Article:

SMCR: the FCA continues to focus on accountability

17 August 2017

The FCA continues to expect Firms to keep accountability high on their agenda, and has announced its plans to extend the Senior Managers and Certification Regime (SMCR) to all FCA solo-regulated firms. 

This will impact Firms of all sizes and widens the SMCR net to a much wider population than the banks and insurers already covered by the accountability and conduct regime. The FCA has released its plans and has opened a consultation until 3 November 2017 for Firms to provide comments on the extension to FCA solo-regulated Firms.
 

What are the proposed changes?

The extended SMCR will replace the Approved Persons Regime in almost all financial services firms, from the very small FCA regulated Firms to large, global businesses. One of the FCA’s key objectives is to use the regime to reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct and competence. The concept of individual accountability is a cornerstone of the proposals.

The consultation paper sets out the FCA’s approach to extending SMCR, and also covers the amendments to the existing banking regime:

  • The concept of proportionality is considered within the proposals to extend the regime, with the intention to be flexible in accommodating the different business models and governance structures of all firms. For Firms intending to provide comments to the FCA, this is likely to be a key area of interest, in terms of how this will be implemented in practice.
  • Tools and principles from the banking regime will be used to create consistency. However, they will be tailored to reflect different risks, impact and complexity of firms.
  • A baseline of requirements will be applied to every firm known as the ‘core regime’. The three main elements of the SMCR will apply to every Firm (Senior Managers Regime, Certification Regime and Conduct Rules).
  • There are additional requirements that will apply only to the largest and most complex firms (fewer than 1% of firms regulated by the FCA) – these Firms will need to have Responsibilities’ Maps, Handover Procedures and to ensure  there is a Senior Manager responsible for every area of their firm. This final category is more closely aligned with what is expected from banks currently.

The FCA has made it very clear in their 2017/18 business plan a continued focus on senior management’s accountability for delivering effective governance. There is no doubt that Firms are expected to keep culture high on their agendas and this regime reinforces that view.

If you would like to discuss any of the changes above, or have any questions, please do get in touch.