Independent review and analysis

Senior Managers and Certification Regime (SM & CR) – individual accountability

The extension of the SM&CR is on the horizon and having discussed the effect on firms in our previous note, we now explore the effect on individuals. The new regime will replace the Approved Persons Regime currently in place and it is essential that individuals affected by the changes understand what they are going to be responsible and accountable for.

The new regime is designed to drive improvements in standards across the financial services market place. The extension is made up of three parts; first is the Senior Managers Regime, where the employees who fill key roles, identified as ‘senior management functions,’ will need FCA approval before they start their roles and will inherit a duty of responsibility. The senior functions will be pre-defined by the regulator and each senior manager will need to submit to the regulator a statement of responsibilities, identifying clearly what they are responsible and accountable for.

The second part is the Certification Regime, covering people who may not be identified as senior managers, but are responsible for functions that by their very nature, could harm the firm or its customers. These are to be labelled ‘certification functions’ and whilst not needing FCA approval, will need firms to formally certify their ability to fulfil their roles annually.

The third part is the new Conduct Rules section, applying high level standards of behaviour that need to be adopted by firms and their employees. This will require significant input from a training perspective and will need to be embedded in firm’s policies and personal development plans.

Clearly, any regulated firm will have to give serious thought to their governance, current structures and individual responsibilities to ensure they comply with the new legislation. Larger firms will also need to adopt a more robust approach, by setting out responsibility maps and carrying out annual suitability declarations relating to each senior manager.

We would encourage the individuals who may be affected by these changes to make themselves aware of the potential impact on their job roles and responsibilities by keeping up to date with the legislative changes. We are already working with several firms helping them put individual plans in place. If you wish to discuss any of these matters, please get in touch.

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