The introduction of the Senior Managers & Certification Regime (SMCR) remains a hot talking point in the UK’s financial services industry, as it’s recently replaced the FCA’s existing approved persons regime nationwide.
This certainly represents a significant shift in the sector, as it looks to create individual accountability and responsibility within companies and institutions. According to legal experts in the SMCR area, Browne Jacobson, this has the potential to affect an estimated 47,000 financial service firms in the UK, and the failure to comply with the new guidelines could prove catastrophic.
But how do you take steps to understand this law change and guarantee compliance? Here are some steps to keep in mind:
1. Start at the top and understand whether SMCR affects you
In simple terms, the widespread implementation of the SMCR ruling affects practically every solo-regulated firm, from sole traders and limited permission consumer credit companies to the world’s leading financial institutions.
The new ruling will also apply to branches of non-UK firms that have the permission to carry out regulated activities in Britain, so the chances are that your company will be impacted by the new SMCR legislation.
From here, you’ll need to start at the top and categorise your people individually, in order to identify the various points of compliance and the individual employees who will be most affected by the change.
This will apply particularly to managers, who must understand their own responsibilities during the implementation period.
2. Develop a comprehensive view of accountabilities for management
This leads onto the next point of interest, which is the pressing need for executives and senior managers to develop a comprehensive view of accountabilities.
At the heart of this is an innate understanding of all management responsibilities, which enables firms to create concise senior management roles and job descriptions for individuals to adhere to.
In addition to detailing the behaviour that they expect from senior managers, this also establishes a framework which outlines how key stakeholders can demonstrate that they’ve taken reasonable steps to avoid any failures and regulatory breaches that may occur.
3. Account for delegation and overlaps in responsibility
Another key consideration is the delegation that takes place in larger financial services firms, as senior managers outsource tasks in-house to create considerable overlaps in responsibility.
Your SMCR plan needs to make allowances for such instances, by ensuring that tasks are delegated to certified persons and that the process as a whole is clearly defined in the SoR.
Delegation must also be measured against the expectations of the regulator. More specifically, tasks must be allocated to the most senior manager or colleague, with the Financial Conduct Authority (FCA) having made this perfectly clear in their legislation.
The key here is to create clear guidelines for staff members to adhere to, so that you can create a culture of compliance that’s capable of surviving even high levels of staff turnover.