RegulationJan 29 2018

Countdown to SMCR: what to consider

  • Learn about the background to the Senior Managers and Certification Regimes and when it will apply.
  • Understand the four practical considerations for firms ahead of its implementation.
  • Comprehend what can be done now to prepare for the SMCR and who needs to be involved in implementation.
  • Learn about the background to the Senior Managers and Certification Regimes and when it will apply.
  • Understand the four practical considerations for firms ahead of its implementation.
  • Comprehend what can be done now to prepare for the SMCR and who needs to be involved in implementation.
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CPD
Approx.30min
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Countdown to SMCR: what to consider

In July 2017, the Financial Conduct Authority (FCA) released its consultation paper (CP17/25) on its planned extension of the Senior Managers and Certification Regimes (SMCR) to apply to the vast majority of those firms that it regulates.

That consultation paper confirmed that the FCA would introduce the regimes on a proportionate basis and in consideration of the variety and range of firms caught by them.

The SMCR will affect the most senior management, with board members (or equivalent) and those who have significant influence, or the ability to cause significant harm to a firm’s business, being assessed and registered as falling within the Senior Managers requirements; or alternatively they may fall within the Certification Regime requirements.

Alongside the SMCR, the FCA also proposed introducing its Conduct Regime (CR) to these same firms. The CR impacts the vast majority of staff at a regulated firm and requires adherence and observation of certain prescribed standards of conduct as staff go about their daily employment.

The CR must also be observed by those included within the SMCR definitions described above.

Implementation process

The FCA had been largely silent on the detail of precisely how and when the transition from the existing arrangements will occur until the release of its further consultation paper (CP17/40) in December 2017.

This timing may seem like some way off, but as with all significant regulatory change, there is much to be considered and done before then.

This deals with the proposed transitional arrangements from the existing to the proposed regimes, in time for a 2019 implementation date.

There is no precise date selected for implementation at this stage, with the current likely timing to be mid-late 2019.

This timing may seem like some way off, but as with all significant regulatory change, there is much to be considered and done before then.

Four practical considerations

Although there are many issues to consider, there are four concerns particularly deserving of thought at this early stage. They are:

1.    Board composition and management structure;
2.    Statements of Responsibility; 
3.    Contractual Requirements; and
4.    Modification of internal processes and procedures.

Board composition and management structure

While the size and scale of boards and other management structures within FCA-regulated firms varies significantly, the process for considering the application of the SMCR will, in essence, be the same.

The key consideration is to define who will hold a Senior Management Function (SMF); who will be within the Certification Regime; those who will be neither; and in every case, the reasons for the determination.

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