SMCR replaces the FCA’s Approved Persons Regime, putting greater emphasis on the senior management and individual responsibility within the financial services sector.
Because of this emphasis, it is important that firms register individual advisers to ensure they meet SMCR requirements.
What is SMCR?
SMCR, or SM&CR, is the Senior Managers and Certification Regime.
It represents a significant shift in the way the Financial Conduct Authority (FCA) regulates financial services in the UK.
What makes SMCR different to the Approved Persons Regime (APR), which it replaces, is its focus on the responsibility of the individual within a firm.
SMCR introduces changes to how the FCA regulates people working in financial services.
The aim of SMCR is to enable firms and regulators to hold individuals to account, reducing harm to consumers and strengthening the integrity of the market.
Key aims of SMCR are to:
- Encourage financial services staff to take personal responsibility for their actions
- Ensure that people understand and can demonstrate the different roles and responsibilities staff have in a firm
- Improve conduct throughout the sector.
The original legislation covering SCMR did not cover solo-regulated firms.
It replaced APR for banking firms in 2016.
However, the Financial Services Act 2016 made certain changes which have meant that the FCA has extended SCMR requirements to cover all firms the FCA authorises.
Therefore, from December 2019, SCMR applies to all FCA-regulated firms, including:
- Firms regulated by the FCA only
- Insurers dual-regulated by the FCA and the Prudential Regulation Authority (PRA)
- UK banks, building societies, credit unions.
SCMR also applies to foreign banks operating in the UK, and larger investment firms that are FCA and PRA regulated.
SCMR covers senior managers that perform senior management functions.
These replace the significant influence functions under the APR regime.
Senior managers will need FCA approval to carry out these functions.
Under SCMR requirements, each senior manager must follow a statutory duty of responsibility.
However, if a firm breaches a FCA requirement, then the senior manager responsible for that particular area can be held personally accountable.
This applies if they are found not to have taken reasonable steps to prevent or stop the breach from occurring.
Other staff, not designated as senior managers, are covered by the certification regime part of SMCR.
This applies to staff who are not senior managers, but who have roles which mean they could cause significant harm to their firm or its customers.
Firms must certify that these individuals are fit and proper to perform their specific role or function. This certification should be completed initially upon hiring individuals, and must then be repeated annually.
Why Must Firms Register Individual Advisers?
Given that the main point of SMCR is to put greater emphasis on individual responsibility and accountability, it follows that firms must register individual advisers who will usually be considered to be in a significant harm role, under SMCR requirements.
The FCA will publish and maintain a directory of these certified individuals.
Previously, firms only had to register the details of senior managers, but this has now changed.
Registering certified individuals on the FCA directory will enable any interested parties, including consumers, to check the details of these key people working in financial services.
Consequently, firms must submit data for certified and assessed individuals to the FCA correctly.
These can be single or multiple entries, but they must cover each individual concerned.
These certified and assessed individuals must include:
- All certified staff, which means those staff covered by the SCMR certification regime
- Executive and non-executive directors not performing senior manager functions (SMFs)
- Other individuals who are sole traders or appointed representatives (ARs)who carry out business requiring qualifications.
The information the FCA publishes about these individuals includes:
- Their name, and any previous names
- Roles, including start and end dates, and
- Activities each listed individual carries out.
Where an individual adviser has a customer-facing role that requires qualifications, their registration must also include their methods of customer engagement, a workplace location (if relevant), and memberships of professional bodies.
What Happens Once Someone is Registered?
Once an individual adviser is registered, this information becomes publicly available through the FCA’s directory.
Firms must make sure they maintain the data of these entries accurately. Failure to keep details up to date could put them in breach of the FCA’s reporting rules.
Currently, solo-regulated firms have until 31 March 2021 (extended from December 2020) to submit data to the FCA for the directory of key people working in financial services.
Maintaining these directory listings will be an annual requirement for firms.
The deadline is looming, and therefore firms should:
- Identify individuals who are performing certification functions
- Develop and apply an assessment process
- Submit certified individuals for entry on the FCA directory.
Richdale can help you steer your way through the new SCMR requirements, providing you with the support and advice you need to make sure your firm is fully compliant.
For more details, get in touch today.