In July 2018, the FCA published their much-awaited, near-final rules in policy PS18/14, having finished consultation on CP17/25 and CP17/40. These outlined the new SMCR requirements that are coming into play for Financial Services Firms.
The Senior Managers and Certification Regime (SM&CR) replaces the Approved Persons Regime (APR). SM&CR is a regulatory framework designed to strengthen the accountability of senior individuals working in the financial services sector. The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have set out detailed rules for monitoring, tracking and reporting on SMCR. Critically, it shifts the ownership from the FCA to the firm itself. Therefore, every FS firm needs to be aware of their legal obligations under this ruling.
The regime defines a set of Senior Management Functions (SMF). These SMF’s 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. They must also demonstrate that they are meeting a pre-defined set of Conduct principles. Subsequently, financial services firms must evidence annually that they (and others) are meeting these requirements and maintaining real-time records. Finally, The FCA should then be notified of any changes. Managing this process manually is likely to be difficult and even risky.
Although only senior managers have to evidence their compliance with the SMF, virtually every member of staff within a financial services firm must have their professional competence certified, CPD and assessed and conduct evaluated at least annually. Again, all of this information should be documented and reported on to the FCA.
Banks have had to meet these standards for a few 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 has created three new SMCR classifications to allow the requirements to be applied in line with potential risk:
Enhanced expected to meet requirements that are similar to the banking SMCR rules;
Core applies to the majority
Limited Scope who will have a lighter set of requirements.
Note that 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.