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.