With the number of days left until the implementation of the Senior Managers and Certification Regime (SM&CR) nearing single figures, SimplyBiz Group’s Mark Greenwood, rounds up everything that advice firms should have considered
Firstly, there has been so much noise around what you need to do to be ready for SM&CR, I thought it might be worth taking a quick look back at why the regulator introduced the new regime in the first place.
The aim of the SM&CR is to reduce harm to consumers and strengthen market integrity by creating a system that enables both firms and regulators to hold people to account. In order to achieve these objectives, SM&CR aims to:
- encourage staff to take personal responsibility for their actions
- improve conduct at all levels
- ensure firms and staff clearly understand, and can demonstrate, who does what. Bear in mind this also means that, should you have the pleasure of a visit from the Financial Conduct Authority, they will also be able to easily identify who is responsible for the various areas of your business.
So, there is the ‘why’, now onto the ‘whats’.
Establish your firm type
Determining where your firms sits within SM&CR should have been one of the very first tasks undertaken as part of your preparations. The vast majority of firms will be classed as ‘core’, except for sole traders who are classified as ‘limited scope’.
Identify the people in your firm
All the individuals holding senior positions within your firm, as well as your firm itself, will be automatically ‘mapped across’ into the new regime. Before this happens, though, you will have needed to ensure that the right people are registered to the right roles – and bear in mind that only senior managers will be approved by the FCA.
As a result, CF30 Investment Advisers will not be listed on the FCA register after the 9 December this year, but will reappear in the directory after 9 December 2020. This element of the regime is effectively the FCA letting you know that the supervision of your staff is not its job but the responsibility of the senior managers within your business.
If you were still in any doubt about what the regulator was looking for from you then the frequency with which the words ‘accountability’, ‘responsibility’ and ‘governance’ are repeated throughout its papers on SM&CR should make it entirely clear.
Once your senior managers are in place you should have allocated the following:
- Statement of Responsibilities – a document that lists exactly what the individual is responsible and accountable for
- Prescribed Responsibilities – these are responsibilities (not applicable to limited scope firms) that the FCA wants to cement into a firm’s structure
- Duty of Responsibilities – this is an overarching principle, which is covered in more depth below
The Duty of Responsibility is a feature of the SM&CR and therefore may need a little more attention when it becomes a reality. In short, if the firm breaches one of the FCA’s requirements, the senior manager could be held personally responsible if they did not take reasonable steps to prevent or stop the breach.
While the burden of proof that reasonable steps were not taken lies with the FCA, there will be an investigation into the circumstances of the case which may result in action against the senior manager, the firm, or possibly both.
Before the implementation of the new regime, senior managers and certified persons must be trained on how the Conduct Rules apply to their role. These rules are similar to the Approved Persons regime and, while there is no formal method in place for delivering the training, a record that it has happened will be required to show a clear audit trail and evidence it has taken place.
As you will know by now, SM&CR is not a light-touch piece of regulation, but falling in line with the regulator’s requirements is perfectly achievable. Hopefully, most of you will be reading this article and nodding sagely, confident that you completed everything outlined above months ago.
If that is not the case, and you’re breathing a little more heavily after reading this, then I would say better late than never. Get in touch with a compliance support expert to start filling in any SM&CR blanks you may have as soon as possible!
Mark Greenwood is director of compliance services at SimplyBiz Group
This article originally appeared in Professional Adviser on 21 November 2019.