July 2018 – The FCA have just published their much awaited, near final rules in policy PS18/14, having finished consultation on CP17/25 and CP17/40 outlining the new requirements that are coming into play for all Financial Services Firms over the next 18 months (Banks have had to comply for some time). The Senior Managers and Certification Regime (SM&CR) replaces the old Approved Persons Regime (APR) and is a regulatory framework designed to strengthen the accountability of senior individuals working in the banking sector. The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have set out detailed rules for monitoring, tracking and reporting on SM&CR. Critically, it shifts the ownership from the FCA to the firm itself so every FS firm needs to be aware of their legal obligations under this ruling.
The regime replaces what was previously known as the Approved Person Regime (APR) and defines a set of Senior Management Functions (SMF) which each include a defined set of prescribed and overall responsibilities (SoR’s) which must be allocated to a senior manager within a firm. Additionally, the Senior Manager needs to be able to evidence that their Certifications and Continuing Professional Development (CPD) are up-to-date and that they are meeting a pre-defined set of Conduct principles. Financial services firms need to be able to evidence annually that they (and others) are meeting these requirements as well as maintain real-time records and notify the FCA of any changes. Clearly, managing this process manually in any but the smallest business is likely to be very difficult and worse than that – RISKY!
Although only senior managers have to evidence their compliance with the SMF, virtually every member of staff within a financial services firm has to have had their professional competence certified, CPD assessed and their conduct evaluated at least annually. Again, this should be documented and reported on to the FCA.
So banks have had to meet these standards for the past couple of years but now the rules have been extended to cover almost all Financial Services Firms from Insurers to IFA’s, essentially it will apply to all FSMA authorised firms. It also applies to branches of non-UK firms with permission to carry out regulated activities in the UK.
The FCA have created three new classifications to allow the requirements to be applied in line with potential risk. Enhanced which, will have expected to meet requirements that are similar to the banking SM&CR rules; Core (which applies to the majority) and Limited Scope who will have a lighter set of requirements. The regime applies per legal entity so if you have more than one legal entity in your firm then you need to apply the regime to each one, again adding complexity and admin so you may want to consider a system like Actus Comply.
We have summarised below
Actus Comply has been designed in partnership with clients in the Financial Services Sector to specifically meet the needs of the new SM&CR Regime. Not only does it meet your new SM&CR Regulatory requirements, but it can also provide a one stop shop for appraisal and performance management and any other regulatory requirements such as GDPR or Health and Safety.
If you are a financial services institution looking to improve your performance management processes and meet your upcoming SM&CR obligations in one cost effective package, why not get in touch. We are also happy to work through Compliance Consultancies and Training Partners if preferred.