What Do You Know About SMCR

What is SMCR?

The Senior Managers and Certification Regime (SMCR) is a set of rules that govern critical personnel's behaviour and accountability. The FCA SMCR was created in the aftermath of the global financial crisis to provide more prescriptive regulation of employee behaviour and competence, prevent customer harm, and improve market stability.

It is a governance related FCA/PRA rule with two main goals:

• Encourage a culture in which all employees, regardless of their degree of responsibility, assume personal responsibility for their actions; and
• Ascertain those businesses and employee understand and can explain where accountability falls.

Regime of Senior Managers

The Senior Managers and Certification Regime is aimed at those in organisations who hold positions that require regulatory authorisation.

Regime of certification

The Certification Regime applies to people in organisations who are not top executives (i.e., do not perform a controlled function), but who may have a major impact or pose risks to a financial institution or its customers, and who, as a result, need proper consideration as to their ongoing eligibility to perform their role.

What is FCA?

The Financial Conduct Authority (FCA) regulates the financial services industry in the United Kingdom and is responsible for the smooth operation of the country's financial markets.

The organisation's mission is to ensure that markets are honest and fair for individuals, firms, and the economy itself. The Authority accomplishes this through safeguarding consumers, financial markets, and fostering competition. The FCA is governed by the Treasury and Parliament of the United Kingdom.

How does the FCA keep track of SMCR regulatory compliance?

The first stage in determining the FCA SMCR's influence on a company and its employees is to determine whether the company is a Core, Enhanced, or Limited Scope organisation. Many businesses will be core businesses. The next phase will be to determine the present tasks and functions of personnel. With this knowledge, a corporation can change its system, according to the FCA SMCR (Senior Managers and Certification Regime) requirements.

The following are amongst the services that are frequently provided:

• Initial risk assessment, as well as the development of a firm.
• Assistance with procedures
• Auditing of files
• Technical assistance, training, and professional indemnity insurance (PII) coverage

The Financial Conduct Authority (FCA) has the power to impose a sanction and issue a statement on a company or individual. It can also conduct investigations and impose disciplinary action. As a result, the FCA has the authority to initiate criminal actions.

Requirements of SMCR

References of previous employers

One of the requirements is that a company that wants to hire a Senior Manager, Certified Person, or Non-Executive Director must get references from any company where that person has worked in the last six years, and those references must be regulated references if the company is regulated by the FCA or the PRA.

Criminal Record Checks

Individuals who could have a Senior Management Function (SMF) must undertake a "normal" criminal background check, according to the FCA SMCR (Senior Managers and Certification Regime).

Both expended and unexpended offences are listed in the basic criminal background check. Personnel who will be performing certification functions are not required to have criminal backgrounds.

As a result, Certified Persons are unlikely to be qualified for routine criminal background checks and will be limited to a minimal criminal background check (detailing unexpended offences only). Basic criminal background checks can be carried out at the firm's discretion, but they are standard industry practise and are considered invaluable in determining an individual's integrity.

Fit and Proper Test/Rules

The "fit and proper" criteria (or "fit and proper test") refer to the standards to be used in evaluating management, directors, and shareholders. The capacity to carry out their responsibilities, and their sincerity and eligibility, are all scrutinised.

FIT provides thorough recommendations on the types of factors that companies should examine when evaluating a person's fitness and propriety. This encompasses honesty, integrity, and reputation, as well as competence and capabilities, such as whether the person meets any FCA training and competency standards. financial stability.

Who do the ‘Fit & Proper Rules’ Apply To

Top Executives

Anyone who performs a Top Management Function falls under this category. Each senior manager will have a Statement of Responsibility and a Duty of Responsibility, but no responsibilities map or handover processes are required.

Individuals that have been certified

This category includes persons who aren't top managers but whose work puts them in a position where they can hurt the company or its consumers.

All employees under Conduct rules

Except for auxiliary staff who do not fulfil a duty related to financial services, these basic norms apply to all employees. There are top five responsibilities that apply to everyone, as well as four extra responsibilities for senior managers.

The expectation that enterprises will take reasonable action to ensure that persons are 'Fit and Proper' to execute these most senior responsibilities is a major component of the FCA SMCR (Senior Managers and Certification Regime). Conducting thorough background checks is an important part of the 'Fit and Proper' evaluation process since it gives clients confidence that:

• They give honest and true information for SMFs.
• Certified Persons' self-regulatory requirements are satisfactorily met by the screening process.