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FCA Senior Managers and Certification Regime

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The Senior Managers and Certification Regime (SMCR) belongs to the UK regulators’ drive to enhance culture, administration and accountability within financial services firms. It tries to discourage misconduct by boosting individual accountability and attention of conduct issues throughout providers.

Banks and PRA-designated investment providers have undergone the SMCR ever since March 2016. On 10 December 2018 the SMCR was extended to all PRA and FCA regulated insurance and reinsurance companies. The SMCR will be extended to cover all other FSMA-authorised companies on 9th December 2019.

At Compliance Consultant we come with an unique depth and breadth of knowledge in advising on the SMCR, and corresponding governance and risk management issues, in the two the consultative and contentious context. We have been instructed by banks and insurers in relation to the operation of the SMCR and the previous SIMR, are advising a number of providers on the extension and continue to have frequent discussion with regulators and the industry about the operation of the regulators’ individual accountability regimes.
The pivotal points to note for FCA solo-regulated companies are:
  • SMCR will involve FCA solo-regulated firms from 9th December 2019.
  • The rules are referred to as “near final”. They are subject to commencement regulations to be made by HM Treasury (and may undergo change among subsequent handbook amendments, Brexit developments and/or “SMCR optimisation”) but the FCA do not expect to make any notable changes.
  • In large part the FCA is implementing the proposals as consulted on. The method is still based on legal entities and senior managers will need a statement of responsibility (SoR) for every senior manager function they hold at each such provider.
  • The few adjustments are generally positive for firms – they include:
    • removal of the Prescribed Responsibility (which concerned Core Firms only) to inform the governing body of their legal and regulatory obligations – a helpful development
    • introduction of an easy process for providers who wish to voluntarily make an application for a higher regime tier (eg from Core tier to Enhanced tier, and
    • change, reflecting consultation feedback, to the approach to calculating whether firms should be enhanced companies, to smooth out the influence of in-year anomalies by examining over a rolling average of three years (eg firms with Assets Under Management of >₤ 50bn, firms with recent total intermediary regulated business revenue of > ₤ 35m, firms with annual revenue generated by regulated consumer credit lending > ₤ 100m and mortgage lenders with >10,000 regulated mortgages, in each case measured as a three year rolling average).
    • Unhelpfully, there remains to be a lack of prescriptive guidance on the extent to which partners will fall within the Senior Management function.
    • The FCA also does not intend to issue prescribed guidance on the assessment of fitness and propriety on the premise that it considers companies best placed to determine how their internal employee assessments should be carried out.
The FCA has provided a Guide for solo regulated firms on the regime more generally which provides practical guidance and includes confirmation that the FCA will get in touch with firms in advance of implementation to confirm the FCA’s indicative assessment of the company’s tier status, and providers will need to identify and train Senior Managers and Certified staff by 9th December 2019, but will have a transitional 1 year period to complete their initial certification process and train all other staff.
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Tel: 0207 097 1434.

Lee Werrell Chartered FCSI FISM.
Compliance Doctor.
Melissa Cairns.
Personal Assistant.
Bob Sarund.
Head of Marketing.
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