What ISN’T the Senior Management and Certification Regime (SM&CR)?
With so much being written on the advent of this game-changer, we want to start with understanding what SM&CR isn’t. This is to show the importance of this regulation. And also that it is not merely passed to a compliance person to deliver. This isn’t what the aim of this wide-reaching change is about.
It isn’t a tick box exercise and it isn’t just another “compliance” initiative that everyone needs to be updated on.
So, what IS the SM&CR then?
For firms who really embrace it, this is a fantastic opportunity to have a structure of senior personnel who are responsible for a designated area of the business, from the top down.
The FCA state the SM&CR has three elements, these being:
This means absolute accountability for the most senior level functions, professionalism, training and competence and an open and honest inclusive culture at all levels.
We want to start with the Conduct Rules as they underpin the whole of the Regime.
So what are they and how do they differ from Approved Persons Regime?
The similarity is intentional we feel, the big difference is the scope. This is not just approved persons, this is the whole firm including administrative roles, technical roles, compliance roles and of course adviser roles. The Conduct Rules set a minimum standard of an individuals behaviour and applying the rules aims to improve an individuals accountability.
All staff, including Certificated Roles, are required to have Conduct Training delivered by a Senior Manager. Delivery of the training should encourage staff at whatever level to explore how these rules interact with their own role, within the wider business and their own requirements to work under the rules.
The Senior Management Regime – SMR
The Senior Management and Certification Regime comes into force from 9th December 2019 for solo regulated firms. Under the Senior Management Regime, the FCA will only approve and authorise the most senior people within firms. Each senior person will be accountable for the area of the business they are responsible for and will be required to have Statement of Responsibilities in place for the Governing Function and also required functions, if applicable, that they deliver. This will ensure that each area of the business has a senior person specifically responsible. And should there be a need for the regulator to be in contact with a firm they know exactly who they need to be communicating with.
We are encouraging senior managers we are working with to state on their Statement of Responsibilities their additional business areas such as (but not limited to) IT, cybersecurity, finance and business development.
The Certification Regime – CR
The scope of the Certification Regime will be expanded to include:
- All advisers who require a qualification to perform their role,
- All Training and Competence Supervisors,
- And anyone where their role could cause significant harm to the firm or its clients, which could include someone in a technical role such as a Paraplanner.
Senior Management of firms will be responsible for the certification of appropriate roles and these roles will no longer be authorised by the FCA.
The key to success sits very much with your fit and proper process, from hiring staff to the ongoing status of competent advice-givers.
The support staff will need to be competent and show competence to perform their role. The obvious benefits of this is a well qualified and well-informed support framework, this will also lend itself to greater retention of staff.
- Does your T&C Scheme really work for your business or are you just continuing with very outdated forms of supervision and evidence?
- Do you need to overhaul your scheme?
- Do you have a robust and repeatable recruitment process that can be fully evidenced?
- Does your Fit and Proper test really show the full picture?
- How are you assessing the competence of staff, competence being the skills knowledge and expertise required to perform their role?