SM&CR – Are You Fully Compliant with the New Accountability Standard for F&I?

The Senior Managers & Certification Regime (SM&CR) came into effect on 9th December 2019 to replace the Financial Conduct Authority’s (FCA’s) ‘authorised persons’ regime affecting all dealers offering F&I services.


The SM&CR represents a new level of personal accountability for nominated senior business leaders in dealers across the UK. It carries with it significant responsibility and should never be seen as a ‘tick box’ exercise.


As far as the FCA is concerned, the SM&CR means they know where the buck stops and they can act on shortcomings. The SM&CR may have been new to dealers but it has been in place for banks since March 7, 2016 and to financial institutions regulated by both the FCA and Prudential Regulation Authority (PRA) since December 2018. More pertinently, dealers need to recognise that the FCA has already demonstrated that they are prepared to take action against individuals for business failures.


In short, everyone involved with F&I must comply with SM&CR standards of conduct.  Here is what he FCA expects:


“You must act with integrity, you must act with due care, skill and diligence, you must be open and cooperative with regulators, you must treat customers fairly and you must observe proper standards of market conduct” to quote the FCA on the subject.


At a high level, senior managers must recognise that they are  responsible for making sure the business is being well controlled has effective delegation procedures in place and discloses any information that regulators would expect to receive.


So is your business fully on SM&CR message?

The following notes are simply a high-level summary, but we hope to provide a flavour of what processes and controls need to be in place; however, the greatest change for many may be cultural. Do the needs of your customers dictate everything your business does at every level, every time without exception? If not, or if you can’t be sure, then this is likely to be the greatest challenge to SM&CR compliance.


Compliance with SM&CR does not have a quick fix option. Steps required are not insignificant and dealers will need to have established the required written processes and controls and staff training to evidence compliance.


The critical focus in a dealership will have been identifying who (it could be more than one person) is/are responsible for undertaking the senior manager function (SMF). It has to be someone very senior, who has the authority to make positive changes happen.


Legally, each senior manager must have a statement of responsibility that sets out their role and responsibilities within the company with respect to the business’ F&I activities.


Under certification, dealers must be able to demonstrate that people in senior roles responsible for F&I below SMF level; F&I managers, business managers, sales leaders. DPs etc. are fit and proper to do their job. This has to be done at least once a year. As well as an annual assessment, evidence to support their ‘fit and proper’ status is essential.


Finally, SM&CR also brings with it conduct standards, which all dealer staff involved with F&I must comply. Dealerships need to identify members of staff responsible for finance, detailing what they should be accountable for and introducing annual checks to make sure staff are properly trained for the roles they do. Under the SM&CR, all this needs to be recorded and evidenced.


In our experience, fulfilling all of this is neither quick to set-up or maintain (18 months ahead of the December 9th date, a legal firm was suggesting that dealers might be leaving their preparation too late!)


The cost of failure

The first case brought by the FCA and Prudential Regulation Authority (PRA) under the SM&CR in May 2018 saw when Barclays’ chief executive James Staley was fined more than £600,000. Custodial sentences for serious breaches are also an option.


Time for additional action?

Time to look again at your state of readiness? We can help email us at

Compliance monitoring: confused, complacent or confident?

The last 12 months has seen a significant increase of regulatory focus of the automotive F&I market. This attention is not unique, across the board the FCA issued more fines than ever before. The pressure for compliance is on for motor retailers and in 2020, this will only increase with FCA changes due to be announced in Q2 and implemented before the year is out. The established motor F&I process and customer experience. Many dealers are already on the journey to change, but with the Senior Managers & Certification Regime (SM&CR) now in place, many senior business leaders are sure to want the confidence that their business is complying with the spirit and letter of regulation. So, what if...


• You could demonstrate complete oversight of your sales processes?

• You felt totally in control of risk management?

• Your business met all the requirements of the regulator?

• The idea of a touch-point with the FCA was a welcome thought not a headache?

• You had the management information that aided the early identification of risk?

• You had the evidence and management information that demonstrates you are doing it right?

• Your compliance partner spoke your language and supported your business?

• Compliance processes benefited your business and your customers?

• The future regulatory landscape was nothing to fear due to your positive compliance culture?


At i-Comply we work in partnership with our motor industry clients. We seek to  assist in developing both a compliance culture and monitoring programme within client organisations that fits comfortably alongside their own organisational directives and operations and adds value to current sales processes and performance.


Please note, a compliance culture cannot be achieved by a tick box sales process and generic documents; this just leads to complacency and heightened risk.



 If you are interested in a positive, experienced assessment of your current policies and processes contact our team using the telephone number or email address at the end of this page.


i-Comply will work with you to identify the gaps and risks that could leave you and your business vulnerable and provide an opportunity to build an adaptive compliance programme that is effective now and into the future.

FCA Compliance: It need not be stressful

Compliance with FCA regulation has certainly held dealers collective feet to the fire over recent months. However, the changes required really not be as onerous as many dealers fear. It is a belief founded upon many years in financial compliance, notably in the motor industry and exposure to the FCA.


With a measured and positive approach, compliance can be quite straightforward. This applies equally to the development of the required processes and the application for authorisation.


Working with a wide range of dealers from major groups to independent operators has enabled us to see that the fear about change is worse than the reality. Having audited current processes and procedures, developing appropriate action plans has largely taken place seamlessly and successfully.


The key word to dealers is ‘proportionate’. The FCA does not expect a 500 page essay as a Business Plan. They simply want evidence that a dealer has a clear strategy. Clear monitoring is necessary, but this can be integrated with current processes; financial promotions can be delivered with a little thought and a recognition that transparency can be a good thing, increasing showroom traffic and website ‘stickiness.’


The changes required are not simple tick boxes, nor should the quickest, easiest solution be seen as the best change. It is as much, if not more, about the people as the systems. Appointed Representative status may appear quick and easy. However, to date there is limited option in the market. If for any reason this option was no longer available, or had limited access to finance providers, then the impact upon a dealer could be significant.


FCA authorisation and compliance does not need to be onerous. The greater change is the cultural one that will need to evolve to create a customer centric and commercially successful environment. Our experience to date is that these need not be mutually exclusive.

Getting SM&CR Ready

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.


SM&CR Categories 

 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.

2Certification 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.

Next Steps


 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!

General Insurance Under the FCA Spotlight

A number of areas of General Insurance (GI) including GAP and scratch and dent insurance have come under new FCA scrutiny in recent weeks in a new thematic review of GI. The report could well signal further changes to the distribution model of these products.


On April 10th, the FCA published a thematic review, on the General Insurance (GI) chain. It focused on three areas; travel insurance, tradesman insurance and from the automotive retailing sector Guaranteed Asset Protection and ‘scratch and dent’ insurance.


The key theme from the findings was that the FCA was unhappy that customers were not being placed at the heart of firms business approach consistently and that a customer-focused culture had not been fully embedded within the culture of firms. The FCA’s  overall conclusion was that they were; “extremely disappointing given the focus and emphasis placed on these areas by the FCA in recent years.”


Central to the FCA’s concern was the way in which the established net pricing model allows the dealer to mark up the final price to enhance their own earnings; it is a similar concern to that highlighted by the FCA concerning DiC commission based pricing for motor finance in their March motor finance review.


The FCA’s concern is crystallised in their observation that; “the value of these products can be compromised by the remuneration received by some parties in the chain, potentially leading to harm to customers.”


While the overall conclusion from the FCA's findings is disappointing, the regulator was not universally damning. They highlighted that "there were many other GI distribution chains and products we considered in our work which appeared to be delivering good value insurance products and appropriate outcomes, with no evidence of these harms manifesting" and that the themes and issues "were by no means universal across the sample of firms and products we considered in our work."


Working with our many dealer and OEM partners, it is these good practises that we must look to ensure are embedded universally across the added value service distribution chain. Already I see the impact and feedback for dealers working with our compliance business, which works with many dealers to ensure their processes, controls and operating culture are aligned to the FCA’s expectations. This type of collaborative approach will be essential as we work to ensure the needs of customers are always ‘front & centre’ in the promotion of GI services, which can and do add value to customers as witnessed by our current Trustpilot score of 8.8/10 from 3802 reviews.



Change for GI in motor retailing does look likely, a reality reinforced by the updated regulatory framework; the introduction of Insurance Distribution Directive (IDD) Rules and the Senior Managers & Certification Regime (SM&CR) introduced at the end of last year for insurers, with dealers set to come under the same SM&CR responsibilities from December 9th this year.