What are the Best Solutions to Ensure SMCR Compliance?

If you are looking to find what the best solutions to ensure SMCR compliance are, you have come to the right place! This quick guide article will give you an overview of the regime, provide guidance on how to comply with the rules and list the top solutions and tools for compliance.

What is the SMCR?

SMCR is a universally accepted acromyn for the Senior Managers and Certification Regime (SM&CR) which was originally launched in 2016 by the Financial Conduct Authority (FCA). At the start the SMCR only applied to banks, building societies, credit unions and PRA-designated investment firms. Between 2018-2020, insurers, solo-regulated firms and benchmark administrators were included in the regime.

The SMCR is split into 3 compliance areas which apply to different business functions and roles. These are the senior managers regime, the certification regime, and the conduct rules. The FCA have said of the regime that the “SMCR aims to reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct and competence”.

There are 3 tiers under the SMCR:-

• Core: firms in this tier must comply with the baseline requirements.
• Enhanced: this applies to a small number of firms whose size, complexity and potential impact on consumers or markets warrant more attention. These firms have extra requirements.
• Limited Scope: this applies to firms who already had/have exemptions under the Approved Persons Regime. These firms are exempt from some baseline requirements and typically have fewer senior management functions.

Senior Managers Regime

The senior managers regime requires that the people in a firm who perform key roles must be approved by the FCA or PRA prior to starting their role(s). Key roles are referred to as senior management functions (SMFs) and are only held by the most senior people. This is because SMFs have the potential to cause the greatest harm or impact to customers and/or market integrity.

Each SMF specified by the FCA is a controlled function under section 59(6A) of the Financial Services and Markets Act 2000 (FSMA). For these functions a firm must make it clear who is responsible for each SMF and ensure the adequate monitoring and oversight. A Statement of Responsibilities (SoR) must be used to document each senior manager, their role, key function(s) and responsibilities.

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Certification Regime

Certain roles and functions in regulated firms may have a significant impact on customers, market integrity or the firm itself. Therefore, many of these roles are already defined as a senior management function. However, those not defined are referred to as a Certification Function. Any person performing such a role or function must be assessed and certified as adequate and fit for performing the role. They should also be issued with a certificate to perform that function by the firm.

SMCR Compliance Solutions & Tools

Ensuring ongoing compliance with the SMCR requires a layered approach. The FCA expects firms to have a framework of policies and controls in place that assess, manage and support compliance with the senior managers regime. Document toolkits such as the SMCR Template Toolkit from Know Your Compliance Limited is used by thousands of regulated firms.

With large requirements and expectations on compliance policies and procedures, document management software (DMS) is a must. Keeping track of policies, updates and employee dissemination becomes much easier when DMS is used. There are also manual tools such as Skills Gap Analysis tools that help a firm to meet their fitness and propriety obligations.