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SMCR duty of responsibility – introducing ‘SMCR EFFECT’

The Senior Managers & Certification Regime (“SMCR”) has been designed by UK regulators to make individual personnel specifically accountable for problems that firms experience. Failure to give effect to the SMCR could make a firm and its managers liable for regulatory sanctions, which could include personal fines and bans from holding senior roles or working in the financial services markets.

‘SMCR: EFFECT’ is a unique legal services offering that enables FCA-regulated firms to give effect to the SMCR rules and to manage the potential HR and employment law consequences.

We have developed a menu of services – summarised below – to cover all phases and aspects of implementing and embedding SMCR before the deadline of December 2019, and to maintain and evidence ongoing compliance afterwards.

The services can be purchased individually or within a bespoke set or series. Working alongside your existing compliance, legal and HR functions and advisers we can provide advice and training ‘face-to-face’, remotely and/or in writing.

We can also help prepare materials for SMCR-related policies and procedures, using our own templates or assisting with a firm’s existing drafts.

As we are a law firm we are able to advise under privilege, which enables clients to provide instructions, and receive advice, on a full, frank and confidential basis.

In deciding which of our services to select, consider how advanced your existing work is on:

  • the SMCR’s effects on your governance and employee reporting and conduct management systems;
  • your ability to demonstrate that those systems will continue to take full account of the SMCR; and
  • your ability to manage the production and potential amendment of your former employees’ references – for up to 6 years after they’ve left your firm.

Download our top 10 SMCR tips

We are a full service law firm, with over 500 lawyers advising clients across commercial, industrial and public sectors, including insurance and financial services. We have a comprehensive and detailed matrix of services and prices for SMCR: EFFECT, key examples and work streams from which are below.

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 approval 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

Download our pricing structure

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 >