Extending the Senior Managers & Certification Regime CP17/25: What does this mean for my firm and what should I be doing about it now The Senior Managers and Certification Regime (“SMCR”) was initially introduced for banks, building societies, credit unions and PRA-designated investment firms in March 2016 following political pressure post the last financial crisis to improve the culture and level of personal accountability within the industry. Post the announcements last year, in the FCA’s consultation paper, CP17/25, the regulator is now consulting on their intention to roll-out the new framework to all FCA-regulated firms. Currently no implementation date has been set, but early indications suggest a ‘go live’ date sometime in 2018. The implementation of the regime within banks was a far more complex exercise than first envisaged. As such the 47,000 firms captured by this expansion of scope are well advised to start work on implementation as soon as possible. In general, the regime will replace the existing Approved Persons Regime and Controlled Functions, within the current framework. The new rules will mean
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Extending the Senior Managers & Certification Regime CP17/25: What does this mean for my firm and what should I be doing about it now The Senior Managers and Certification Regime (“SMCR”) was initially introduced for banks, building societies, credit unions and PRA-designated investment firms in March 2016 following political pressure post the last financial crisis to improve the culture and level of personal accountability within the industry. Post the announcements last year, in the FCA’s consultation paper, CP17/25, the regulator is now consulting on their intention to roll-out the new framework to all FCA-regulated firms. Currently no implementation date has been set, but
early indications suggest a ‘go live’ date sometime in 2018. The implementation of the regime within banks was a far more complex exercise than first envisaged. As such the 47,000 firms captured by this expansion of scope are well advised to start work on implementation as soon as possible. In general, the regime will replace the existing Approved Persons Regime and Controlled Functions, within the current framework. The new rules will mean
that the most senior individuals or Senior Managers within firms, will be required to fulfill Senior Management Functions (“SMF’s”) and require explicit FCA approval. A population of personnel below the SMF’s within firm’s will become Certified individuals under the new framework, performing Certified Functions (“CF’s”). The new CF roles will not need FCA approval but firms will need to make annual attestations to the regulator that the holders of these posts remain fit and proper to perform their roles. As well as these senior roles and responsibilities, the framework also contains Conduct Rules that apply more widely across a firm’s employees compared to the current Approved Persons regime. The only exception being ancillary staff such as cleaners, receptionists, catering staff and security staff. Firm’s will be expected to train all staff on the conduct rules and ensure that they are fully aware of their obligations and how the rules apply to them. Given the differing scope of Financial Services firms set to be affected by the roll-out of SMCR, CP17/25 also
stratifies the firms it regulates into three classifications; Limited Scope firms; Core firms; and Enhanced firms. It is expected that most firms will be deemed to be a Core firm and there will about 350 firms captured by the enhanced requirements. Enhanced firms will have more requirements to adhere to given the increased complexity and impact that they are deemed to have. The SMCR requirements detailed within CP17/25 contain information on the detailed rules such as the ‘Prescribed Responsibilities’ that need to be allocated amongst Senior Managers, the requirement for each Senior Manager to agree a ‘Statement of Responsibilities’, and for Senior Managers in Enhanced firms to document ‘Responsibility Maps’. The solution for these new requirements should be designed to clearly articulate reporting lines and the scope of an individual’s responsibility. In practice, these may not easily fit within a firms existing management and governance framework and therefore may require some up-front planning or reorganisation.
How we can help:
Assistancecanbeprovidedtofirmswithanon-UKfirmpresencelookingtoestablish how they should handle the newregime along with the increased scrutiny,and whether, local governancearrangements canbe strengthened tokeepoverseasexecutivesoutsidethescopeoftheregulations.
Theregimehasparticularchallengesfor overseas-headquartered firmsand overseas branches, as globalsenior management areunderstandably reluctant to besubjecttotherisksandrequirementsofaUKaccountabilityregime
Rosediemarewellplacedtodesignandoffersuch trainings, hosting either classroomtraining sessionsorworkshopsat your firmorinanoff-sitelocation.
To comply with the Conduct Rules,FirmswillberequiredtoensurethattheytrainalloftheirstaffsothattheyknowhowtheConductRulesapplytothem as individuals of a UKaccountabilityregime.
Rosediemcanassistwiththecreationofthesedocumentsandtheapportionmentofresponsibilitieswithinyourorganisationwhilstkeepingdisturbanceto the existing governance structure to aminimum.Thismayincludeprovidingadviceon how Senior Managers and CertifiedFunctions should be assigned and howprescribed responsibilities should bemanaged. Our staff are experienced atimplementing governance structureswithinfirmsandworkingwithalllevelsofpersonnelincludingBoard levelexecutivesandSeniorManagementtohelpwithmappingoutlinesofresponsibility.
The detailed and prescriptiverequirements of SMCR will requiredetailed planning around theallocationofresponsibilitiesandkeydocumentswillneedtobeproducedas will be mandated under theregime.Thecreationofa'Statementof Responsibility' and a'Responsibilities Map' can be achallengingexerciseinpracticegiventheimplicationsonpersonalandfirmaccountability.
Implementation in banks was a protracted and complex exercise, so firms will be well advised to start work on implementation as soon as possible. Should you wish to read more about CP17/25 please read our though our more detailed thought leadership paper on the topic which can be accessed free from our website
www.rosediem.com or by contacting us directly. If you would like to discuss this paper or implementation at your own firm further please get in touch directly by email or by leaving a message behind on the website and one of our team will get back to you.
Contact us
Nisha Madhvani CEO & Managing Director [email protected] 07930 323 758
We are also well placed to assist firms indesigning their fit and proper assessmentstructuresincludingdesigningawayinwhichevidence can bemaintained as part of theassessment.
The firm will now have aresponsibility to attest to theregulatoronanon-goingbasisas towhether Senior Management andCertified Individuals are fit andpropertodotheirjob.
