to insurers in December 2019.

SM&CR comprises three main elements:

  • The Senior Managers Regime: covering the most senior roles, who will be registered with the FCA under Senior Management Functions (SMFs)
  • The Certification Regime: which will cover individuals who carry out roles that have the potential to cause harm to a Firm or its Customers, and which will be administered by the industry
  • The Conduct Rules – a new set of conduct rules applicable to almost all employees (with additional rules applying to Senior Managers)

Senior Managers will have a duty of responsibility to take reasonable steps to prevent regulatory breaches in the areas of the firm for which they are responsible. Senior Managers will need to understand and articulate what it is that they are responsible for, and document this through a Statement of Responsibility. This means that if a firm breaches an FCA requirement, the Senior Manager responsible for that area could be held personally accountable if they cannot demonstrate that reasonable steps were taken.

The FCA has a phased approach to the Certification Regime component. Conduct Rules will apply to all Certified Staff and SMFs from December 9, 2019, but firms will have a further 12 months to December 9, 2020 to conduct fit and proper assessments, train staff on Conduct Rules and complete certification assessments.

Actions to take now 12 months out from implementation

  1. Agree internal ownership for SM&CR implementation, engage stakeholders
  2. Identify impacted group entities; determine for each one whether Core/Enhanced/Limited Scope regime will apply (as defined by the FCA)
  3. Identify Senior Managers and Certification roles
  4. Engage with those individuals to explain the implications and next steps
  5. Determine accountabilities, identifying and resolving ambiguities and gaps
  6. Allocate prescribed responsibilities to Senior Managers, where applicable
  7. Prepare Statements of Responsibilities for all Senior Managers
  8. Prepare the firm’s Responsibilities Map (Enhanced firms only, optional for Core firms)
  9. Identify HR and Compliance processes that will require enhancement
  10. Develop the implementation timeline

How Duff and Phelps can help?
Duff & Phelps has extensive knowledge and experience in advising firms on the transition to the SM&CR. Our team of regulatory technical experts have also performed numerous Skilled Persons reports on Governance and Individual Accountability and have a proven methodology in assisting firms create and maintain robust controls and governance frameworks. We can assist in the following areas:

Regulatory Expertise

  • Interpret and advise on all areas of the SM&CR
  • Provide support and guidance on governance and management arrangements
  • Reasonable steps guidance to Senior Managers

Technology and Toolkits

  • Advise on technology solutions
  • We have the templates and toolkits prepared to allow firms to focus on the actual mapping and certification assessment of individuals

Quality Assurance

  • Test ongoing compliance with the regulations
  • Advise on reasonable steps on an ongoing basis


To read the FCA’s guide on SM&CR for FCA solo-regulated firms, please click here.


Sources -
1 HM Treasury : https://assets.publishing.service.gov.uk/government/uploads/system/uploads/ attachment_data/file/468328/SMCR_policy_paper_final_15102015.pdf

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