We need to talk about… SMCR

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The Senior Managers & Certification Regime (or SMCR, as we can never have too many regulatory acronyms) takes effect from 9 December 2019. It replaces the Approved Person Regime (APR) for FCA solo-regulated firms, including investment and asset management firms, insurance intermediaries, claims management companies, and consumer credit businesses.

What is it?

The SMCR is part of the FCA’s approach to drive cultural change in the financial services industry. The aim—to reduce harm to consumers, and strengthen market integrity by making individuals within firms more accountable for their conduct and competence.

The SMCR is broader than the APR, placing more of an onus on firms taking responsibility for the actions of senior management and internal decision makers. It’s about encouraging a culture of staff at all levels to take personal responsibility for their own actions and for the actions of those they supervise.

Business as Usual?

SMCR firms must take a two-pronged approach to supervision of senior managers and decision makers—the regulations are split into the Senior Managers Regime and the Certification Regime, to help staff understand overall allocation of responsibilities and reporting lines within a firm.

The Senior Mangers Regime requires firms to designate specific functions to Senior Management. This may follow your existing Approved Person roles. However, the SMCR does have additional requirements—such as development of Statements of Responsibilities and enhanced regulatory referencing requirements.

The Certification Regime builds on the APR – passing additional responsibilities to firms whose employees perform “Certification Functions”, these include client dealing activities, and roles with significant responsibility for your business (such as: complaints handling, client asset oversight, or management responsibilities) that may not come within the existing regime.

Firms will need to consider existing systems and controls to assess “fitness and propriety” requirements, on at least an annual basis – and document the certification process for certain staff.

The SMCR also introduces additional Conduct Rules that will, essentially, apply to staff involved in delivery of regulated services. This, along with the Certification Regime, are two of the SMCR’s biggest changes to the existing regime.

What if I’m an Appointed Representative?

The SMCR does not currently apply to ARs, however the FCA could consult in the future on how the SMCR may be extended to ARs. An AR seeking individual authorisation will need to consider the SMCR in making an FCA application for standalone authorisation.

Capital Law—Here to Help

We appreciate regulatory change can be daunting, so we’re here to help. Capital is working with businesses to prepare for the SMCR, with tailored projects and solutions to fit individual business needs.

This may include SMCR audits and gap analysis, development of internal systems and controls (such as certification regimes, or development of Statements of Responsibilities), and delivery of SMCR workshops.

If you’d like to know more, please get in touch with Rachel Hillier or Oliver Woodhouse in the Financial Services Regulatory team.

Oliver is a regulatory lawyer, providing advice to clients in the insurance, technology and financial services sector, primarily for FinTech and InsurTech businesses.