Preparing for the SMCR: Timeline and checklist
Authors: Sarah Leslie
The Senior Managers and Certification Regime (SMCR) will apply to all Financial Conduct Authority (FCA) solo-regulated firms from 9 December 2019. In the second of her series of four articles, Sarah Leslie provides a checklist of the key steps that firms must take to prepare for its arrival, and the timeline.
On 9 December 2019, the SMCR will replace the Approved Persons Regime for all FCA solo-regulated firms. A similar version of the SMCR has been in place for banks since March 2016, and for insurers since December 2018.
The SMCR is slightly different for solo-regulated firms, which can range from dentists with credit facilities to multi-national asset managers. Given the diverse nature of these firms, to ensure that the SMR is applied proportionately the FCA decided to separate them into three tiers: limited scope, core and enhanced.
This timeline and checklist focuses mainly on the requirements applicable to core and enhanced firms.
Timeline and summary of key tasks
- Preparatory work - decisions to be taken and processes to be designed in advance of 9 December 2019
- Assign tasks among project team to ensure that regulatory risk/compliance, people/human resources, and governance/company secretarial teams are all involved and aware of their responsibilities.
- Decide which senior management functions (SMFs) should be assigned to which senior manager.
- Decide which staff need to be certified.
- Define initial, annual and ad-hoc (in case of disciplinary issues) fitness and propriety processes, as well as escalation and appeal routes.
- Define breach-reporting process, and consider impact on disciplinary process and fitness and propriety process.
- Draft updates to policies including disciplinary, compliance training, screening/verification and remuneration.
- Define process for changing statements of responsibilities.
- Design tailored training on SMFs for senior managers and on the conduct rules for certified staff.
- Draft updates to contracts of employment.
- Draft updates to termination documentation clarifying document retention (and access by senior managers) for the purposes of FCA investigations.
- Tasks to be completed prior to 9 December 2019
- Draft statements of responsibilities for each senior manager and ensure that these are joined up and do not leave any gaps where responsibilities for a particular area are unclear.
- Assess intended senior managers for fitness and propriety.
- Register SMFs with FCA.
- Deliver tailored training on SMFs to senior managers, and on conduct rules to certified staff.
- Provide training to HR team and line managers on requirements of regulatory references.
- Issue updated contracts of employment.
- 9 December 2019: Deadline for all SMFs to be registered and certified staff identified.
- Between 9 December 2019 and 8 December 2020:
- Carry out annual fitness and propriety assessment process for certified staff and senior managers.
- Upload information on certified staff to the directory.
- Design and deliver tailored training to conduct rules staff on conduct rules.
- 9 December 2020: The directory - information about certified staff publically available.
- Ongoing:
- Initial and annual certification and fitness and propriety assessment.
- Conduct rule breach-reporting obligations.
- Maintenance of senior managers' statements of responsibilities.
- Updating of directory.