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What incoming regulation should advisers look out for?

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Guide to regulatory changes

What incoming regulation should advisers look out for?

Now that Mifid II and General Data Protection Regulation (GDPR) have started to bed in, the industry is beginning to look seriously at what the Senior Managers and Certification Regime (SMCR) will mean for it. For solo-regulated firms, such as financial advisers, it is due to kick in on 9 December 2019.

The Financial Conduct Authority (FCA) has said firms should focus on getting clarity on responsibilities and driving high and consistent standards of behaviour across all staff who operate in financial services.

In an information video, David Blunt, head of conduct specialists at the FCA, says: “The SMCR replaces the approved persons regime. This represents a shift in our focus, increasingly looking at individuals as well as firms.”

Adviser action

The steps firms will need to take to prepare will vary by firm. It is affected by the size and complexity of the business, as well as how clear the reporting line, accountability and governance structure is.

The three components of the regime are:

  • Conduct Rules
  • Senior Managers Regime
  • Certification Regime.

The question that firms need to be asking themselves is whether their staff know enough to do their job: from the most junior person to the most senior.

Also, firms need to explain practically what the three components mean for staff and explain how they should follow them.

There will also be an annual check in relation to individuals with significant roles, whose actions can have a significant impact on the company. This will ensure the people in these roles are fit and proper to do the job they are doing.

The most senior people at firms, like the chief executive, who already comes under the approved persons regime will be under greater scrutiny from the FCA.

According to Chris Egbunike, managing consultant at Bovill, there is an acceptance among asset management firms that they have to start the process of reviewing who is responsible for what and how the accountability will be documented.

Mr Egbunike says: “It is definitely, for us, the biggest regulatory issue on most asset managers’ minds. It is also fair to say, a lot of them are compliance punch drunk.

“Between GDPR, Mifid II, the Alternative Investment Fund Managers Directive (AIFMD), most firms within the fund management space are pretty tired.”

Keith Maner, head of compliance at Thistle Initiatives says: “We expect 2019 to be dominated by the extension to all firms. This regime is expected to have a relatively greater impact on larger and/or more complex [advice] firms and to affect smaller ones less and appointed representatives not at all, since they are out of scope.”

SMCR is not the only thing that firms will have to worry about in 2019.


For mortgage brokers, who are not immune from the impact of the SMCR, there have been a number of specific developments in the mortgage sector.

In the interim report of the FCA’s Mortgage Market Study which came out in May 2018, the regulator says: “We believe the market could work better in a number of ways, while preserving important regulatory protections where these are needed.”