Concerning the SMCR for remaining FCA authorised firms under FSMA Authorisation
The largest challenge for the remaining FCA authorised firms under FSMA, who will need to execute changes to obey all components of SMCR is time scale. The larger organisations who will undergo the enhanced regime must not miscalculate the time and energy necessitated to ensure that they are compliant promptly. In essence, SMCR addresses the very center of an organisation: its culture and attitude towards accountability. To fully seize the spirit of the regulation, firms should undertake to consider and incorporate changes immediately.
It is calculated that core firms will consume up to 37 working Man Days of Senior Management time to implement the SMCR by the December deadline; this is without admin staff time.
Under the banking implementation of SMCR, a notable challenge faced by firms was the need to flex their organisational structure to fit the regime. Nevertheless, the December 2019 go-live presents an opportunity for the newly in-scope parties to rise above this, by reviewing their organisation, its structure and reporting lines, and making the effort to create and embed real strategic adjustments to assist them in compliance with the regulation. This can possibly be a difficult but required process, particularly for organisations who run as a subsidiary of a global company, or one where significant decision making currently happens outside the UK.
Roles and responsibilities will likely be technically delegated from the parent company to the UK-based entity, to ensure that Senior Managers in the UK are empowered with the decision-making capabilities that enable them to take full accountability for their Senior Management Functions (SMF) and Prescribed Responsibilities. This re-structuring is strenuous and time consuming, but may prove to become more helpful in the long-term than attempting to fit a round organisation-shaped peg in a square regulatory hole.
Additionally, the shift will install a huge burden of accountability upon Senior Managers, who will experience increasing pressure to verify the workforce’s fitness and propriety, and illustrate their ability and control under the “reasonable steps” requirement. Thus, firms should take almost every opportunity to assist those identified as SMFs to get used to this additional exposure. This will expand beyond formal training, and may incorporate the creation of tools and other governance, new procedure and controls, additional committees and realigned or new MI that will assist in the day-to-day and strategic goals of the role.
Firms can take advantage of this remaining time to embed this new culture of accountability and take advantage of testing their new processes, controls and documentation as a component of the annual review cycle. By conceding the complexities of their current business and the mistakes made at the banks, and beginning to action SMCR now, firms have almost nothing to lose and everything to gain.
To save time, Compliance Consultant, one of the leading regulatory compliance consultancies, have launched their SMCR Preparation Service where they will project manage your arrangements, and ensure that everything is completed in order. They will provide templates and checklists for you to complete and after that the final documents could be loaded onto an online document management system for you to ensure you stay up to date with regular updates, or amend the required governance on time. With a 90 day countdown reminder service to get everything in position by the right people at the correct time.