Your firm under SM&CR

By Mark Greenwood, group regulatory policy manager at SimplyBiz

Senior managers within a firm have a crucial role in demonstrating that they are accountable and responsible for delivering effective governance. This includes taking personal responsibility and being accountable for their decisions and exercising rigorous oversight of the business areas they lead. The FCA wants all firms to develop a culture of accountability at all levels and for senior individuals to be fully accountable for defined business activities and material risks.

The main aim of the Senior Managers and Certification Regime (SM&CR) is to reduce harm to consumers and strengthen market integrity by creating a system that enables firms and regulators to hold people to account. This has been applied to banks, building societies, credit unions and PRA-designated investment firms since March 2016, and is now replacing the approved persons regime (APR) across almost all financial services firms.

The FCA wants to have consistent principles applied across financial services; however, they also want the new regime to be proportionate and flexible enough to accommodate the different business models and governance structures of firms.

The proposals

Firms will need to make sure they have appropriately allocated all of the prescribed responsibilities below to their senior managers, unless they are a limited permissions consumer credit firm, where prescribed responsibilities do not apply.

• Performance by the firm of its obligations under SM&CR including implementation and oversight
• Performance by the firm of its obligations under the Certification Regime
• Performance by the firm of its obligations in respect of notifications and training of the Conduct Rules
• Responsibility for the firm’s policies and procedures for countering the risk that the firm might be used to further financial crime
• Responsibility for the firm’s compliance with CASS (if applicable)
• Responsibility for ensuring the governing body is informed of its legal and regulatory obligations

The new regime will introduce two levels of responsibilities. These are senior managers and certified persons.

Limited permission firms require a senior individual to hold the SMF29 – limited scope function, same as the CF8 apportionment and oversight function under the APR.

Full permission firms, if involved in debt management ie refinancing buy-to-lets etc, require a senior individual to hold the SMF16 – compliance oversight function, in the current regime this is CF10.

Lenders require a senior individual to hold the SMF17 – money laundering reporting officer function, in the current regime this is CF11.  

In addition, all must have a statement of responsibilities, demonstrating they are responsible and accountable, as well as duty of responsibility accountabilities should things go wrong.

It is the firm’s responsibility to ensure that senior managers are suitable to carry out their roles and to annually assess for fitness and propriety. In the case of new personnel, the requirement is to establish six years of employment references and other selected information. 

There is a further paper expected this summer, which will confirm how the transition from one regime to the other will be carried out.

Those taking SimplyBiz support will receive guidance and a specific service that will carry our assessments and produce annual statements to demonstrate compliance with the new regime.