Senior Managers and Certification Regime

The Senior Managers and Certification Regime (SMCR) replaces the Approved Persons Regime, changing how people working in financial services are regulated.

Aim of the SMCR

The aim of the Senior Managers and Certification Regime (SMCR) is to reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct and competence.

As part of this, the SMCR aims to:

encourage a culture of staff at all levels taking personal responsibility for their actions
make sure firms and staff clearly understand and can demonstrate for what activities they are responsible

Who does it apply to

Solo-regulated Firms

Solo-regulated firms are those regulated by the FCA only. If your firm is currently regulated under the Approved Persons Regime, this will be replaced by SMCR from 9 December 2019

Insurers

Dual-regulated insurers are those regulated by both the FCA and PRA. The SMCR replaced the revised version of the Approved Persons Regime and the PRA's Senior Insurance Managers Regime from 10 December 2018

Banks

The SMCR already applies to UK banks, building societies, credit unions, branches of foreign banks operating in the UK and the largest investment firms regulated by the PRA and the FCA. Some changes have been made to the SMCR for the banking sector which was published on the 4 July 2018

The FCA has also published information on how the SMCR regime would apply to them and how this would work.

Why regulations are changing

In response to the 2008 banking crisis and significant conduct failings such as the manipulation of LIBOR, Parliament set up the Parliamentary Commission for Banking Standards (PCBS) to recommend how to improve standards in the banking sector.

PCBS recommended a new accountability framework focused on senior management. It also recommended that firms take more responsibility for employees being fit and proper, and that there be better standards of conduct at all levels in banking firms.

Based on these recommendations, Parliament passed legislation in December 2013, leading to the FCA and Prudential Regulation Authority (PRA) applying the SMCR to the banking sector. Parliament made further changes to legislation in May 2016, requiring regulators to extend the regime to all FSMA authorised firms.

To aid firms in their implementation process, the FCA has produced a guide for solo-regulated firms, The Senior Managers and Certification Regime: Guide for FCA solo-regulated firms. This guide summarises the application of the SMCR and is a good starting point for firms, providing sign posts to areas of the FCA Handbook for further reading. However, the FCA states that the guide does not substitute reading the Handbook rules and guidance, and where the rules and guidance conflict with the guide, the rules and guidance take precedence.

Timeline

The implementation date for solo-regulated firms is 9 December 2019, subject to commencement regulations to be made by HM Treasury.

The Conduct Rules will apply to Senior Managers and Certification Staff by the 9 December 2018. However, firms have a 12-month transitional period in which to complete the certification process for existing Certified Staff and to train most other staff on the Conduct Rules. This process must be completed by 9 December 2020 from when the Conduct Rules will apply to other Conduct Rules staff.

Public Directory

The FCA has also launched a consultation (CP18/19) on a Directory to help consumers and firms check the status and history of individuals working in financial services. The proposed Directory will include:

those who hold Senior Manager positions requiring FCA approval;
those whose roles require firms to certify that they are fit and proper under the Certification Regime;
non-Senior Manager Function (SMF) Directors; and
sole traders and appointed representatives where they are undertaking business requiring qualification in their capacity as an individual.

CISI Response to this (link to response).

Key publications:

All FCA policy statements, quarterly publications and Consultation papers can found here.

SMCR Conduct Rules Toolkit

The CISI has created a SMCR Conduct Rules toolkit which is aimed to help individuals gain a better understanding of the FCA's Individual Conduct Rules.

This includes the extension of the FCA's Conduct Rules to all staff within affected firms, other than 'ancillary staff'(e.g. cleaners, caterers, security guards) and, likely, most CISI members based in the UK will therefore be expected to adhere to the five Conduct Rules.

View the SMCR toolkit

CPD Events

We offer an extensive programme of events in London, regionally and internationally. These events keep you up to date with the latest insights and developments in financial services and allow you to network with like-minded professionals to build your professional network.

View events on the SMCR