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  • Robert Bell

Final preparations for the Senior Managers and Certification Regime

Aiming to strengthen accountability and responsibility in financial services, the Senior Managers and Certification Regime will complete its roll out across the industry when solo-regulated firms come under the Regime on 9 December 2019. With deadline day less than a month away, this week we’ll take a look at how firms can make the most of the run-up to implementation day.

Final preparations for SM&CR

Solo-regulated firms can take heart from banking firms, which have been subject to the regime since March 2016. A recent FCA report found that banking firms were embedding the regime well – the spirit as well as the letter – and that feedback from those within the firms was generally good, with staff understanding the Conduct Rules, and that the Regime was supporting positive culture change, and perhaps most importantly, that the regime change did not lead to unintended consequences. Where there was uncertainty, this dissipated, which suggests that the Regime works well in practice.

There were, however, a couple of areas which the FCA took issue with, and solo-regulated firms can bear these in mind as they finalise their preparations.

The FCA found that some firms place a lot of importance on their Responsibilities Map, and were using it beyond what it was originally created for. Firms can ease some of the pressure on resource in the run-up to implementation by taking the time to confirm what needs to be done, and what doesn’t. Where there is any doubt, additional guidance can be sought – our SMCR guide sets out key transition steps in easy to understand English, for example, and the FCA have produced guidance on responsibilities maps which should be helpful for any firm unsure of the boundaries.

Senior Managers were reported to be unsure of the meaning of ‘reasonable steps’, and with it, what good might look like in practice. Appropriate training – which Senior Managers must undertake before the implementation date – will help to bring this requirement to life.

The FCA were pleased with how banking firms were implementing processes to oversee the certification population of their firms, particularly where firms had broadened assessment beyond solely technical skills. Firms must identify their Certification staff and will need to check and certify these people are fit and proper to do their job at least once a year. This includes employees who manage Certification staff. Firms should also be aware that where a Senior Manager undertakes a certification role that is different to the role they are approved for under the Senior Managers regime, they will also need to be Certified.

Where firms did less well was in being able to demonstrate the effectiveness of their certification assessment consistency. How firms ensure consistency in practice will depend on the size and nature of the firm, but assessor training and standardisation exercises can help to ensure a uniform approach.

In general, banking employees understood the Conduct Rules, but the FCA found that many firms were unable to explain what a conduct rule breach looked like in the context of their business. Appropriate training should bring the Conduct Rules to life, and encourage staff to consider how the rules might apply to their role and their firm in a way that encourages flexible analysis of the work of the firm, making clear that a ‘tick-box’ or apparently exhaustive list of potential breaches should be avoided.

There are administrative checks to complete as well. Enhanced firms will need to check that firm and individual details are correct, using the relevant form on Connect if any changes need to be made. Enhanced firms must submit Form K by 11.59pm on 24 November 2019, or risk the withdrawal of their Controlled Functions, which would mean the firm is in breach of the regulatory requirements. Core and Limited Scope firms will have most of their APR functions automatically converted, but they should check whether they have a CF2 Non-Executive Director who is Chair of the governing body – there is no equivalent under SMCR, so firms should submit Form K before 11.59pm 24 November to convert the individual to SMF9 (Chair). The FCA have provided a set of helpful checklists to ease the process (and the headache!), and ensure that deadlines are met.

Firms also need to make sure that they have created and completed their Senior Managers’ Statements of Responsibilities, ensuring that all applicable Prescribed Responsibilities are assigned to an appropriate Senior Manager. Enhanced firms should also ensure that their Responsibilities Maps are prepared and ready.

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