The Senior Managers and Certification Regime is Less Than Two Months Away. Are You Ready?

The Senior Managers and Certification Regime (SM&CR) will replace the current Approved Persons regime on December 9, 2019 and is the biggest change in the regulation of individuals in recent history. The new regime aims to improve culture across the financial services industry and strengthen individual accountability.

There will be a conversion process to grandfather across individuals who are currently approved in Controlled Functions to the appropriate new Senior Management Functions. However there are still a number of steps that firms need to take in order to be compliant with the new regime.

We therefore remind firms of the key actions they need to take before December 9 (implementation date) in order to be compliant.

(Please note that this list is not meant to be exhaustive or take into account business as usual or actions needed after December 9, 2019.)

Actions for Limited scope, Core and Enhanced firms

  • Establish whether you are a Core, Limited Scope or Enhanced firm
  • Determine whether you intend to voluntarily “opt up” (e.g. from Core to Enhanced)

    • Form “O” will need to be submitted by November 24, 2019 
  • Brief Senior Managers on the new regime and the impact on them as individuals
  • Review and assess current governance arrangements to see whether changes need to be made in preparation for SM&CR
  • Agree population of Senior Managers, Certified Staff and Conduct Rules Staff
  • Review current approved persons, assess how they will be grandfathered to Senior Management Functions and make any necessary changes before the implementation date.  (Note that conversion will happen automatically for Limited scope and Core firms. Enhanced firms will need to make notifications – see below.) Ensure your firm’s details are correct.
  • Assess whether your Firm has a Chair. These will not convert automatically for Limited scope and Core firms. Firms will need to submit forms to notify the FCA where they have either Non-Executive directors or Directors who will become Chairs.

    • For a Non-Executive Chair a Form K needs to be submitted by November 24, 2019 (which is available now on Connect)
    • If the firm is going to have an Executive Chair a Form A should be submitted. 
  • Allocate and agree appropriate Prescribed Responsibilities to Senior Managers. (This does not apply to Limited Scope firms).
  • Identify other aspects of the business that are relevant for your firm for which responsibilities need to be allocated, covering both regulated, operational and support activities.  Allocate other responsibilities for areas which are relevant for your firm’s business to Senior Managers. (This only applies in a limited way for Enhanced firms, who need to allocate Overall Responsibilities instead – see below.)
  • Draft, agree and finalise Statements of Responsibilities for each Senior Manager
  • Undertake Fit and Proper Assessments for Senior Managers and Non-Executive Directors. (Assess how the Fit and Proper requirements apply if you are a Limited scope firm.)
  • Develop a Reasonable Steps framework for Senior Managers across the firm
  • Deliver Conduct Rules Training for Senior Managers and Certified Staff
  • Produce internal procedures for SM&CR, making sure they cover the requirements for Senior Managers, Certification Regime, Conduct Rules, Fitness and Propriety Checks (including Regulatory References) and update existing procedures where necessary, for instance recruitment or annual appraisal procedures. 

 

Additional Requirements for Enhanced Firms

There are more Senior Management Functions, Prescribed Responsibilities and additional requirements for Enhanced firms. The process for conversion is also different. Therefore we remind Enhanced firms of the actions required, in addition to the above, before 9th December.

  • Every business area, activity and management function must be allocated to a Senior Manager as an Overall Responsibility
  • Prepare Handover Procedures
  • Develop a Responsibilities Map
  • For conversion, enhanced firms must submit the following to the FCA by November 24, using the Connect system:

    • Form K, notifying the FCA which approved persons should be converted to a mapped Senior Management Function
    • A Responsibilities Map
    • A Statement of Responsibilities for each Senior Manager

Please note that if an Enhanced firm fails to submit their Form K by the deadline, the existing approved persons will not be converted across for the new regime and the Firm will have no approved Senior Managers, which is a breach of the FCA rules.

Conclusion

If you have not yet started preparing for SM&CR you need to start now – but try not to panic!

If you would like help with implementation of this new regime, we have developed a toolkit for firms to use to enable them to implement it themselves. It is user friendly and will save firms a considerable amount of time. The toolkit comprises the following:

  • SM&CR Guide which gives an overview of the regime and of the toolkit
  • Project plan which contains all the necessary steps up to implementation date and beyond
  • Grandfathering and Mapping Tracker, to help firms plan for the conversion process
  • SM&CR Handbook, which covers all relevant aspects of SM&CR, which firms can use for guidance during implementation and can adopt for their internal SM&CR procedures for business as usual
  • A number of templates including for instance Fitness and Propriety questionnaires and assessments, checklists for joiners and leavers, Senior Manager documents to cover reasonable steps, key controls and declarations covering their obligations. These will help firms adopt a consistent approach to SM&CR. There are also trackers to use as a monitoring tool for SM&CR and highlighting any outstanding issues or processes for business as usual

We would also be delighted to assist you with your implementation project, undertake a review of the work you have done for SM&CR, deliver training or provide ad hoc advice. For more information, please click here.

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