Key facts about SMCR

What is SMCR?

Lessons were learnt from the 2008 banking crisis, and significant conduct failings were seen, such as the manipulation of LIBOR, so the UK Parliament set up the PCBS (Parliamentary Commission for Banking Standards) to recommend how to improve banking/financial sector standards. PCBS recommended a new accountability framework focused on senior management, which later became SMCR.

The UK parliament replaced the APER (Approved Persons Regime) with SMCR (Senior Managers and Certification Regime), more focused on firms with senior management and designated individual responsibilities.

Since March 2016, banks and other PRA-designated investment firms (Relevant Authorised Persons) have complied with The Senior Managers and Certification Regime. However, from 9th December 2019, it was extended to cover all FCA (Financial Conduct Authority) solo-regulated financial services. It replaces the current Approved Persons regime entirely.

SMCR aims to reduce the harm caused to customers by holding individuals accountable and responsible for their actions. It represents a significant shake-up of financial services regulation and will fundamentally change how FCA-regulated firms operate and engage with regulators. The SMCR expects employees to be 'fit and proper' when handling their business.

SMCR is a broad topic. Read through to know some facts on SMCR.

Which type of firms will apply for SMCR

The SMCR will apply to all FCA-regulated firms from December 2019. Limited, Core or, Enhanced firms will have different requirements to apply for SMCR.

Who are all covered under The Senior Managers Regime?

As defined under SMCR, Senior Managers are employees who will perform responsibilities listed under senior management functions as designated by the FCA. The FCA must approve all Senior Managers to carry out their jobs. The Certification Regime covers staff currently requiring FCA approval.

What is the three key components of SMCR?

FCA categories firms into Core, Enhanced or Limited Scope firms, depending on their size and profile. SMCR has three components or key pillars, which are mentioned below:

The Senior Managers Regime

Post finalising the candidate for the role, the candidate (senior management) must be assigned his written statement of responsibilities, as set out by the FCA. Enhanced firms must issue a responsibility map with a complete job listing.

The Certification Regime

The certification regime even applies to employees who are not senior managers but whose roles can significantly harm the company or its customers. Under the certification regime, firms must certify that such individuals are fit and proper to carry out their certification function at hiring and then annually.

The Conduct Rules

These rules are a new set of rules to set an expectation for good conduct. These rules are for employees to help form the company's culture and policies. The rules will also encourage employees to have good behaviour. There are two tiers of rules. The first tier applies to all staff, and the second tier is for senior managers.

Duties involved

SMCR aims to strengthen the market by reducing harm to consumers. It focuses on integrity by making individuals more accountable for their conduct and competence. It gives an individual more extensive accountability by setting new standards for personal conduct. It increases healthy work culture and effective governance in companies. It focuses on integrity by making individuals more accountable for their conduct and competence.

Referencing / Employment screening

Employment screening or referencing helps in protecting the organisation and mitigating risk. When finalising the senior manager, companies must obtain a regulatory reference covering the last six years of their employment. The referencing must be done on a mandatory template as mentioned in the FCA handbook.

Conduct of the rules

All staff within FCA-regulated firms need to comply with the FCA's Conduct Rules. All companies must ensure that all their designated employees receive proper training as required for the role.

Notify FCA

All members must be fit and proper to perform their respective responsibilities consistently. If a senior manager breaches the conduct codes under any circumstances, the company must notify FCA. If a member of staff at any time is found not fit and proper, companies must not renew their certification.

Employment policies and contract

All firms under SMCR need to update their employment contract mentioning the new policies. The staff handbook containing all investigations, reports, disciplinary actions and proceedings, other rules and regulations must be updated.

New Directory by FCA

The new directory by FCA provides information to consumers and firms on individuals working in the financial sector. The directory is available to the public and provides a complete range of information as part of SMCR. Companies can submit data new FCA Directory Persons Connect form. One can also access information on those whose roles are no longer made public on The Financial Services Register, in accordance with SMCR.

Actions that FCA takes

FCA or The Financial Conduct Authority enforcement powers include the right to impose a penalty on a company or individual and make a public statement. Therefore, the FCA has the power to launch criminal proceedings. It also has the authority to investigate and take disciplinary action.

SMCR extension to insurers

The SMCR was extended to insurers on 10th December 2018, replacing the PRA's Senior Insurance Managers Regime (SIMR) and the FCA's Approved Persons Regime.

SMCR for FCA-Solo Regulated Firms

FCA has created crowdfunding platforms, consumer credit firms and sole traders to increase individual accountability regimes for diverse investment firms, mortgage providers and large asset managers.

FCA has a three-tire regime that distinguishes between core, standard and enhanced firms based on size and complexity.

Covid-19 impact on SMCR

Covid-19 has impacted the working of many companies in several ways. Recognising these impacts, deadlines for firms to be fit and proper for their certified persons and to obey all mandatory regulations were extended from 9th December 2019 to 31st March 2021. This was to make sure that all companies could completely comply with the changed regulations.

How Can SMCR Help?

SMCR's overall aim is to drive positive behaviour change, improve work culture, build trust, and increase personal accountability. SMCR is an initiative started by the UK, and this is something FCA wants to get right and fixed.

How can Complygate SMCR Screening help?

Complygate can help filter out the specific SMCR screening package required by assessing the job profile and type of company. Please scroll through our SMCR page to explore more.