Keeping up momentum is key, even if the December deadline seems some way off
As firms step up their Senior Managers and Certification Regime project activity, challenges facing HR and compliance functions are becoming apparent; not least the question of resource, and competing priorities for what is a finite resource at most firms.
Some firms are bringing in specialists on short-term contracts to assist with the workload, while others, particularly medium and large businesses, are seconding resource from departments elsewhere to undertake everyday tasks while their HR and compliance experts focus their efforts.
Statements of responsibility
Most firms should be beginning to prepare the initial drafts of statements of responsibility. A template will include:
- Senior management function(s);
- Prescribed responsibilities as required by the regulator;
- Other responsibilities held by the individual;
- Additional information, such as how a responsibility may be shared and the individual’s wider job role.
From experience, there may need to be a few iterations of the SoR, particularly if some roles are shared.
When allocating an individual a senior management function, make sure they have the necessary authority within the business to deliver all elements of their SoR.
When allocating prescribed responsibilities, do not leave any areas with unclear accountability, and keep reporting lines to senior managers as simple as possible.
Even in smaller firms, try not to concentrate all the prescribed responsibilities on one person.
This may be easier said than done, but consider how allowing one individual too high a degree of control of the business could be seen as a problem.
The regulator is not necessarily expecting firms to appoint more senior managers than they have current approved persons. However, where you do identify senior managers who are not currently approved persons, gain approval wherever possible under the approved persons regime in order for them to smoothly transition into the SMCR on 9 December.
Do not leave fit-and-proper considerations until the last minute. Create a template for your fit-and-proper and annual competence assessments that follows your documented process and will ensure your team collects all relevant evidence when preparing annual certification statements.
One of the issues the FCA has raised at a number of events I have attended is the importance of the conduct rules. First time around with the banks, insurers and building societies, significant time was spent on the senior managers and certified staff, with perhaps not enough attention on conduct rule staff. As the driver behind the regime is about improving the culture of a firm, ensuring all staff are fully aware of the objectives of the regime and how their role plays a part, conduct rules training is very important.
Many firms are looking at the mandatory training they provide to all staff and seeing how they can add the conduct rule element.
Where appropriate, firms should also look at tailoring the training to specific cohorts of staff to make it as relevant to their role as possible.
It is worthwhile considering how the SMCR will affect your strategy over the coming years and how much business change it may require, such as to HR systems, or processes for evidencing decisions and actions of senior managers. Avoiding making decisions informally without properly recording them will be important. More generally, you should now have milestones in your business plan for 2019. Set an early deadline to check your readiness well in advance of 9 December.
The SMCR is about the spirit of regulation and a key component of the FCA’s culture agenda, so do not approach it as if it were a black and white piece of regulatory change.
It is about culture and people, not rules alone.
Simon Collins is managing director, regulatory, at Eversheds Sutherland