The New Regime

The FCA has been talking about the Senior Managers and Certification Regime (SM&CR) for some time. The aim according to the regulator is “to reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct and competence”.

Preparation for the SM&CR regime is one of the three priority issues, set by the Board, that the CFA will be focusing on in 2019. This goes to the very heart of a firm, its governance and how senior staff set the right culture. Therefore, it’s important that members start to think about implementation and what is means for their business.

The regime will change how the FCA regulates individuals working in financial services and for CFA members, SM&CR will replace the Approved Persons Regime.

This is all tied to ensuring that firms establish a culture where members of staff take responsibility for their actions.

The FCA defines the regime areas:

The Senior Managers Regime

The most senior people (‘senior managers’) who perform key roles (‘senior management functions’) will need FCA approval before starting their roles.

Every senior manager will need to have a ‘statement of responsibilities’ that clearly says what they are responsible and accountable for.

The Certification Regime

This applies to employees whose role means it’s possible for them to cause significant harm to the firm or its customers. These roles are called ‘certification functions’.

These people won’t need to be approved by us. Instead, firms will need to check and confirm (‘certify’) that they are fit and proper to perform their role at least once a year.

In July the FCA published near final rules for how it plans to extend SM&CR to all solo-regulated firms. Solo-regulated firms are those regulated by the FCA only.

At the CFA, we have been liaising with the regulator on the development of these rules, and we continue to attend events that will help firms to implement the new regime.

Once the final rules are published, we will be looking at the regime in greater detail, thinking about how we can support those individuals that will be the “senior managers” and the other individuals in the business responsible for managing the new system.

Firms should be starting to prepare now. It’s about knowing where to begin and understanding what the business needs to implement ahead of the new regime. Firms will have to document some of the things they are already doing, in order to demonstrate how and why decisions are taken.

CFA members can expect to see lots of support and relevant sessions and events, to ensure that firms are ready when the rules kick in on the 9th December next year.

Watch out for more details.

The FCA guide for solo-regulated firms can be accessed here

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