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Financial Services: Regulatory and Compliance update – Senior Managers & Certification Regime II

08 November 2019

Richard Hull

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With less than one month to go until the Senior Managers & Certification Regime (SMCR) is extended to most FCA solo-regulated firms, if you have not yet made preparations for the changes, now is the time to do so. As we explained in our previous newsletter, the SMCR means that there will be big changes for firms. This update focuses on what practical steps core firms should be taking now to get ready for when the extension of the SMCR comes into force on 9 December 2019.

 

As the new regime will affect many different parts of your business, it is a good idea to start by identifying which category your firm falls into (i.e. if it is a limited, core, or enhanced scope firm) and reviewing which responsibilities each senior manager is responsible for. You should also carry out an audit of your policies and procedures to identify the areas you need to focus on. Some of the main steps you should take include the following:


1. Prepare Statements of Responsibilities for Senior Managers
All senior managers must sign a Statement of Responsibilities which sets out exactly what areas they are responsible for. The idea behind this is that it should be easy for senior managers, other staff, and the FCA to look at the document and to understand exactly what each manager is accountable for.
2. Make changes to internal policies and procedures
Several existing policies are likely to be affected by the changes and so will require amendment. You should undertake a review of all policies now so that you can identify and make any changes required. Procedures should also be reviewed – for example, in relation to how you will deal with and report breaches of conduct rules and how you will comply with the regime when recruiting new staff.
3. Make changes to contracts of employment
Employment contracts for current staff and template documents should be reviewed and amended so that they take into account the changes brought into effect by the SMCR. This applies to contracts for staff subject to the conduct rules, certified staff and senior managers.
4. Prepare for F&P assessments
Under the SMCR, firms must carry out assessments for certified staff, NEDs and Senior Managers when they are in the process of being hired, on an annual basis, and also in circumstances where it is necessary to carry out an ad-hoc assessment. The way the assessments are carried out will vary depending on which circumstance they relate to. Steps you can take now include planning how assessments will be carried out, implementing procedures to deal with assessments and making changes to policies as a result of the new requirements.
5. Carry out staff training

 

Senior managers and certified staff must be provided with training on the rules that apply to them by 9 December 2019, and other staff who will be subject to the conduct rules must have had training by 9 December 2020. If you have not yet arranged for training, it is important to do so now, particularly for senior managers and certified staff.

 

Our Regulatory and Compliance team can help you assess the application of the rules to your firm, prepare policies and procedure and provide training. If you would like further information, please get in touch with the 3HR Regulatory and Compliance team.

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Senior Solicitor

Richard Hull

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