With less than fifty days until the full rollout of SMCR to all solo-regulated firms, the clock is ticking loud and clear.
And while it seems most firms are well on the way in their preparation, it is not all plain sailing.
As part of our consulting on financial regulation, we at Bovill are seeing plenty of common ground where firms are having the most difficulty in ensuring that they are fully compliant.
Here, we look at the five most common stumbling blocks for firms soon to be regulated under SMCR, and advise on what firms can do to address them.
Top five SMCR issues:
- Statements of responsibilities
- Identification of certified staff
- Training and competence
- Conduct rule breaches
- Firm culture
Statements of responsibilities – what, not how
Every Senior Manager must have a Statement of Responsibilities (SoRs): a single document that clearly sets out their role and what they are responsible for, which must be submitted to the FCA via a form on the Connect website.
The early sections of the form are straightforward to complete – they capture details of the individual, the role they perform and their Prescribed Responsibilities under the regime.
Then comes the section of the form called ‘Other Responsibilities’, which describes the activities or areas of the business for which the individual is responsible. In our experience, this is where people have most difficulty, so where should you start?
The FCA is clear that they want SoRs to be succinct – there is guidance suggesting that a maximum of 300 words should be used to describe each responsibility.
In practice, we found that Senior Managers attempting to draft their own SoRs wrote heavily caveated articulations of how, rather than a succinct outline of what they are responsible for.
Bovill suggests following three ‘S’s to make sure your SoRs are up to scratch:
Straightforward – the SoR should be clear and easy for anyone to understand, whether they are regulators, other colleagues in the firm or Senior Managers themselves. The SoR should contain enough information to clearly describe the Senior Manager’s actual responsibilities and accountabilities, but without unnecessary detail.
Self-contained – a SoR should not refer to other documents. It should not be drafted as a job description setting out competencies, and should exclusively focus on what the Senior Manager is responsible and accountable for – not how they do their job.
Senior Manager-owned – each individual Senior Manager must take ownership for their own SoR. This means they need to be involved in the preparation of their statement, and be comfortable with the content.
Identification of certified staff – don’t underestimate the complexity
As with banks, many investment firms are finding the Certification regime to be the most challenging component of SMCR to implement.
The identification of staff who need to be certified is proving more challenging than the relatively straightforward identification of senior managers.
While the senior management functions are clearly defined, many jobs requiring certification can only be identified through careful consideration of the rules.