The Senior Managers Regime (SMR) or Senior Managers & Certification Regime (SMCR) is the most far-reaching attempt to improve industry culture and to overcome the problems faced by the FCA, bringing senior people to account for regulatory failings. It entails a significant shift in the way firms must manage regulatory risk.
In our experience:
- It can be difficult to correctly identify and categorise some Senior Managers and Certification Function employees;
- The SMCR can generate senior and junior staff changes;
- The SMCR almost always leads to employment contract, staff handbook, job specification and other documentation changes;
- The Conduct Rules are often misunderstood;
- Those expected to determine questions of fitness and propriety find it a challenge to be expected to think like a regulator and exercise difficult judgements with career defining implications;
- It’s almost always quicker, easier, and less expensive, if SMCR preparation begins well in advance.
Whilst 2019 may seem a long way off, even at this stage firms can do the following to prepare for the implementation of the SMCR, and assist Senior Managers and certified staff to understand their own obligations:
- advise and train boards and senior managers on what to expect and what is expected of them;
- consider how roles map into the new regime;
- draft responsibilities statements;
- revise and update employment contracts;
- draft new policies and update existing ones to assist with SMCR compliance; and
- identify any employee relations issues which inevitably come with a period of change, for example, those who want to be senior managers but aren’t, and those who don’t want to be senior managers but are, removing staff who may not meet certification requirements;
- provide drafting guidelines for managers on assessing fitness and propriety, and advising on new forms for appraisals and for handling regulatory references.