RegulationOct 29 2019

SMCR: The five things everyone’s stuck on

  • Describe some of the responsibilities required by SMCR
  • Describe how to instil cultural change
  • Identify some of the challenges with SMCR
  • Describe some of the responsibilities required by SMCR
  • Describe how to instil cultural change
  • Identify some of the challenges with SMCR
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SMCR: The five things everyone’s stuck on

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.

There are a number of job types posing such a challenge, with the ‘significant management function’ and ‘client dealing function’ categories currently causing the most difficulty. In the first instance, significant management functions are not to be confused with senior management functions.

The relevant staff are those with significant responsibility for a significant business unit.

While the FCA provides examples of such staff, their list is not exhaustive and there is work to be done to define who has this level of responsibility.

For client dealing functions, the criteria will broaden under SMCR.

Previously, only those who advise and deal were included. Now, those who deal with clients or client property in relation to such advice and dealing will also be regulated.

There are staff involved with such activities who are exempt from certification, but such exemptions only serve to further complicate the initial task of determining who should be certified.

There is no quick fix – the only solution is to ensure your SMCR project acknowledges the level of complexity that comes with the Certification regime and does not relegate it to a secondary concern.

Firms should therefore resist the temptation to focus their resource solely on Senior Managers.

 

Training and competence – crucial to the Certification Regime

An effective approach to T&C – or training and competence – is critical to complying with SMCR. Ensuring staff qualifications and competencies are aligned with the requirement of the T&C regime will be at the core of the regulation’s annual certification process.

Following these three steps will help you comply with the T&C regime:

Managing from the front line – there is always the temptation to delegate all the responsibility to HR, but in reality this moves the responsibility away from the managers who have the clearest understanding of their charges’ roles. Frontline management should be responsible for their team’s competence.

Running an evidence-based process – firms need to be able to justify the certification of all staff. To do this, the correct evidence needs to be gathered – this is evidence that focuses on employee competence and not more commercial concerns like profitability.

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