SMCR - Senior Managers and Certification Regime (SM&CR)

SMCR - Senior Managers and Certification Regime

Whether you call it SM&CR, SMCR, Senior Managers Regime or use its correct name – Senior Managers and Certification Regime – there are big changes happening for regulated firms in the UK.

Under the new SMCR rules, regulated firms have a responsibility to write down and notify the FCA exactly who in their companies is specifically responsible for what.

 smcr

So, what is the Senior Managers and Certification Regime?

The new SMCR rules, which are also referred to as the ‘Accountability Regime’, were introduced for Banks, Building Societies, Credit Unions and Insurers in March 2016, replacing the existing Approved Persons Regime (APER), which was described by the Parliamentary Commission on Banking Standards as “failing” and being “too narrow”.  SMCR was updated for Banks in July 2018.

SMCR is being extended to all regulated firms, from December 2019. There are three main features to the Senior Managers and Certification Regime. These are:

  • The Senior Managers Regime
  • The Certificate Regime
  • The Conduct Rules

SMCR: THE SENIOR MANAGERS REGIME

Senior managers and certification regime

Under SMCR Senior Managers will continue to require approval from FCA before they are appointed to their role.

Each senior person must have their role and responsibilities clearly defined and documented in a formal Statement of Responsibilities, which must be kept up-to-date and re-issued to FCA whenever it significantly changes.

FCA have defined specific ‘Senior Manager Functions’ and ‘Prescribed Responsibilities’ which must be allocated to appropriate Senior Managers.

For some Firms, there is a more rigorous set of requirements, called the ‘Enhanced Regime’, which obliges them to also create and maintain a ‘Management Responsibilities Map’ that clearly defines how the firm’s governance arrangements work, in practice. They must also ensure that a Senior Manager has ‘Overall Responsibility’ for all activities of their firm – in many firms this will be the CEO.

The Responsibility Maps and Statements of Responsibility (along with relevant supporting evidence) must be version controlled and retained as formal records by all firms, for as long as necessary.

SMCR: THE CERTIFICATION REGIME

Senior managers regime

Under SMCR the Certification Regime applies to all employees who play a role that can affect the firm and its customers in a negative way. Their roles are referred to as ‘Significant Harm Functions’ (SHF).

The FCA have defined the list of SHF’s, which will apply to a much larger group of people than the previous APER regime. The regulator will no longer approve these staff, instead the firm is obligated to ensure that they are annually assessed as Fit and Proper to act in their roles and to issue them with a Certificate, to that effect. A Senior Manager must be personally responsible for this obligation.

It is therefore critical for firms and individuals to ensure they understand the responsibilities associated with their positions. Organisations must ensure that these Certificates are renewed on at least an annual basis in order to remain compliant. 

SMCR: THE CONDUCT RULES

The Conduct Rules under SMCR are principles designed to ensure a high standard of behaviour for all staff, and extend to all individuals in the regulated company, except for ancillary roles.

There are two tiers of Conduct Rules, Tier 1 applies to all staff, while Tier 2 applies to Senior Managers only. It is the responsibility of firms to ensure that their employees fully understand the Conduct Rules and receive specific training on how they apply to them. Any breaches of the Conduct Rules must be formally notified to FCA.

Click here if you would like to know more about Goodacre’s SMCR CPD training – we offer both open courses and bespoke in-house training programmes.

In a typical firm, SMCR will impact most operational processes, including management reporting, HR, Recruitment, Performance Management and Record Keeping. For most firms, existing processes will need to be reviewed and updated to ensure compliance.

Does this seem like a lot of work? Goodacre can help you out.  Ask us how we can help you meet all obligations on time and within budget.

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