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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CPD
Approx.30min
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CPD
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Countdown to SMCR: what to consider

Firms and impacted senior managers need to work together to agree the content of Statements and should ensure that they are accurate and properly reflect the role to which they relate.

Statements are often the subject of some negotiation and comment between the firm and senior managers, which often includes legal advice being sought by a senior manager, before they ascribe to a Statement.

The largest firms are required to ensure that they have and maintain a map of responsibilities and consider the interaction of all the Statements for the constituent senior managers at the firm at all times.

Although smaller firms do not have an identical burden, it is a very useful discipline and one which facilitates the firm, demonstrating to the FCA its efforts taken in implementing the SMCR.

Contractual requirements

While not dictated by the FCA in its proposals, it is good practice to make changes to the existing contractual arrangements for all staff at regulated firms to reflect the SMCR and CR changes.

Adherence to Statements should be explicitly incorporated into employment contracts. This reminds everyone of the Statement and the importance of it in the employment. It also shows the FCA the importance of the Statement and confirms that a breach of the Statement could or would be a breach of the employment terms.

Inclusion in the contract means that senior managers generally have a reasonable expectation to a contractual right of support from their employer in the event of regulatory action relating to their Statement. The contract or a collateral agreement should provide detail as to the situations in which the firm will support the senior employee and the parameters of that support.

A practical example of this is in the instance of a regulatory investigation in respect of an alleged systems and controls issue which falls within the ambit of a Statement.

Given the imposition of the SMCR and CR, it will be necessary to review and overhaul a range of internal policies and procedures at all firms.

The intricate detail of the issue giving rise to the investigation will likely be outside the day-to-day level of involvement in the business by a senior manager, but nonetheless be within the scope of that individual’s Statement. The senior manager would generally expect the firm to provide support in dealing with and responding to the investigation.

Certification-staff should have similar contractual terms, which record the impact of the certification regime on their role and the impact of non-compliance or default by such an individual. 

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