FCA and BoE Launches Joint Review of Senior Managers and Certification Regime

The Financial Conduct Authority (FCA) has launched a review of the Senior Managers and Certification Regime (SMCR) in collaboration with The Treasury and Bank of England (BoE). The regulator has published a discussion paper seeking feedback on the rules, as part of the Edinburgh Reforms announced in December 2022. The SMCR is the key individual accountability regime that aims to reduce harm to consumers and strengthen market integrity. Introduced in 2016, the regime has faced criticism for its slow pace of certification. The discussion paper will assess the effectiveness of the regime and explore whether any changes need to be made to streamline it.

Purpose of the Review

The purpose of the review is to ensure that the SMCR is fit for purpose and is helping firms to improve conduct and strengthen individual accountability. The review will assess the effectiveness of the SMCR since its introduction and whether any changes are necessary to streamline the process and increase accountability. The FCA and other bodies want to understand whether the action already taken to address certification delays is still working, and if not, what can be done to improve it.

Key Questions in the Discussion Paper

The discussion paper raises a number of questions listed as follows:

  1. To what extent do you agree or disagree that the SMCR has made it easier to hold individuals to account?
  2. To what extent do you agree or disagree that the SMCR regime has improved safety and soundness and conduct within firms?
  3. To what extent do you agree or disagree that the fitness and propriety requirements support firms in appointing appropriately qualified individuals to senior manager roles?
  4. Please provide any suggestions that can help ensure that appropriately qualified individuals are not deterred from taking up relevant senior manager roles.
  5. To what extent do you agree or disagree that the SMCR has made it easier for firms to hold staff to account and take disciplinary action when appropriate against them?
  6. To what extent do the specific accountabilities of individual directors established by the senior managers regime work in ways that complement the collective responsibility of the board of directors or decision making committees? Are there ways this could be improved?
  7. To what extent do you agree or disagree that the prospect of enforcement promotes individual accountability?
  8. How could our approach to enforcement be enhanced to better support the aims of the SM&CR?
  9. To what extent do you agree or disagree that the scope of the SM&CR is appropriate?
  10. Are there actions the regulators could take in respect of the SM&CR that would help enhance competition or international competitiveness?
  11. To what extent do you agree or disagree that the SM&CR is applied proportionately to firms and individuals?
  12. How could the process for SMF approvals be further improved?
  13. To what extent to do you agree that the process for obtaining criminal records and notifying these to the regulators is effective in supporting the aims of the SM&CR?
  14. To what extent do you agree or disagree that the 12-week rule sufficiently helps firms to manage changes in SMFs?
  15. To what extent do you agree or disagree that the regulators have in place:
    1. an appropriate set of Senior Management Functions to achieve the aims of the SM&CR?
    2. an appropriate set of Prescribed Responsibilities to achieve the aims of the SM&CR?
  16. To what extent does the Duty of Responsibility support:
    1. personal accountability?
    2. better conduct of Senior Managers?
  17. To what extent do you agree or disagree that Statements of Responsibilities and Management Responsibilities Maps help to support individual accountability?
  18. To what extent do you agree or disagree that the Certification Regime is effective in ensuring that individuals within the regime are fit and proper for their roles?
  19. Regarding the Directory of Certified and Assessed Persons, to what extent do you agree or disagree that:
    1. it captures the appropriate types of individuals?
    2. the requirements for keeping it up to date are appropriate?
  20. To what extent do you agree or disagree that regulatory references help firms make better-informed decisions about the fitness and propriety of relevant candidates?
  21. To what extent do you agree or disagree that the Conduct Rules are effective in promoting good conduct across all levels of the firm?
  22. Are there other areas, not already covered in the question above, where you consider changes could be made to improve the SM&CR regime?

The discussion paper is open for feedback until 1 June 2023.

Importance of the SMCR

The SMCR is an essential part of the regulatory framework for financial services. It is intended to strengthen individual accountability, improve conduct, and increase market integrity. It was introduced in response to the financial crisis, which highlighted the need for greater individual accountability within financial institutions. The regime aims to ensure that senior managers and certified individuals are responsible for their conduct and that firms are held accountable for the actions of their employees. By increasing accountability, the SMCR is expected to reduce the risk of misconduct and improve overall market integrity.

How Can Complyport Help?

If this article has raised any questions about the proposed review of the SMCR following the government’s Edinburgh Reforms, or you think your firm may require assistance, please contact Jan Hagen via jan.hagen@complyport.co.uk to book a free consultation.

About Complyport

Complyport is a market leading consulting firm supporting the UK financial services industry for over 20 years. We specialise in providing Governance, Risk and Compliance services to support the regulated financial services industry to raise standards and thrive.

Complyport advises and assists firms to become authorised and to comply with the rules and requirements of regulators on an ongoing basis. Our vision is to be there for our clients every step of the way, helping them change, grow, and excel through expertise, insight, and innovation, and in so doing to become our clients’ most valued supplier and trusted advisor. We have successfully assisted over 1000 firms to become authorised with the FCA and EU and are providing regulatory support to over 600 regulated firms on an ongoing basis globally. With presence in the UK and EU, as well as via our Associates Network, Complyport can assist firms across multiple jurisdictions.

We specialise in supporting the UK financial services industry with compliance guidance, advice and best practice including support with:

  • Consumer Duty implementation advice
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  • Prudential support, IFPR, ICARA and financial resilience advice
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Contact our Head of Regulatory Business Solutions, Jan Hagen via email at: jan.hagen@complyport.co.uk to book a free consultation.

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