Getting a senior job with a boutique firm in London is about to become complicated

This SMCR article was first published by efinancialcareers on 5 December 2019.

5 December 2019

On 9 December 2019 the Senior Managers and Certification Regime (SMCR) will be extended from dual regulated firms (larger financial institutions) to FCA solo-regulated firms including boutiques and many in the wealth, insurance and asset management sector. Here are 5 ways this may impact job hunters who are FCA regulated individuals: 

 

  1. Under the SMCR, for all except senior managers, the firm rather than the FCA decides whether to certify an employee as fit and proper (and whether to re-certify them each year). Given potential employers will no longer be able to rely on FCA approval for an incoming employee with a blot on their record, they will probably be reluctant to recruit anyone into a certified role who does not have a perfect record.
  2. Employers will have to introduce their own vetting systems to certify staff. For recent and new joiners this will include seeking references covering the last six years. Former employers giving those references who are FCA regulated will have to provide detailed information not just on whether they consider someone fit and proper but anything relevant to the consideration of fitness and propriety.  If in doubt they are likely to disclose rather than withhold information to be sure they have complied with their regulatory obligations. It may therefore be possible that individuals who were approved under the old regime might not be under the new one. Some certified staff may be unwilling to move to a new job out of fear that a different employer might refuse to certify them.
  3. It is highly advisable that anyone with concerns about their background should tell a potential employer about any skeletons in their cupboard during the recruitment process and seek confirmation that the new employer will still certify them as fit and proper before they resign from their current job. Even this is not fool-proof: if the references when received give the impression that the matter is more serious than previously thought the new firm could re-think its position on certifying.
  4. Negotiating references with the firm you are leaving (references that omit information or are economical with the truth, for example) will no longer be accepted practice and this is, in fact, specifically prohibited. Related to this whereas in the past, faced with a regulatory allegation an employee might have resigned and moved on before a determination had been made in order to preserve a clean record, under the new system there is now a much greater incentive to contest any allegation in an effort to maintain a clean record.
  5. Senior managers will still be approved by the FCA. Yet under the SMCR the FCA can take enforcement action against them personally if there is a regulatory breach within their area of responsibility and if they fail to take reasonable steps to prevent or stop that breach. Increased accountability after all is the main purpose of the new regime. Since the FCA will be deciding what should have been done with the benefit of 20:20 hindsight there is a real risk that senior managers could be sanctioned in future for failing to deal with a problem which they were not able to spot. Some senior managers may demand higher pay packets as a result of the new level of responsibility they are taking on and some capable senior managers may even choose to leave the industry rather than risk clawback of their bonuses and accrued compensation.

The SMCR is designed to ensure that senior managers take responsibility for what happens within their business and it is likely to make them more proactive in the way they oversee the business. Regulated financial services professionals operating under this regime will need to maintain squeaky clean regulatory records if they want to play in the job hunting market in future.

This SMCR article was first published by efinancialcareers on 5 December 2019: Getting a senior job with a boutique firm in London is about to become complicated

Further information

If this is an area which concerns you please feel free to contact Adrian or any member of the employment team.

Latest blogs & news

Disciplining an employee for posting racist comments online

We have seen examples of people being ‘outed’ for posting racist comments online by individual bystanders who have been able to find their LinkedIn profiles and then contact relevant employers calling for the employee in question to lose their job.  Unfortunately, this is nothing new. But what can an organisation do in these circumstances, if it wants to demonstrate that it stands against racism and discrimination?

Back to the workplace – the new guidance and key considerations for employers

With lockdown restrictions moving to “Stage 4” of the Government’s roadmap to recovery, one of the key questions will be what this means with regard to returning to the workplace and, in a recent article, we considered the rights of employees on this issue.

Law firm partner’s profit share allocation was a reasonable exercise of discretion

Most disputes between partners of professional services firms are settled either through confidential negotiations or arbitration.  A public resolution of the matter through a full hearing and reported judgment is a rare occurrence. A recent example of such a case involving an ex-partner of a law firm is a useful reminder that it is difficult to challenge profit share or bonus decisions as an irrational exercise of discretion.

Regulatory compliance, trust and confidence in the financial services sector

In a case that attracted national media coverage and emphasises the crucial importance of regulatory compliance and the highest standards of professional conduct in the financial services sector, the High Court dismissed a breach of contract claim brought by an investment manager.

Your legal rights on returning to the office in the UK during COVID

So the Prime Minister has announced that most restrictions in place due to the coronavirus pandemic will be lifted on 19 July, despite acknowledging that the pandemic itself is far from over and that case numbers are expected to continue rising.   

 

Leading the way: it’s time for action on pregnancy loss

In recent weeks, it has introduced a formal workplace policy providing paid time off for all staff who are directly or indirectly affected by pregnancy loss. This is not only a significant enhancement to the provisions required by law but is also, I understand, the first of its kind being put in place by a UK law firm. We hope other firms in our sector and beyond will follow suit and normalise protection in this space, thereby supporting the wellbeing of those affected and protecting talent.

Keeping the crypto market on its toes? The FCA publishes latest cryptoasset consumer research and takes regulatory action against Binance Markets Limited

For the fourth year the FCA has published research on the changing relationship between consumers and cryptoassets. In spite of the pandemic, the strong upward trend in public engagement and media coverage has continued, with the FCA estimating 2.3 million adults now hold cryptoassets.

How wide should an investigation into bullying claims be?

When deciding whether to focus on the discrete allegations or look beyond them, employers need to balance confidentiality with duty of care to employees, says Mark McWilliams.

Disciplining staff for misconduct outside the workplace

Employers need to show the individual’s behaviour clearly affected the organisation’s reputation or their colleagues, says Catherine Bourne.

What are my rights on returning to work after a spinal cord injury?

According to the most recent NHS statistics 2,500 people are injured or diagnosed with a spinal cord injury every year. Indeed it is estimated  that there are a total of 50,000 people living in the UK with a spinal cord injury of some sort. Unfortunately sustaining a spinal cord injury impacts on every aspect of a person’s life. Often, where everyday tasks are a challenge, returning to work may seem unrealistic. The fact is that employment rates among people with spinal cord injuries remain much lower than the general population.

Should staff be compelled to have the COVID-19 vaccine?

There is currently no legal requirement to be vaccinated and the government has so far shied away from compelling people to be. Michael Gove’s review of the potential use of vaccine passports, expected in June, could alter the position. Employers can encourage staff to get vaccinated (as they may do with a winter flu jab, for example), provide access to medical information, allow paid time off to get the vaccine and provide sick pay for those suffering with side effects. However, insisting that employees are vaccinated could risk exposure to discrimination claims from those whose choice not to be vaccinated.

Preventing solicitor burn-out: more than ‘just an HR issue’

Failing to promote a good workplace culture based upon a firm’s core values is a potential regulatory issue.

Whistleblowing in the financial services sector – back in focus

The Financial Conduct Authority (FCA) recently launched a whistleblowing campaign, “In confidence, with confidence”, encouraging individuals working within the financial services sector to come forward and raise any concerns they have regarding potential wrongdoing, emphasising its commitment to protecting their identity and an increase in both resources and training at the FCA.  The FCA also commits to create a report about all concerns which have been expressed and to provide updates to a whistleblower every 3 months if so requested. 

Are bonus payments at an employer’s discretion?

In light of a recent EAT ruling, Nadjia Zychowicz and Eugenie Freeman discuss whether a high-performing employee should be awarded a bonus if the business is at risk of insolvency.

What are the alternatives to compulsory redundancy?

With many employers under significant pressure to cut costs, Moira Campbell outlines some possible options to consider other than reducing staff headcount.

The discontinuation of LIBOR and phasing in of SONIA in the Sterling Markets, what do we know so far?

Global financial markets are preparing to transition away from the use of the London Interbank Offered Rate (“LIBOR”) and adopt an appropriate alternative risk free rate (“RFR”) by the end of 2021. What are the reasons for the move away from LIBOR, the progress to date in terms of identifying the Sterling Overnight Index Average (“SONIA”) as the most appropriate alternative rate in the Sterling markets, and the steps still required to be taken to ensure such markets are ready for the phasing out of LIBOR by the end of the year

The importance of seeking support from your employer when going through a divorce

The breakdown of a relationship is a challenging and stressful time, even when you and your partner are on relatively good terms.

There are a number of support services we recommend to help manage the strain which comes with relationship breakdown and the significant changes to your and your children’s circumstances. People often go first to friends and family and then perhaps to a lawyer, counsellor or financial advisor. Many people do not feel comfortable talking to their employer about their circumstances and in this blog, we explore how it can be important from both a personal as well as family law and employment law perspectives.

Breach of 2002 banking undertakings - the CMA writes to Danske Bank

At the end of last month, the Competition and Markets Authority (CMA) published a letter written to Danske Bank concerning its breach of the Small and Medium-sized Enterprise (SME) Banking Behavioural Undertakings 2002, following loans it had offered under the ‘Bounce Back Loan Scheme’.

Should businesses scrap unconscious bias training?

Equality and diversity training initiatives have received a considerable amount of negative attention recently. In December 2020, the government announced its intention to scrap unconscious bias training for civil servants. Since then, there have been press reports of senior managers allegedly claiming that unconscious bias does not exist and the training is just ‘virtue signalling’ and a waste of money. 

So does this mean employers should now bin their diversity training? I don't believe so.  

Off-payroll working rules in the private sector – the change is near

6 April 2021 will see the implementation of the biggest reform in the engagement of contractors for decades.  The changes were originally scheduled to come into force on 6 April 2020, but implementation was delayed due to the coronavirus pandemic.  

Share insightLinkedIn Twitter Facebook Email to a friend Print

Email this page to a friend

We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

Leave a comment

You may also be interested in:

Skip to content Home About Us Insights Services Contact Accessibility