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Senior Managers and Certificate Regime Milestone 7: What’s next?

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By Laura Autiero

19 Feb 2020 | 1 minute read

The new Senior Managers & Certification Regime (the SMCR) entered into force on 9 December 2019 for all solo regulated firms. Whilst a number of tasks had to be completed before the 9 December deadline, as a result of the FCA's transitional provisions, firms have until 9 December 2020 to implement certain parts of the SMCR.

Starting to think about next December now is probably not something at the forefront of most people's minds. To avoid a mad rush in November/December 2020 however, we highly recommend that you start thinking about these outstanding tasks now. As you will see below, some tasks will need to be completed at certain specific points during the year. It is therefore important that you put a plan in place as soon as possible as to how and when you are going to implement the remaining parts of the SMCR.

This note summarises those tasks that core firms must complete before 9 December 2020. Note that we have focused solely on core firms as most FCA regulated entities fall within this category. Different tasks and transitional provisions may apply if you are an enhanced firm or a limited scope firm. If you work for an enhanced firm or a limited scope firm and you would like advice on how the transitional provisions apply to your organisation, please contact us.

Senior Managers

There are no transitional provisions relating to Senior Managers. All Senior Manager related tasks (such as identifying senior managers, drafting their statements of responsibilities and ensuring that they have been trained on the Conduct Rules) should have been completed before 9 December 2019.

That being said, there are still things that you will need to think about in relation to Senior Managers over the next 12 months; Statements of Responsibilities will need to be kept up-to-date to ensure that they remain accurate and Senior Managers may join and / or leave the firm during this period.

Certification Regime

Before 9 December 2019, all firms had to:

One

Identify all employees who would fall within the Certification Regime from 9 December 2019.

Two

Have a process in place for identifying which employees will fall within the Certification Regime on an on-going basis (i.e. a process to deal with new joiners, leavers and new job roles).

Three

Train all certified individuals on the Conduct Rules and how the Conduct Rules apply to their specific role.

As the outcome from an employee's annual appraisal process is likely to be important and will need to be considered in any certification assessment, the certification process should be carried out as part of the annual appraisal process. The annual certification for instance could be carried out at the end of each annual appraisal.

We have experience in designing certification processes and drafting certification policies for different types of regulated firms. Our fee for carrying out this work will be between £1,500 to £2,500 plus VAT, depending on the size and complexity of your firm, however we can provide you with a more definitive fee estimate on request.

Conduct Rules

Before 9 December 2019, firms had to train all Senior Managers and those individuals falling within the Certification Regime on the Conduct Rules and how the Conduct Rules apply to them and their specific role.

By 9 December 2020, this training must be provided to all non-executive directors and all other employees who have any involvement in the firm's financial services activities (whether regulated or not). Note that the FCA has listed a number of individuals who fall outside of the conduct rules, including secretaries, receptionists and cleaners. A full list can be found on page 45 to 46 of the following FCA guidance note here.

By way of a reminder, here is a list of the Conduct Rules:

First Tier: Individual Conduct Rules

  1. You must act with integrity
  2. You must act with due care, skill and diligence
  3. You must be open and cooperative with the FCA, the PRA and other regulators
  4. You must pay due regard to the interests of customers and treat them fairly
  5. You must observe proper standards of market conduct

Second Tier: Senior Manager Conduct Rules

SC1

You must take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively.

SC2

You must take reasonable steps to ensure that the business of the firm for which you are responsible complies with the relevant requirements and standards of the regulatory system.

SC3

You must take reasonable steps to ensure that any delegation of your responsibilities is to an appropriate person and that you oversee the discharge of the delegated responsibility effectively.

SC4

You must disclose appropriately any information of which the FCA or PRA would reasonably expect notice (this Conduct Rule also applies to non-executive directors).

We have experience in designing and providing Conduct Rule training for a number of regulated firms. If you would like help with either designing and/or delivering this Conduct Rule training, please let us know (our contact details are below). Our fee for drafting the Conduct Rule training (which will need to be bespoke for your organisation and each employee's role in accordance with the FCA's rules) will be between £1,500 plus VAT and £2,500 plus VAT, depending on the size and complexity of your firm; however we can provide you with a more definitive fee estimate on request.

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