The countdown is on - a final checklist for the SM&CR

By Steven Howard , Head of Mortgage and Lending Intermediaries Compliance Services at SimplyBiz

With just a few days left to go before the introduction of the Senior Managers and Certification Regime (SM&CR) and with so much noise around what you need to do to be ready for it, now would be a good time to have a quick look back at why the regulator introduced the new regime in the first place.

The aim of the SM&CR is to reduce harm to consumers and strengthen market integrity by creating a system that enables both firms and regulators to hold people to account. In order to achieve these objectives, SM&CR aims to:

• encourage staff to take personal responsibility for their actions
• improve conduct at all levels
• ensure firms and staff clearly understand, and can demonstrate, who does what. Bear in mind this also means that, should you have the pleasure of a visit from the Financial Conduct Authority, they will also be able to easily identify who is responsible for the various areas of your business.  

So, there is the ‘why', now let’s take a look at what you have to do:   

Establish your firm type

Determining where your firm sits within SM&CR should have been one of the very first tasks undertaken as part of your preparations. The vast majority of firms will be classed as ‘core', except for sole traders who are classified as ‘limited scope'.  

Identify the people in your firm   

All the individuals holding senior positions within your firm, as well as your firm itself, will be automatically ‘mapped across' into the new regime. Before this happens, though, you will have needed to ensure that the right people are registered to the right roles - and bear in mind that only senior managers will be approved by the FCA.

If you were still in any doubt about what the regulator was looking for from you then the frequency with which the words ‘accountability', ‘responsibility' and ‘governance' are repeated throughout its papers on SM&CR should make it entirely clear.

Assigning responsibilities 

Once your senior managers are in place you should have allocated the following:

• Statement of Responsibilities - a document that lists exactly what the individual is responsible and accountable for
• Prescribed Responsibilities - these are responsibilities (not applicable to limited scope firms) that the FCA wants to cement into a firm's structure
• Duty of Responsibilities - this is an overarching principle, which is covered in more depth below

The Duty of Responsibility is a feature of the SM&CR and therefore may need a little more attention when it becomes a reality. In short, if the firm breaches one of the FCA's requirements, the senior manager could be held personally responsible if they did not take reasonable steps to prevent or stop the breach. 

While the burden of proof that reasonable steps were not taken lies with the FCA, there will be an investigation into the circumstances of the case which may result in action against the senior manager, the firm, or possibly both.  

Conduct Rules 

Before the implementation of the new regime, senior managers and certified persons must be trained on how the Conduct Rules apply to their role.

While there is no formal method in place for delivering the training, a record that it has happened will be required to show a clear audit trail and evidence it has taken place.  

SM&CR is not a light-touch piece of regulation, but falling in line with the regulator's requirements is perfectly achievable. Hopefully, you will be reading this article and nodding sagely, confident that you completed everything outlined above months ago. 

If that is not the case, and you're breathing a little more heavily after reading this, then I would say better late than never. Get in touch with the FIBA team on enquiries@fiba.org.uk to enquire about FIBA compliance support as soon as possible!

*Please note that if you are not authorised and regulated by the FCA, the SM&CR guidance will not apply to your firm.