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SMCR duty of responsibility – introducing ‘SMCR EFFECT’

Introduced by the Financial Conduct Authority (FCA), the Senior Managers & Certification Regime (SMCR) has the potential to affect approximately 47,000 financial services firms in the UK. Failure to comply could have significant consequences for both organisations and individuals – but SMCR implementation is made easy with Browne Jacobson.

Our team of highly trained SMCR regulatory and insurance lawyers have developed a comprehensive matrix of services to help FCA-regulated firms abide by SMCR regulation and manage HR and employment law consequences. Known as SMCR EFFECT, our robust SMCR solution covers every phase and aspect of the FCA SMCR regulation, to give you the confidence you need moving forward.

What is SMCR?

The SMCR is a regulatory framework for the behaviour and accountability of key personnel at financial services firms. Replacing the Approved Persons Regime, the ruling is being rolled out in stages and has been in force for large banks and insurance firms since March 2016. It will be extended to cover all FCA-regulated financial services firms from the 9th of December 2019, with ongoing requirements thereafter.

The SMCR arose from the global financial crisis in order to provide more prescriptive regulation on employee conduct and competence, reduce harm to consumers, and improve market reliability.

What do businesses need to do to comply with SMCR regulation?

In short, businesses will need to work with UK regulators to demonstrate robust control processes and highlight individual responsibilities in detail and whenever updated. SMCR implementation will have a significant impact on management, compliance, HR and technological processes for all FCA-regulated firms.

Senior managers in particular will need to undertake SMCR training courses in preparation for taking on a greater level of risk by becoming solely responsible for their teams.

For more information on SMCR requirements, see the FAQs at the bottom of this page, view our top 10 before-and-after SMCR tips, or get in touch with our expert SMCR legal team.

What are the consequences of not complying with SMCR?

Failure to meet the necessary standard could make a firm and its managers liable for significant regulatory sanctions, which could include personal fines and bans from holding senior roles or working in the financial services markets.

When dealing with a matter of such legal importance, it is important to partner with a legal firm that understands the finer details. Thankfully, our expert SMCR regulation team is on hand to guide financial organisations and professionals safely and smoothly into this new era.

How Browne Jacobson can help – with SMCR EFFECT

Introducing SMCR EFFECT. In response to the FCA’s strategy to establish greater personal responsibility in financial services, we’ve put together a unique legal services offering to enable FCA-regulated firms to give effect to the SMCR rules and manage changes to internal processes.

Our SMCR toolkit provides comprehensive support through each stage of SMCR implementation and compliance - both before the December 2019 deadline and beyond.

We understand that every firm is different, which is why our SMCR EFFECT services can be offered individually or within a bespoke set. We’ll work in harmony alongside your existing compliance, legal and HR functions and personnel to provide the level of advice and training you need, be it remotely or in writing.

Our experienced team can also assist in preparing materials for your company’s policies and procedures, such as your SMCR policy statement. This could mean using our own templates or bolstering your existing drafts. And as a leading national law firm, we can advise under privilege - which enables you to provide instructions and receive advice on a full, frank and confidential basis.

SMCR EFFECT services and prices

Our exhaustive SMCR solution readies firms for the commencement of the regime and ongoing compliance. Key examples and work streams include:

  • Strategic planning for SMCR implementation: From £600 for a personal presentation to a maximum of £1,500 for a written advice
  • Creating new, or stress-testing current, polices, procedures and materials: From £600 for a skills gap analysis, to a maximum of £2,500 for a written advice on preparing employment contracts and applications to the FCA for individuals to take up senior manager functions (SMF Applications)
  • Responding to FCA challenges to SMF Applications: Up to a maximum of £3,500 for a complete overhaul of a firm’s own previous application
  • Template training modules on SMCR: Up to a maximum of £1,500 (bespoke training can be prepared and presented with specifications agreed)
  • Upgrading board reporting and re-casting HR processes to evidence embedding of SMCR: Up to a maximum of £2,500 each

You can view a detailed matrix of our SMCR EFFECT services and prices by downloading our pricing structure.

Why choose Browne Jacobson?

As a full-service national law firm with vast experience and expertise in managing risk in the insurance sector, we make the process of SMCR implementation easy. We have a track record of providing tailored support for every one of our clients, and can apply this approach to establish the best actions for your firm in light of the SMCR regulation.

Our insurance team has been recognised as a ‘go-to’ firm by leading broker networks, securing tier 1 rankings in Legal 500. With offices situated in Nottingham, Birmingham, Manchester, London and Exeter, we are well-placed to support financial firms across the UK.

Get in touch today to find out more about how our SMCR EFFECT services can help your firm make a smooth transition and maintain an ongoing standard.

Frequently asked questions

SMCR should be embedded by 9 December 2019 for asset and wealth management firms and the Conduct Rules will apply from then to all Senior Managers and Certification Staff. These companies should already be developing their SMCR strategy and building their change programmes.
Currently SMCR applies to the banking sector and has been integrated as a means to create greater individual accountability of those working within financial institutions. It is likely that SMCR will have a substantial impact on HR processes for regulated firms. It will change the risks for those individuals working in senior management positions as they will become solely responsible for their team. It will change the way that they manage their team and even the company values.
Approximately 47,000 financial services across the UK will be affected by SMCR from 9 December 2019. However, SMCR does apply to any employee who has an effect on the firm and its customers in a negative way.
Failure to comply with SMCR could make a firm and its managers liable for regulatory sanctions. This could mean personal fines and bans from holding senior roles to not working in the financial services markets at all.
The Senior Managers and Certification Regime (SM&CR) replaces the Approved Persons Regime, changing how people working in financial services are regulated. SMCR has been in force for banks, building societies, credit unions and PRA-designated investment firms Relevant Authorised Persons (RAP) since March 2016. It is due to be extended to cover all Financial Conduct Authority (FCA) solo-regulated financial services firms from 9 December 2019.
SMCR has been introduced due to the banking crisis. Parliament advised that the FCA implement a new strategy for all financial services to establish a greater personal responsibility regime. The implementation of SMCR will have significant impact on management, compliance, HR and technological processes for all FCA regulated firms. Its aim, as outlined by the FCA, is to reduce harm to consumers and strengthen market reliability, as well as restore confidence in the industry by making individuals accountable for their conduct and competence.
Businesses need to act with due care, skill and diligence. They must be open to working with the FCA, PRA and other regulators. Businesses will also have to demonstrate robust control processes that highlight their responsibilities. It is not a tick boxing exercise but rather showing a standard.  It is about staff members at all levels taking responsibility for their actions, making positive changes to cultures and behaviours to deliver good customer outcomes.
Under the new SMCR rules, regulated firms have a responsibility to write down and notify the FCA exactly who in their companies is specifically responsible for what. It has been designed by UK regulators to make individuals specifically liable for problems and issues that firm’s experience.

There are external providers offering compliance training courses. Under SMCR, Senior Managers will continue to require approval from FCA before they are appointed to their role.

Each senior person must have their role and responsibilities clearly defined and documented in a formal Statement of Responsibilities, which must be kept up-to-date and re-issued to FCA whenever it significantly changes.

FCA has defined specific ‘Senior Manager Functions’ and ‘Prescribed Responsibilities’ which must be allocated to appropriate Senior Managers.

For some Firms, there is a more rigorous set of requirements, called the ‘Enhanced Regime’, which obliges them to also create and maintain a ‘Management Responsibilities Map’ that clearly defines how the firm’s governance arrangements work, in practice. They must also ensure that a Senior Manager has ‘Overall Responsibility’ for all activities of their firm – in many firms this will be the CEO.

The Responsibility Maps and Statements of Responsibility (along with relevant supporting evidence) must be version controlled and retained as formal records by all firms, for as long as necessary.

Approximately 47,000 financial services across the UK will be affected by SMCR on 9 December 2019.
It is important to be partnered with a law firm who understand SMCR in great detail and know how to implement this for a business. We will take care of any key tasks for you so that you are ready for commencement of the regime.

The final guidance aims to help all FCA firms clearly set out Senior Managers’ responsibilities through SoRs. ‘Enhanced’ firms will also be able to use it to produce Responsibilities Maps which show how their firm is managed and governed.

The guidance builds on the information we published in the SM&CR Guide for solo-regulated firms.

Read the final guidance here >