Senior Managers and Certification Regime – Hands up if you are ready

February 19, 2021

Overview

The Senior Managers and Certification Regime (SM&CR) aims to reduce harm to consumers and to strengthen market integrity by holding individuals to account for their actions. This is achieved by raising the standards of conduct for everyone who works in the financial services industry, and by making senior people in firms more responsible and accountable for their conduct, actions and competence. The SM&CR shifts the responsibility of activities within a firm onto “senior managers” and brings into scope non-executive directors.

The SM&CR came into force on the 9 December 2019 with a one year transition period granted to solo-regulated firms to implement the new changes. The original implementation deadline was then extended to 31 March 2021 due to the COVID-19 pandemic for firms to have undertaken the first assessment of the fitness and propriety of their Certified Persons. With the new deadline date fast approaching it is time for firms to act now to ensure they are ready.

How does the SM&CR regime apply to firms?

For solo-regulated firms, the Financial Conduct Authority (“FCA”) took a proportionate approach to implementation to reflect the different risks, impact and complexity of firms subject to the extension. Under the FCA’s regime, firms are categorised depending on their size and profile into Core, Enhanced or Limited Scope firms.

The SMCR consists of three key pillars:

  1. The Senior Managers Regime (SMR) – The most senior individuals (‘Senior Managers’) who perform key roles (‘Senior Management Functions’ or ‘SMF’)
  2. The Certification Regime (CR) – Employees who are not Senior Managers but whose job can cause significant harm to the firm or its customers
  3. The Conduct Rules – The New Conduct Rules apply to almost all employees within firms. The first tier (Individual Conduct Rules) is a general set of rules that applies to most employees (except ancillary staff). The second tier (Senior Manager Conduct Rules) applies to Senior Managers only.

The FCA Directory

The FCA’s new Directory will enable consumers, firms and other stakeholders to find information on individuals working within the financial services industry. With the FCA’s extension, solo-regulated firms have until 31 March 2021 to submit their Directory Persons data, and from mid-December 2020 the FCA has begun to incrementally display data provided by firms as it is submitted. The FCA is encouraging firms to submit their Directory information as soon as possible and not wait until the 31st March deadline.

There are two key requirements firms need to implement prior to the 31st March 2021 deadline:

  • To identify all employees captured as “Certified Function” holders, undertake a “fit and proper” assessment, issue a certificate once the assessment has been completed and submit their details for submission to the new FCA Directory.
  • Deliver training on the conduct rules to all staff (except certain “ancillary” staff), the training should be sufficiently detailed to meet certain requirements to ensure it meets FCA expectations.

From April 2021, the FCA Directory will include details of:

  • Individuals designated as Certified Staff under the SM&CR
  • Non-Executive Directors (NEDs) who have not been designated as Senior Managers under SMCR; and
  • Certain other individuals in customer facing roles such as, financial advisers, sole traders, or appointed representatives.

Points to note and consider.

  • Firms will be required to change the data within seven days of an employee leaving the firm, becoming certified or changing roles.
  • A £250 admin fee will be enforced where data is incorrect and has been identified by external users via a complaint to the FCA.
  • Senior Managers who also perform a certified role will also need to appear on the register.
  • The FCA expect staff included in the directory to have already been certified by the firm
  • Any NEDs who are not senior managers need to be added to the register.

Conduct Rules Training

It is mandatory for firms to provide their employees with training and guidance on the Conduct Rules and how those rules apply to their role and duties under both Tier 1 and Tier 2 conduct rules.

It is also mandatory for a Senior Manager to be allocated a Prescribed Responsibility (PR) for this training and oversight and should the training not be completed to the required standard before the deadline, the senior manager with this PR will be held accountable by the FCA.

How Effecta can Help

  • Effecta can assist you with completing competency assessments and provide certificates post assessment
  • Effecta can assist you with recording the employee information to the FCA ahead of the deadline for publishing on the Directory
  • Effecta can provide conduct rules training for all staff that cover the requirements as set out by the FCA
  • Effecta can assist with ad hoc SM&CR questions and queries and all larger SM&CR projects, based on your specific needs.