This December, change is once again sweeping the financial services industry. However the upcoming Senior Managers & Certification Regime (SMCR) is different to the regulatory tsunami that preceded it.
Instead, the SMCR is arguably the culmination of the FCA’s regulatory mission ever since its inception in 2013.
Rather than simply watching and waiting for regulatory breaches, the FCA has been increasingly focusing its efforts on improving standards across the financial services industry. Professionalism in the industry has significantly improved and the SMCR is the stick to the carrot – accountability among senior management is something firms can no longer ignore.
As with any regulation, it can be easy to lose sight of what the overall purpose is. With hours of meetings and paperwork, even the most skilled and thorough compliance team will sometimes have to pause and ask themselves ‘what is this piece of particular legislation actually asking of us?’
With the SMCR, the intention from the FCA is to make the most influential people in a firm accountable and responsible in their role.
With that in mind, if you remember anything when it comes to your SMCR journey, make sure it includes these five key takeaways:
1. The most senior people have to know what they are responsible for
Under the senior managers regime, it is crucial to identify who this regulation applies to within your organisation and consider what roles they have oversight of. A starting point is to simply map out your employee network and ask yourself if everything is organised as best as possible. This task should have been conducted during the early stages of the SMCR implementation lifecycle.
2. The focus is on skills, capability and conduct
Identifying your senior people is the first step, but are they the right individuals for those roles? Here there is an emphasis on competence – aside from the fact the SMCR requires records to back this up such as qualifications and background checks, be objective and ask if they’re doing their jobs correctly.
3. There has to be a sense of accountability throughout the firm
Yes, it may be the ‘senior managers’ regime, but the FCA doesn’t want firms to simply pass this regulation onto the people at the top. Rather, the regulator wants firms to be proactive and self regulate with the right policies and procedures in place.
4. Systems and controls mean senior management suitability should be easy for the FCA to assess
It’s all well and good for a firm to say it’s compliant with the SMCR, and the spirit of it, but you’ll be expected to prove this to the FCA. Ensure you have evidence of your compliance and how things work at your organisation (regularly review these to save yourself potential pain down the line).
5. The FCA will hold individuals to account, not the firm
If ever your senior managers are reluctant to engage with the SMCR, and prefer for the compliance department to deal with it, remind them this regulation’s penalties are designed to discourage that from happening. Individuals who breach the SMCR could face unlimited fines (Barclays CEO Jes Staley ended up paying £1.1m when he was found guilty of an SMCR breach in 2018).
The SMCR is simply asking firms to be proactive and ensure they can prove they take conduct and responsibility seriously.
Regulated firms that approach compliance and conduct seriously, will also embed processes to ensure they market compliantly and have the right record-keeping practices in place.
For these firms, having an archiving solution in place that allows them to effectively evidence changes in their financial promotions is just one way they can not only comply with the FCA and MiFID II but also demonstrate true accountability across their marketing and promotions.