Advisers urged to prepare early for senior managers deadline

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
Advisers urged to prepare early for senior managers deadline

The Financial Conduct Authority has issued a reminder to all authorised companies to prepare for the Senior Managers & Certification Regime, which comes into effect this December.

The regulator has already rolled out the SM&CR to banks and insurance companies and after December 9 the regime will apply to all 47,000 companies the FCA regulates.

Under the SM&CR, anyone who holds a senior management function at an advice company will need to be approved by the FCA and every senior manager will need to fill out a statement of responsibilities explaining what they are responsible for.

The FCA hopes the regime will help establish healthy cultures and effective governance in firms by encouraging greater individual accountability and establishing a new standard of personal conduct.

It is part of its overarching strategy to secure protection for consumers, to protect and enhance the integrity of the UK financial system and to promote competition in the interests of consumers.

The FCA has suggested firms should start by preparing their bespoke training plans and ensuring staff understand the practical application of the specific rules which are relevant to their roles.

Jonathan Davidson, executive director of supervision, retail and authorisations at the FCA, said: "Senior leaders should view the regime as a catalyst to inspire positive culture change at their firms. 

"The SM&CR is an important way to ensure individuals at all levels within firms take personal responsibility for their actions. It is good for business when employees buy into a firm’s purpose, feel personal accountability and are inspired to speak up and to listen. 

"This can be encouraged through the new conduct rules. This kind of culture supports a healthy and inclusive workplace for employees, innovation and sustainability, and thoughtful identification and mitigation of risk."

According to the FCA, under the SM&CR senior managers will need to take responsibility not just for the decisions they make, but for how they influence others and must encourage a healthy culture among their staff and all senior managers must have a statement of responsibility which outlines what activities the senior manager is responsible and accountable for in the business.

On top of this, larger and more complicated companies will be required to have 'responsibility maps' which show how the responsibilities of their senior managers fit together.

Advisers will face different demands depending on whether the FCA classifies their company as "core", "enhanced" or "limited scope", but most advice companies would fall into the core category, meaning they will only have to comply with the baseline requirements.

The introduction of SM&CR comes with five new conduct rules the FCA hopes all financial services staff will embrace. These are to act with integrity, to act with due care, skill and diligence, be open and cooperative with the FCA, pay due regard to the interests of customers and treat them fairly, and observe proper standards of market conduct.

Last week, Mark Spiers, partner at regulatory consultancy Bovill, said the regime would allow the FCA to hold individuals accountable to mass mis-selling scandals and described this as a 'cultural shift' for advisers.

SimplyBiz has launched an SM&CR support programme to help advisers prepare for the implementation of the new rules. Gary Kershaw, compliance director of SimplyBiz, said the regime was "one of the biggest" regulatory changes facing advisers this year.

Shaun Church, director at Private Finance, said: "While the SM&RC is additional work, I think it should be viewed as a positive thing in the industry.

"Although I don't think there's an inherent problem that necessarily needs to be solved, I think it will inspire people to lead in the way they should be leading.

"By having a set standard of behaviour that the FCA would expect people to act by, you set that standard for firms with five people to firms with 500 people. It's a good thing."

Carl Shave, director of Just Mortgage Brokers, agreed. He said: "While the changes required by the FCA for the implementation of the SM&CR will be seen by many firms and brokers as another exercise to add to their growing number of tasks, it is a vital and important element of clarifying the structures and responsibilities of management.

"Many larger firms will no doubt have specific compliance personnel to assist with this change however the importance for all to ensure this is done on time is the same. The premise of the exercise will hopefully be for the greater good, with clear defined responsibilities and accountability for all firms regardless of their size."

imogen.tew@ft.com