SMCR comes into force for advisers

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Dec 12, 2019

The Senior Managers and Certification Regime is now in force for advisers and the remaining financial services authorised firms including asset managers, investment firms and sole traders.

The rules require the additional 47,000 eligible firms to perform additional checks for senior managers and provide formal statements documenting their responsibilities.

SMCR has been in place for larger financial institutions since 2016 to address failings identified during the financial crisis of 2008.

The 9 December implementation deadline for SMCR will have been an important milestone for advisers all over the country.

There are three main pillars to SMCR: senior managers, certification and conduct rules.

The regime aims to encourage staff to take personal responsibility for their actions, improve conduct at all levels and make sure firms and staff clearly understand and can show who does what.

FCA executive director of supervision for retail and authorisations Jonathan Davidson says: “The culture and governance of firms is a priority for us and should be for industry too. We expect firms to embed healthy cultures as this will lead to better outcomes for consumers and markets. It should lead to a healthy and fulfilling environment for employees in which diversity and inclusion is the norm. It should also lead to healthy and sustainable returns for businesses.

“The SMCR is an important way to ensure that individuals take personal responsibility and it is a catalyst for driving cultural transformation. It is about the principle of stepping up and taking accountability every day from here on, not just about ticking the box on implementation of the regime. So today is just the starting point for what firms need to do to live the spirit of the regime.”

In a recent interview with Money Marketing, Seven Investment Management’s chief executive Dean Proctor said: “On 9 December SMCR is live in our industry. For myself that obviously carries with it responsibility and liability.

“It has an impact on your firm – not least because there is a cost association in ensuring these things are done. For example, we will hire an individual who is almost fulltime dedicated to ensuring we are fully observant to SMCR. That is therefore a financial impact on the firm.”

Proctor said: “You have got to make sure everyone understands their accountabilities and you have got to make sure you have got the processes in place to ensure those accountabilities can be comprehensively managed and that governance exists.

“We have redone some job descriptions, so we are all clear on the things that we are and aren’t accountable for. These things don’t just happen there has been a fair amount of preparatory work taking place in the background.”

He suggested that rules are not always “black and white” and it can often come down to how they are interpreted.

“But if you have the right intent for conduct and how you do business that becomes a culture thing as well as just a rule thing,” he said.

By 9 December 2020 solo-regulated firms will need to ensure all relevant staff are trained on the conduct rules and how they apply to their roles.

They will also need to make sure all staff in certified roles are “fit and proper” to perform that role and are issued with a certificate.

Firms will be required to submit data to the FCA for the directory of key people working in financial services.

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