With less than eight months to go until the extended Senior Managers and Certification Regime (SM&CR) replaces the Approved Persons Regime for most firms on 9 December 2019, firms should be progressing well with their implementation plans. Yet, at our recent SM&CR seminar, 84% of firms surveyed had not started to implement their SM&CR project, or are yet to agree their approach to the SM&CR. Only 16% of firms had started any work on their SM&CR implementation plan.
Planning, time & resource
It is expected approximately 47,000 firms will be impacted by the extension of SM&CR to all FCA-solo regulated firms, the majority of those firms being categorised as a Core SM&CR firm. On the face of it, the SM&CR may seem uncomplicated to map across to your firm, however, from our experience (and as also confirmed in the FCA’s video) the SM&CR implementation work requires a lot of planning, time and resource. In the FCA’s short video, banking leaders shared their insights and highlighted that implementing the SM&CR is a ‘project in its own right’ and was ‘more complex’ than initially envisaged, especially when being absolutely clear about how decisions are made and who is ultimately accountable and willing to accept such duties of responsibility.
By starting now, there is still time for your firm to be ready by 9 December 2019, but it will need engagement and support from all involved, especially from the leadership of the business.
Steps to consider
If you haven’t already put together an action plan of what your firm needs to do under the SM&CR to ensure compliance, then this is one of the first steps. Firms should think about each of the components of the SM&CR, and where and how different areas of the business will be impacted. Another element you need to consider is how aware your staff are about the upcoming changes? Your firm may have made an assumption that everyone in the business knows about the SM&CR and what it means, but how true is that? Has the business specifically notified staff about what will be happening over the next few months so they can get used to the idea and start to think about any questions they may have about what it means for them in their particular role.
Governance and conduct risk
The SM&CR also presents firms with a good opportunity to review their existing governance and conduct risk frameworks, but only 28% of firms surveyed were revisiting their conduct risk framework as part of their SM&CR implementation plan. The remaining 72% of firms had not planned to revisit the conduct risk framework, or were yet to make a decision on this. If this applies to your firm, then this is definitely worth considering. Making sure that your firm has the right foundations in place to build on will assist when integrating the SM&CR.
Moreover, a robust governance and conduct risk framework will also help the firm and Senior Managers to demonstrate that reasonable steps are taken to prevent regulatory breaches from occurring, or continuing to occur, in their area of responsibility. This is fundamental given the increased onus on individual accountability as a result of the statutory duty of responsibility that will apply to Senior Managers.
In addition, both Core and Enhanced SM&CR firms are reminded that a Senior Manager will be allocated a Prescribed Responsibility in regard to their obligations under the Senior Managers Regime, including implementation and oversight. In addition, separate Prescribed Responsibilities related to the Certification Regime and training of the Conduct Rules will also need to be allocated to a Senior Manager. With this in mind, we encourage firms to adopt a prudent approach.
Find out more about the Senior Managers and Certification Regime here.
How we can help
With our regulatory expertise and industry knowledge obtained whilst assisting Banks and Insurers with implementing the regime, our Regulatory Consultancy team is well prepared to advise and assist firms on the extension of the SM&CR to all other FSMA authorised firms. We offer a range of services to help firms implement the SM&CR that are tailored to a firms SM&CR category, business model, governance structure and operations. Find out more.
If you require assistance or have any questions about the SM&CR, please do get in touch.