The Senior Managers and Certification Regime (SM&CR) deadline is fast approaching and the new regulation comes into force from 9 December 2019 for all FCA solo regulated firms. With Senior Management Functions replacing Controlled Functions, there are a range of additional and enhanced responsibilities and expectations that firms and their staff need to be aware of.
Whilst many firms will now have identified the relevant cohort of Senior Managers and Certified staff within their business, the work does not end there; it is now vital for all firms to keep an eye on the clock while working through their SM&CR “to-do list”. Dilys Gale, Stride Underwriting’s Compliance & Audit Manager answers some important questions to help with the preparation in the final weeks.
Q. How should firms be preparing for SM&CR?
A.As the deadline is just around the corner, if firms have not already done so it is essential that they ensure:
- all individuals have been identified for the Senior Manager Regime, their Statements of responsibilities need to be agreed and individuals are positioned to transition into their Senior Management functions
- all staff are aware of SM&CR and how this will impact them – a great way of doing this is a staff awareness presentation
- all staff have a thorough, practical knowledge of the conduct rules
- systems and controls documents are all up to date and on track
Q. What do Senior Managers need to be aware of?
A. With the introduction of SM&CR Senior Managers can now be held accountable if something goes wrong. Therefore, every Senior Manager must have a Statement of Responsibilities: a single document that clearly sets out their role and what they are responsible for. You will need to add these statements to job descriptions to ensure Senior Managers are aware of their responsibilities.
Q. Once 9 December arrives does the work stop there?
A. No – all firms should keep an audit trail of what they have done as part of their SM&CR implementation. The statements of responsibility and procedures put in place should be reviewed at regular intervals (e.g. quarterly or annually) and duly amended if any changes have occurred.
Most importantly though, fostering a culture of integrity and compliance is necessary to satisfy the FCA with the introduction of SM&CR. Embedding a good company culture that will carry these efforts forward after 9 December is vital. By continuously reviewing training you can be confident that staff will be on board with any changes.
Q. Do you have any other advice during the final stages of SM&CR?
A. Yes – don’t forget about the Certification Regime. The Certification Regime applies to employees who have a significant responsibility and impact on the firm or its customers, whilst they do not need to be approved by the FCA, firms still need to check and certify they are fit and proper to perform their role. The numbers of Certified staff in many companies can outweigh the Senior Managers, therefore it can require more time and resources to implement and manage.
Although SM&CR applies from 9 December 2019 and firms must abide by the Conduct Rules from this date, there is a one year transition period for which brokers must complete the certification process and train staff through the business in the Conduct Rules. 12 months may seem like a while away but it will come around before you know it. If you haven’t already, it is worth starting now!
What happens now?
Most firms will already have their implementation projects well underway, if not complete. There has been plenty of warning from the FCA and it is unlikely they will be forgiving to those that fail to meet its requirements in a timely fashion!
For more SM&CR guidance take a look at the following articles: