Robert Bell
- Jul 12, 2017

Senior Managers and Certification Regime – What’s Next?

With a significant change on the horizon - the Senior Managers and Certification Regime (SMCR) - it is critically important to keep up to date with the latest news on the subject! So, here it is.

Change ahead - Senior Managers and Certification Regime

What is the Senior Managers and Certification Regime (SMCR)?

The regime is the result of the Parliamentary Commission on Banking Standards which investigates the conduct of individuals in banking. Essentially, the Commission recommended the current Approved Persons Regime to be abandoned and replaced, SMCR does this. Originally this was only designed for banking, however, the Bank of England and Financial Services Act 2016 extends the SMCR to all sectors of the financial services industry – including consumer credit firms.

However, the FCA are yet to release exactly how the scheme will work for consumer credit firms; they have promised us a consultation this summer.

How does it work?

As alluded to above, we don’t know for sure but we can draw some expectations from the regime the FCA applied to the banking industry. It is made up of three aspects each covering different groups of people. The Senior Managers Regime covers board members and other senior managers requiring regulatory approval. This is the closest to the Approved Persons Regime as we know it.

The first thing to understand is that all senior managers will have to apply under the scheme, whether they are currently approved persons are not. Firms must, therefore, establish which senior managers the regime applies to. As mentioned, we don’t know how this will look for consumer credit firms but for the current regime the FCA have created a number of “significant management functions” (SMF) with any person undertaking these roles needing to be approved. The main SMFs which would apply are Compliance, Head of Internal Audit, Chief Finance, Chief Risk, Director and Executive Director.

These senior managers have new responsibilities including a legal responsibility to take reasonable steps to prevent breaches from occurring in their area of responsibility. Upon certification, senior managers become personally responsible for compliance in their area and firms must provide a statement of responsibilities for each senior manager upon application.

The Certification Regime covers any ‘Significant Influencer Functions’ as well as any other staff judged to be able to cause ‘significant harm’ to the firm or its customers. It asks firms to identify staff who may cause “significant harm” to customers and certify them as fit and proper at induction and at least annually thereafter.

The Conduct Rules apply to senior managers and certified staff, they apply two tiers of rules a summary of which is in the image below: