Senior Managers and Certification Regime

8th Jul 2021

The Rogers & Norton Regulatory and Compliance team has recently provided advice and training on the application of the Senior Managers and Certification Regime (“SMCR”), which has changed the regulatory landscape for people working in financial services.

The SMCR replaced the existing Approved Persons Regime on 9th December 2019, and regulated firms had until the 31st March 2021 to ensure that their firm was SMCR compliant.

The Financial Conduct Authority (FCA) have stated that the aim of the SMCR is to reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct and competence. As part of this, the SMCR aims to:

  • Set a new minimum standard of conduct
  • Encourage staff at all levels to take personal responsibility for their actions
  • Make sure firms and staff clearly understand and can demonstrate where responsibility lies

The SMCR applies to all firms that are solely governed by the FCA, known as ‘solo-regulated’ firms. There are three types of solo-regulated firm; Limited Scope, Core and Enhanced. The category your firm falls within will determine how the SMCR applies to your firm.

Solo-regulated firms will need to comply with three key parts of the SMCR:

  • The Senior Managers Regime
  • The Certification Regime
  • The Conduct Rules

The Senior Management Regime

Senior managers who perform key roles will need FCA approval before starting their roles. Each senior manager will need to have a statement of responsibilities setting out the responsibilities they are accountable for. A senior manager must also be assigned specific responsibilities, known as ‘prescribed responsibilities’, this ensures a senior manager is accountable for all key conduct and prudential risks at a firm. Once every year a firm will need to assess the fitness and propriety of the senior manager for the suitability of the job.

The Certification Regime

This regime applies to employees who are employed in a position where they could pose a risk of significant harm to the firm or its customer. A firm will also need to assess and certify the fitness and propriety of the employee’s ability to perform their role before they take on the role, as well as on an annual basis and whenever a material change occurs to their role. These employees will not need FCA approval.

The Conduct Rules

The conduct rules introduce minimum standards of individual behaviour in financial services. Certain rules apply to all employees, whilst others also apply to senior managers. Firms will be responsible for ensuring all employees subject to the conduct rules are provided with suitable training on how the rules apply and the practical application of specific rules to their work.

We understand transitioning your firm to the SMCR is not a straightforward task and the SMCR imposes onerous obligations on firms, such as recordkeeping, regulatory references, updating the directory of certified and assessed persons, and notifying the FCA when an individual is found not to be fit and proper to perform their function or have breached the conduct rules.

No matter the nature or size of your firm our Regulatory and Compliance team is equipped to assist you with transitioning to the SMCR. For further advice please contact Peter Hastings at ph@rogers-norton.co.uk.

*This article is provided for general information purposes only and does not constitute legal or any other professional advice.