Back to Blog

SM&CR: How Ready Should Asset Managers Be?

Marketing Team


SM&CR: How Ready Should Asset Managers Be?


Time is running out for the asset management industry. There's now only four months left before the Senior Managers & Certification Regime (SM&CR) is fully implemented, forever changing how regulated firms are run.

However... there are worrying signs that a huge proportion of asset managers are not ready.

Less than 2% of regulated firms are ready for SM&CR, according to a recent survey by ACA Compliance. The deadline day isn’t until the 9th December 2019 but as we‘ll explain, the SM&CR is a thoroughly comprehensive piece of regulation that requires compliance and input from teams throughout asset managers’ organisations.

In short, the SM&CR is a move away from box ticking and is requiring regulated firms to ensure their senior managers are the right people for the job, with all the systems and processes in place to verify this. With the FCA increasingly focusing on conduct and culture, the SM&CR falls directly at the feet of senior managers and makes them directly accountable for how their firms are fun (with individuals at risk of penalties, not the group). 

What firms should have already completed

According to the Alternative Investment Management Association (AIMA), compliance with SM&CR requires a prelude of up of 12 months. With this in mind, and with only four months to go, firms should have already taken considerable time to;

  • Assess their structure, reviewing systems and reporting procedures already in place.

  • Create a bespoke plan for implementation and how all staff will be impacted.

  • Engage with external providers and non-UK stakeholders.

  • Finalise identification of all senior managers, certified persons and conduct rule staff as well as their contractural statuses.

  • Identify relevant process requirements and changes (concerning recruitment, training, alignment of disciplinary procedures etc).

If done correctly, this then leaves firms with enough time to implement their plans and ensure they are ready by close of play 8th December 2019. Looking ahead, the next few months could be crucial for firms getting in shape for SM&CR. By now (and according to the AIMA), firms should have these plans firmly in place and be ready to be put into action. 

Getting ahead of the December deadline

Building on what they should have already done, what does the next few months look like for these firms?

Having a record of these plans and how SM&CR will be implemented is vitally important via drafted statements of responsibility for designated senior managers (which should be created in discussion with the individuals they are addressing).

This process can be expanded into further detail with a responsibility map for larger and more complex organisational structures. The point of this is to allow a firm to articulate how it accounts for responsibility with specific identification and disclosure of the senior personnel with the most influence.

This is important as the firm needs to ensure everyones’ job titles matches their written responsibilities and that there are no overlaps or gaps. At this point firms will only have a couple of months left, allowing time to rectify potential organisational oversights and to introduce training or improvements for potential shortcomings.

Then, with a few months to go, firms should in theory have little to do and simply be following through with all of their plans. This includes ensuring there is updated documentation everywhere concerning statements of responsibilities and other elements like employee handbooks. Depending on the kind of firm, paperwork for the regulator will need to be finalised and submitted to the FCA while all staff are repeatedly contacted to ensure they know what is about to happen. 

After 12 months of work a firm should be SM&CR ready and able to demonstrate this. As we know, compliance with SM&CR requires thorough and extensive work, meaning firms are unable to simply tick a box and pay this piece of regulation lip service.

However, things are already complicated for asset managers as within the funds industry there several different management structures in existence. This means each implementation of SM&CR will be truly unique and therefore minimises opportunities for best-practice sharing. Additionally, in its consultation phase, the FCA recognised that due to the influence of asset management on society and peoples’ retirement savings, most asset managers would fall under the ‘enhanced’ category of SM&CR.

As the name suggests, this means considerably more requirements for firms in this bracket to satisfy. This is a serious issue for asset managers, many of which account for hundreds of millions – if not billions – of pounds of investors’ capital with extensive and convoluted management structures. 

Looking back to ACA Compliance’s concerning findings on SM&CR preparation, 60% of firms are one third (or less) through their projects for this new regime with over 25% admitting there was minimal awareness outside compliance teams. Given SM&CR is designed to directly address senior managers, their accountability and capability, it's time for those in the industry to realise that whilst there's still time to prepare for SM&CR, the clock is ticking. 

More from the Blog

2024 So Far: Recordkeeping Revamps and Regulatory Rigor

An analysis of the intense regulatory activity we have seen so far from the SEC, FINRA and the FCA.

Read Story

Whatsapp Compliance, Self-Reporting, and Ripping off the Band-Aid

The SEC has incentivized firms to self-report on off-channel violations. We look into the process and its benefits.

Read Story

FINRA Report 2024: Recordkeeping Takeaways

Key recordkeeping teakeaways from the 2024 FINRA Annual Regulatory Oversight Report.

Read Story

See what we can do for you.

Let us show you why MirrorWeb is trusted by organizations across the globe for their compliance and digital preservation needs.