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Posted by Jon Yarker on 25-Jun-2019 16:25:40

Why you can't afford to get SM&CR wrong


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The upcoming Senior Managers & Certification Regime (SM&CR) is arguably the most critical piece of legislation the financial services industry has heading towards it.

This is because the SM&CR, which has been in effect in the banking sector since 2016, puts accountability from management right in the middle of the conversation.

For some time now, the message behind the regulation of the UK financial services industry has been about conduct. The FCA wants firms to embrace the spirit of regulation from a conduct perspective and not simply pay lip service.

But, who can improve the conduct and culture of an organisation?


This is where the SM&CR comes in, placing this responsibility firmly in the hands of senior management teams. The FCA expects those leading businesses to do so by example, to operate with accountability in mind and help the regulator do its job by bringing about cultural change.

This is no easy task and the SM&CR is less about box ticking but instead about the actual conduct of an individual and goes past the simple fit and proper requirements. A holistic framework of systems and processes needs to be brought in at each firm to ensure the requirements about competence, conduct and knowledge are being met.

The watershed moment in SM&CR is that it's an example of the FCA asking the financial services community to self-regulate and co-operate with them in order to improve standards across the industry. However, the deadline is clear, all FCA regulated firms and insurers must be compliant by December 2019, conduct and accountability must truly become a part of how they operate.

The British public hasn’t necessarily trusted financial services since the crisis and tends to paint everyone in the square mile with the same brush saved for bankers. Plus, although standards across the industry have risen considerably, a recent survey by PwC found 57% of consumers don’t believe regulatory reforms will prevent another financial crisis. Change has to come from within.

True, it is debatable how much the general public knows or cares about the SM&CR. But the SM&CR is a valuable opportunity for senior managers to embrace cultural change and have a say in their reputation.

One way to improve accountability is to exhibit clear and evidence-based monitoring of their digital output, with a firm showing they are paying serious attention to how they communicate with customers and represent themselves online. The very basic and reactive requirement was to store PDFs and screenshots of these communications.

The problem is, this archaic approach is labour-intensive and leads to record keeping errors, but worst of all, it isn't legally admissible meaning compliance teams are having to rethink the way firms manage new regulation. For those who've prepared for MiFID II and GDPR, steps may have been taken here, for example, Tesco Bank and Zurich are currently utilising the MirrorWeb Platform to archive their websites, helping to drive down costs and ensure full compliance.

Is your firm's use of web and social media MiFID II compliant? Find out with our free checklist where we describe the new requirements in full to help set you on the right track!

What key areas should I focus on?


We advise firms to get implementation projects underway as soon as possible. If you're already far along in your preparations then that's great, for those who haven't started, it's time to make things happen. You may be surprised at just how much resource and time is required to successfully implement SM&CR. 

Here's just a few things firms need to consider:

  • How will SM&CR become 'business as usual'? Firms need to ensure they can get on with the day job whilst new initiatives are put in place to support SM&CR. Change must be welcomed as businesses evolve because new regulation will always be just around the corner.  

  • What impact will it have on organisational structure? Think about how responsibilities might shift in the firm and what this means for Directors, this could have further offshore implications

  • How will SM&CR change infrastructure? Firms should create a map of management functions and responsibilities to address this. How will relevant documents be collected and retained through the process? 


We believe that firms who embrace the spirit of regulation from not only a compliance perspective but also a conduct perspective will be seen as leaders in this area. If the regulator comes knocking, they'll find it much easier to highlight the steps they've taken to be not only compliant but to become self-regulated and proactive in improving standards across the industry.

Miss our last blog? Click below to learn all about how digital banking officially broke the bank...

Blog: how digital banking officially broke the bank

Topics: Banking, Financial Services

Written by Jon Yarker

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