Commencement of the Senior Managers and Certification Regime for 47,000 Financial Services Firms in the UK
On 9 December 2019, the Senior Managers and Certification Regime (SMCR) was extended to approximately 47,000 firms regulated by the Financial Conduct Authority (FCA).
The SMCR already applies to the banking and insurance sectors in the UK. The extension of the SMCR is designed to create a more positive culture of individual accountability across the financial services sector.
The SMCR encourages greater individual accountability and sets new standards of personal conduct in financial services industry by:
- ensuring senior managers are accountable for conduct in their areas of responsibility;
- ensuring a minimum standard of behaviour for everybody working in the sector through 5 Individual Conduct Rules;
- enhancing professionalism in the industry by requiring firms to certify that their staff are fit and proper.
The extended SMCR has been designed to be applied in a flexible and proportionate manner, taking into account the differing risk profiles of regulated firms. FCA solo-regulated firms (i.e. those not also regulated by the Prudential Regulation Authority) must comply with different levels of requirements:
- Enhanced Regime
Larger and more complex firms (<1% of those regulated by the FCA) have to comply with enhanced requirements. Additional requirements include: (i) Management Responsibilities Maps; (ii) Handover Procedures; and (iii) designated senior manager responsible for every area of the firm. Enhanced Firms will be subject to obligations comparable to banks to ensure a level playing field in the industry;
- Limited Scope Regime
Smaller firms, i.e. those firms that currently adopt a limited application of the current Approved Persons Regime will comply with a reduced set of requirements;
- Core Regime
These are baseline requirements applying to all regulated firms except for Limited Scope Firms.
The FCA has put in place transitional arrangements which provide firms with additional time to comply with all the SMCR requirements. By 9 December 2020, all solo-regulated firms will need to ensure:
- all relevant staff are trained on the Conduct Rules and how they apply to their roles;
- all staff in certified roles are fit and proper to perform that role and are issued with a certificate;
- they submit data to the FCA for the new Directory of key people working in financial services industry.
DLA Piper has a dedicated regulatory team with extensive experience acting for financial services firms and dealing with complex regulatory matters. We are advising a significant number of firms on the SMCR ranging from Limited Scope firms to Enhanced Firms as well as banks and insurers. We offer bespoke advice and practical support to help your firm with successfully implementing the requirements of the SMCR.
DLA Piper can support you with all aspects of the SMCR, which includes working with you and your business teams to create and implement an appropriate framework, transitioning approved persons into the new SMCR, identifying staff that require certification, helping you with developing management responsibilities maps, Senior Managers’ statements of responsibility and other template documentation.
We have created an informative and practical SMCR Portal for clients which you may access here.