Consultant Zone

Senior Managers and Certification Regime (SM&CR) Update

With the legislation over six months old, a review has been commissioned by the Financial Conduct Authority (FCA) and some significant changes have been proposed. The FCA is now seeking feedback on new regulations that will extend the oversight responsibilities placed on senior executives and non-executives at UK banks and insurance companies.

A number of the proposals concentrate on extending the conduct rules, which previously applied to individuals who held a ‘Controlled Function’ approval, to all non-executive directors (NEDs). Chairman and NED roles will now be designated as Senior Management Functions (SMFs). This will create more accountability for boardroom decisions and they will need to show an increased understanding of key business and strategic activities and their associated risks. The thinking behind this appears to be that the FCA feels that many prescribed responsibilities may not have been allocated to the most senior and/or most appropriate individuals within a company. They feel that consideration should be given to ensure the correct senior personnel are chosen to carry out the function, to ensure that enough clarity has been provided to determine whether the responsibility should be shared or divided.

Management Responsibility Maps (MRMs) have also come under the microscope, as some firms have only provided limited details on their governance arrangements. More clarity is required on reporting lines, committee structures and memberships and interaction with group governance arrangements. The FCA has also indicated that some statements of responsibility have been seen to be inconsistent with the MRMs; responsibilities have been limited and without clarity.

Andrew Bailey, Chief Executive of the FCA, said: “Generally, we have observed that firms are taking their responsibilities seriously and have broadly got the regime right. But we recognise culture change takes time and there is still more to do. So we have to keep a watchful eye on the progress firms are making.”

Although the overall message from the FCA is positive, it is important that those firms who will become subject to the regime in 2018 are keeping up to date with the directives. As a review firm, we continue to promote these updates, as it is essential that the directives from the SMR are soundly embedded in businesses as early as possible. We continue to help forward thinking companies with process and procedure reviews in all aspects of regulatory compliance.