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What advisers can learn from new banking regulation

A look at the important take-aways from the senior manager regime’s previous implementation for those beginning their own preparations

The forthcoming extension of the Senior Managers & Certification Regime represents the next major regulatory change that gets to the heart of a firm’s culture, governance and operational considerations.

SM&CR implementation will not be a one-time activity. The regulations are designed to be iterative and to evolve as your business does.

To ensure you are meeting the FCA’s expectations from day one, it is important to allow enough time to establish, review and refine your approach ahead of the December deadline.

But SM&CR is not entirely new territory and the most proactive firms are looking to the banking sector to streamline their implementation roadmap. Below are the most important take-aways.

Senior manager buy-in
The laser-focus on individual accountability is one of the defining features of SM&CR, particularly at board level and across a firm’s senior management.

This will help ensure all senior managers are aware of the impact of the regime and their individual responsibilities.

FCA shows IFAs how duties might be split under senior managers regime

Achieving management buy-in from the outset helps demonstrate to the regulator that the firm has a strong commitment to robust governance and helps to ensure a smoother transition.

Firms that can demonstrate this from the outset are also likely to benefit from a better relationship with the regulator, with a lower level of scrutiny.

While senior management buy-in is an important and necessary first step for all firms, it is particularly crucial for groups and global matrix firms because the regime will impact all those with oversight of areas of the business, not just those based domestically.

Early analysis and preparation
Identifying which employees come under the various parts of the regime, and to what extent, is not a quick, straightforward process.

The more time devoted to this exercise, the higher the likelihood of success as it will provide an adequate period to review and refine the approach ahead of the implementation date.

Once the necessary individuals have been identified, the relevant documentation, including statements of responsibilities, needs to be prepared.

Engaging with affected individuals as early as possible will ensure they are involved throughout and provide adequate time to address any concerns or challenges that might arise.

It is important to engage colleagues from both the HR and compliance teams at this early stage to ensure that the implementation plan meets the requirements from the outset. Not involving either of these departments from this point leaves firms open to confusion and issues down the line, even resulting in potential implementation delays.

Governance
As one of the central pillars of the regime, governance is an area firms need to devote significant time to reviewing and considering in light of the changes.

Going forward, SM&CR will be one of the FCA’s primary tools for monitoring firms’ governance and culture, and we expect this focus to continue for the foreseeable future.

Compliance tip: How to avoid senior managers regime traps

The majority of firms are not set up with overlapping roles, job descriptions or prescribed responsibilities in the same way as SM&CR. These grey areas require detailed consideration to ensure there are no gaps in oversight.

The most successful examples of SM&CR implementation we have seen have been where governance structures are not only reviewed and amended to meet the new requirements, but where the processes surrounding regulatory reporting are also considered and amended to ensure they effectively evidence a firm’s compliance with the regime.

Training and awareness
Employees are essential in driving and embedding change across an organisation.

Successful firms engage and empower their staff, with clear communication to avoid confusion and address any concerns.

This is also supported by comprehensive, tailored training and competency programmes to ensure ongoing compliance.

Business as usual
Rather than reinventing the wheel unnecessarily, existing policies and procedures have formed the foundations of SM&CR in many businesses.

On top of these, new systems and controls are then developed as necessary to fill any gaps.

This can help to reduce the overall implementation time and also decrease the learning curve for employees.

Don Scott is technical director at TCC

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