The Senior Managers and Certification Regime (“SM&CR”) is part of the UK regulators’ drive to improve culture, governance and accountability within financial services firms. It aims to deter misconduct by improving individual accountability and awareness of conduct issues across firms.
Banks and PRA-designated investment firms have been subject to the SM&CR since March 2016. On 10 December 2018 the SM&CR was extended to cover all PRA- and FCA-regulated insurance and reinsurance firms. The Financial Conduct Authority (“FCA”) is extending SM&CR to all FSMA authorised firms on 9 December 2019. Under the new regime, all senior managers must have a Statement of Responsibilities and additionally, firms that qualify as ‘enhanced firms’ under SM&CR must have a statements of responsibilities map.
The FCA are currently looking at guidance around FCA solo-regulated firms preparing for SM&CR. Their proposed guidance (available here) sets out practical assistance and information to firms preparing statements of responsibilities and responsibilities maps. The FCA opened a consultation period on this guidance at the end of last year which is now closed. The FCA plan to issue a response in the coming months.
Since the FCA published the policy statement to extend the SM&CR to insurers, there has been uncertainty as to whether administrative functions would be in scope of the client dealing function in the certification regime. The client dealing function covers roles that include dealing in, or arranging investments with, retail and professional clients. It also includes individuals giving financial advice in relation to designated investment business, or acting in the capacity of an investment manager. At the end of 2018 in response to this uncertainty, the FCA stated that it is their intention to consult on clarifying the scope of the function and make final rules before December 2019, ahead of commencement date for solo-regulated firms.
Although the SM&CR does not come into force until December 2019, firms should be considering senior management roles and responsibilities of such persons and should also ensure that human resources and compliance processes are in place to comply with the letter as well as the spirit of SM&CR.
For more information on or any guidance or advice in relation to SM&CR, Cleveland & Co external in-house counsel, your specialist outsourced legal team are here to help.