New Regulation Breakdown: SM&CR

Another day, another regulatory change for firms to implement!  With the SM&CR (Senior Managers & Certification Regime) deadline fast approaching, here's a whistle stop tour over the upcoming changes and what you need to do.

What is SM&CR?

SM&CR is legislation being implemented by the FCA to help reduce harm to consumers and to strengthen market integrity by making individuals more accountable for their conduct and competence.

As part of this the SM&CR aims to:

• Encourage a culture of staff at all levels taking personal responsibility for their actions.
• Make sure firms and staff clearly understand, and can demonstrate, where responsibility lies.

Sounds good right?  Encouraging accountability and responsibility across the whole firm is a positive step, we are heading in the right direction as a profession to ensure well run businesses and good client outcomes every step of the way.

Just like MiFID II and GDPR (but thankfully a lot less confusing this time), the Senior Managers & Certification Regime is going to bring about some changes in how firms are run and for the individuals who hold certain roles. However, unlike MiFid II and GDPR you'll be pleased to know SM&CR has to be one of the clearest pieces of legislation in terms of what needs to be done, and one of the easiest to implement! Please breathe a sigh of relief. And even more good news? We're finding most firms are broadly operating in the way that SM&CR intends, just think of it as the chance to ensure the right people in the right roles.

We've put together two helpful checklists, covering the key points that need to be considered before the deadline (December 9, 2019) and what needs to be completed afterwards. Hopefully, this will help to keep you on the right track with SM&CR… after all, it's less than two months away, eek!

Before the 9th December 2019…

1. Stop, breathe and don't panic – You have time. It is one of the easiest pieces of legislation to implement. Please note, the workload will be substantially more for an enhanced firm.

2. Establish which regime you fall under – This will help you in knowing what your responsibilities are when implementing the regulation. To find out what regime you fall under, check out the FCA's online firm type checker tool here.

3. Create a timeline – Even though we are getting closer to the deadline now, having a timeline and project plan will enable you to see how much work needs to be done by when. It will also help you identify what work needs to be completed on an annual basis.

4. Split the tasks into three separate segments – Senior Managers, Conduct Rules and Certification Regime. This will make the workload easier to manage.

5. Establish who will hold Senior Manager Functions and identify what their prescribed responsibilities are - A single person can hold more than one responsibility, as long as they are the most appropriate person to carry the responsibility.

6. Carry out criminal record checks – This only applies to those who have not previously held a Senior Manager Function. You can choose to carry one out on every individual if you like, but it only needs to be done at this point on newly appointed Senior Managers.

7. Create a Statement of Responsibilities for your Senior Managers – This will need to be in written form and kept on file. These do not need to change in any specific period, such as annually, but if the individual holding the Senior Management Function changes or the job description, then you will need to alter them accordingly.

8. Notify the FCA of any changes to role holders – For example, if an individual holds the CF10 role currently and they are not continuing in the role, then you need to notify the FCA of this, along with whom will be taking over the role. If the role holder is continuing then you do not need to do anything as they will grandfather over.

9. Training on the new Conduct Rules – Both Senior Managers and Certification staff need to have received training on, and comply with the Conduct Rules, with Senior Managers having to complete and extra layer of SM Conduct Rules training. This should include them being aware of the consequences of a breach.

10. Change job descriptions and contracts – You may need to amend the job descriptions you have given and the contracts you have with your staff, to reflect the new responsibilities they will have.

From then on…

1. Fit and proper assessments – This should include looking at honesty, integrity & reputation, competence & capability and financial soundness. Make sure you have a plan in place for who is going to be responsible for making sure these are completed annually, who will carry them out and at what time of the year.

2. Criminal record checks – Under SM&CR once a criminal record check has been completed, it does not need to be done again. However, as the check is only accurate at the time it was carried out, we would suggest completing these checks every 1-2 years and if the roles of the individual change.

3. Conduct Rule training - All non-certified staff have between 10^th December 2019 - 9^th December 2020 to complete the conduct rules training. A handy hint is to think about how it affects them in their role, i.e. HR, Admin, Accounts.

4. Regulatory references – These need to be requested for any new joiner who becomes a Senior Manager or holds a Certification function after the 9th December.

5. The new ‘Directory' - this will be available as a public register as only Senior Managers will continue to be held on the existing approved register after the 9^th Senior Managers will need to add details of your Certified individuals including Mortgage advisers. This will also include non-executive directors who are not senior managers, sole traders or appointed representatives where they undertake business with clients and require a qualification to do so. This is an ongoing requirement and must be kept up-to date. Who will be responsible for this?

I hope this helps towards your SM&CR preparations - if you have any questions please do not hesitate to get in touch  by contacting hello@apricitycompliance.co.uk!

Please note this information is not legal advice and is not intended as legal advice. It is intended to provide general information.

Hannah Scott joined Apricity Compliance two years ago when the company first launched. She was their first recruit via The Grad Scheme - their in-house recruitment tool. Before joining Apricity Compliance she studied Law at the UoL in Manchester, it was there that she realised she had a passion for regulation and the impact it can have. She is now studying towards her diploma and has realised how much she enjoys working in financial services with IFAs. Nerdy as it is, she really enjoys working on regulation changes and helping advisers adapt to the new changes.

The views expressed in this article are that of this author and do not necessarily reflect the views and opinions of Voyant.