On December 9th 2019, the Senior Managers and Certification Regime (SMCR) comes into force for all Financial Conduct Authority (FCA) regulated firms; this replaces the Authorised Persons regime and affects all dealers offering finance and insurance products.
In this brief article, I aim to provide a high-level overview of some of the key actions dealers need to take; please note it is not an exhaustive list, there are more!
The basic regime
Senior Managers Regime. The most senior individuals within a firm must be approved by the FCA, after the transition period.
Certification Regime. Senior roles below SMF level must be certified by their employer as “fit and proper”.
Conduct Rules. All employees promoting/accountable for F&I services must comply with the new conduct rules.
The SM&CR has three categories:
- Limited scope firms which will be subject to a reduced set of requirements (similar to limited permissions currently);
- Core firms;
- Enhanced firms.
For further guidance, search online for the FCA’s Guide for FCA solo-regulated firms.
Three Priority Areas to Have Prepared
1. Senior Manager Statements of Responsibilities (SoR)
Each Senior Manager must have a SoR that sets out clearly what they are accountable for, based on their role and the template provided by the FCA.
2. Certification Regime: ‘Fit & Proper’ (F&P) Assessments
Dealerships should already be assessing the fitness of their employees promoting F&I. This should include vetting them on appointment and then monitoring performance through annual appraisals. Under SMCR, this becomes more formal. Firms must now:
Carry out F&P assessments at different points in the employee life-cycle for all Certified Staff, and Senior Managers;
Complete an annual assessment for all Certified Staff and issue a dated certificate as evidence.
3. Conduct Rules and Training
Individual Conduct Rules:
- You must act with integrity;
- You must act with due skill, care and diligence;
- You must be open and co-operative with the FCA, the PRA, and other regulators;
- You must pay due regard to the interests of the customer and treat them fairly; and
- You must observe proper standards of market conduct.
Senior Manager Conduct Rules:
- You must take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively.
- You must take reasonable steps to ensure that the business of the firm for which you are responsible complies with relevant requirements and standards of the regulatory system.
- You must take reasonable steps to ensure that any delegation of your responsibilities is to
- an appropriate person and that you oversee the discharge of the delegated responsibility effectively.
- You must disclose appropriately any information of which the FCA or PRA would reasonably expect notice.
- When exercising your responsibilities, you must pay due regard to the interests of current and potential future policyholders in ensuring the provision by the firm of an appropriate degree of protection for their insured benefits.
Training of all staff included in conduct rules is mandatory. Training should include:
- Managerial training on how to assess F&P;
- Conduct Rules training for Senior Managers;
- Conduct Rules training for Certified Staff.
There are just three months to the SM&CR going live; please do not leave it too late to ensure you are ready and if we can help, just ask!