24Jan

The Senior Managers and Certification Regime (SM&CR) has finally arrived, and most authorised firms will be only too aware of what they needed to do prior to December 9 last year to ensure they complied with their obligations.

However, there are a number of areas where firms have extra time to carry out certain requirements under the Regime. For example, firms have until December 9 to:

  • Train their staff on the five Conduct Rules and how they apply to each individual job role
  • Carry out their fit and proper assessments on individuals covered by the Certification requirements of the Regime
  • Provide the FCA with the information it requires for the new Directory

The Conduct Rules are:

  • Act with integrity
  • Act with due care, skill and diligence
  • Be open and cooperative with regulators
  • Pay due regard to customer interests and treat them fairly
  • Observe proper standards of market conduct

The Conduct Rules apply to all staff, except for those listed on pages 45 and 46 of the FCA’s SM&CR Guide.

The Certification element of the Regime applies to individuals within the firm who are not Senior Managers, but who still hold positions of responsibility, especially if their actions could have a significant impact on whether the firm’s customers are treated fairly. For examples of who might be included, please see page 32 and 33 of the FCA’s SM&CR Guide.

There is no need for individuals in Certification roles to be approved by the FCA, however firms are required to carry out their own annual fit and proper assessments. On completion of the assessment, the individual should be provided with a certificate that states that the firm is satisfied that the individual is a fit and proper person to perform the duties of their role. The certificate must also explain the aspects of the firm’s business in which the individual will be involved.

The FCA suggests that a fit and proper assessment of a person in a Certification role might include:

  • Criminal records checks
  • Obtaining regulatory references

An assessment of fitness and propriety must consider the individual’s honesty, integrity and reputation; competence and capability; and financial soundness.

In very small firms there may be no one who is subject to the Certification Regime, because there might be a team of senior managers and then some more junior administrative staff, with no one in between. Sole traders, for example, will not have anyone subject to the Certification requirements.

Regarding the Directory, firms should log in to the FCA’s Connect system. Some of the required information will already have been populated by the FCA. The firm will then need to provide the remaining information. A list of the information that will appear on the Directory can be found on page 5 of Policy Statement PS19/7

The FCA concludes the item on SM&CR in the January 2020 issue of its regulation round-up by addressing the issue of a firm’s culture. The relevant item reads

“Firms’ culture and governance is a priority for us and should be for you 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 FCA’s idea of what ‘the right corporate culture’ really means appears to include areas that some firms may not have thought of. For example, a recent Dear CEO letter highlights that, in the FCA’s view, non-financial misconduct issues should be included in the fit and proper assessment of senior managers. Some examples of non-financial misconduct, according to the FCA letter, could include discrimination, harassment, victimisation and bullying.

Finally, the FCA urges firms to check their entries in the existing Financial Services Register to ensure it shows the correct information about their senior managers.

 

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article