SMCR

Senior managers and certification regime

The SMCRs have been in force since 7 March 2016 with the overall aim is to improve accountability for individuals working in financial services. The UK’s Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) require firms to map out the roles of their senior managers and to allocate responsibilities to them so as to make them individually accountable.
 

Both individuals and firms in the financial sector are significantly affected by the regime. All involved need a thorough understanding of the new regime.

Individuals

The Senior Managers Regime applies to all individuals exercising a senior management function (SMF). In many cases, non-executive directors will also be covered, for example if they chair any committee directly relevant to a firm’s safety or soundness.

Senior managers need to examine carefully the scope of the responsibilities allocated to them by the firm and to refuse to accept anything that is outside their actual responsibility or expertise. Where a presumption of responsibility was initially proposed, the Government has instead decided to introduce a statutory duty on senior managers to take reasonable steps to prevent regulatory breaches in their areas of responsibility – the so-called “duty of responsibility”. They also face criminal liability if they recklessly make a decision (or fail to prevent a decision) that leads to the failure of a bank.

Mid-level employees are subject to the Certification Regime under which it is the responsibility of their firm to certify that they are fit and proper on an on-going basis. An assessment by the firm that an individual is not fit and proper could have very serious implications for the individual from an employment and regulatory perspective.

The new conduct rules will be applicable to a much greater number of individuals working in financial services than under the current regime and are broader in scope. 

 

Financial organisations

Firms should consider the the allocation of responsibilities amongst senior managers and assess the areas of responsibility falling within the certification process.

It is important that firms fairly assess the responsibilities of their employees and that the exact extent of their remit is acknowledged and clearly defined so that an individual is not allocated responsibilities outside the scope of their duties, either in their individual statement of responsibility or the firm’s overall responsibilities map. 

Together these documents should make clear who is responsible for what, and ensure individual accountability.

The FCA is monitoring carefully how firms implement the new regime and it will ultimately impact on their regulatory risk in the future. Support functions such as HR and IT departments, as well as Compliance and Risk must address legal and operational issues including ensuring that appropriate policies and training are in place.

Firms need to identify individuals within the scope of the regime and ensure their employment documentation, governance structure and resources are appropriate.

 

How we can help

With a financial services team drawn from our regulatory, commercial, employment and criminal departments we are able to assess holistically the needs of our clients.

We have worked with a number of regulated firms on regulatory issues and are familiar with working with the FCA. We are able to assist with the drafting of relevant documents, including individual statements of responsibility and the firm's overall responsibilities map. We are here to help with training needs and the amendment of policy materials.

For individuals we can advise on how to negotiate the ambit of their responsibilities, what the regime requires in terms of the discharge of their duties and conduct, and what they can do to protect themselves, particularly if they have grounds for concern about their personal position and potential exposure.

We regularly deal with financial regulators and act for clients in cases involving disciplinary and enforcement action.

SMCR -  Key dates (2015-2018)

  • 15 October 2015: Bank of England Financial Services Bill – introduced duty of responsibility
  • Winter 2015: Final Rules on incoming branches of overseas firms
  • 7 December 2015:  Consultation on mandatory form for regulatory references closes
  • 1 January 2016: Applications for Significant Influence Function (SIF) candidates who will be taking up their post after new regime
  • 8 February 2016:  Final deadline to submit responsibilities maps and statements of responsibilities
  • 8 February 2016:  Deadline to submit grandfathering notifications
  • 7 March 2016: Reforms to the Senior Managers and Certification Regime come into effect
  • 7 March 2016: All Certified staff must be identified. Conduct rules apply from this date
  • 7 March 2016: New offence relating to a decision causing a financial institution to fail in force
  • 7 March 2016:  Appointment of a Whistleblowers’ Champion (Senior Manager)
  • 7 September 2016: Scope of Responsibilities documents for all SIF holders to be available for FCA review, or earlier if the firm is otherwise required to produce one
  • 7 September 2016: Deadline to comply with package of measures on whistleblowing
  • End October 2017: First annual submission for notifying breaches of the Conduct Rules of staff within the SMR or Certification Regime
  • 7 March 2017: Firms’ deadline for issuing certificates for individuals under the Certification Regime
  • 7 March 2017: Application of Conduct Rules to staff who are not within the SMR or Certification Regime
  • July 2017: Consultation on the extension of the SMR and Certification Regime to all FSMA authorised firms.
  • End October 2017: First annual submission notifying breaches of the Conduct Rules including staff who are not within the SMR or Certification Regime
  • Summer 2018: FCA Policy Statement on Extension of the SMR and Certification Regime to all FSMA authorised firms.

 

Kingsley Napley LLP stands out for its experience acting for senior executives in contentious matters"

Legal 500 UK, 2019

Latest blogs & news

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 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.

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.  

‘Shecession’: what can be done to prevent the decline of women’s economic empowerment?

Last week we reflected on this year’s International Women’s Day theme #ChooseToChallenge and felt the impact of COVID-19 on women in the workplace cannot go without a mention. For the first time in nearly ten years, women’s economic empowerment in the workplace is set to decline according to PwC’s latest Women in Work Index, creating what has been coined a “shecession”, caused largely by the COVID-19 pandemic. 

 

Best practice guide for charities responding to Illegal Working Civil Penalty Information Requests

COVID-19 has had a severely damaging affect on all organisations and no less so those in the charitable sector.  Be that on a dramatic hit to donation levels, resourcing issues through furloughing or redundancies and difficulties in delivering programmes and training.  In a battle to survive and deliver on core services, it is easier than ever to forget crucial internal risk and compliance processes. 

Where age and gender discrimination meet: the challenges faced by older women in the workplace

The BBC recently reported that women appear to be bearing the brunt of ageism at work.  According to the UN, the number of people over the age of 65 is growing faster than any other age group and yet ageism is the most common type of discrimination in Europe with women being particularly disadvantaged.

“Was it something I said?” Whistleblowing during the pandemic

You may be surprised to learn that you are whistleblower and could be entitled to significant compensation. You may also be considering the dismissal of a whistleblower. In each case, things need to be handled very carefully. 

Tackling sexual misconduct in the virtual workplace

Kirsty Churm explains how employers can best address sexual harassment claims when staff are working remotely and what steps they can take to ensure workers feel safe.

Ethnicity pay gap – still an issue, still on the agenda

Today will see the start of the UK’s first Race Equality Week (an initiative “to unite organisations and individuals in activity to address issues affecting ethnic minority employees”).  Whilst initiatives like this and, indeed, the UK’s first ever Ethnicity Pay Gap Day (8 January 2021) are very welcome and a cause for celebration and hope in relation to such matters, there is much work yet to be done on the issue of race equality and we cannot afford to be complacent.  The ethnicity pay gap is one aspect of this that still needs to be addressed, despite the recent publicity around it and the increasing pressure on Government to take action.

Employee supervision or surveillance: have we got the balance right?

While working from home and flexible working arrangements have long been available in workplaces, the impact of the COVID-19 pandemic has drastically increased their prevalence in the UK. The Office of National Statistics (“ONS”) reported that in April 2020 46.6% of UK employees did some remote working, in contrast to only 12.3% in 2019. The significant increase in working from home has been mirrored by a booming of “productivity intelligence” software used by employers. In a November 2020 report entitled ‘Technology Managing People’ the TUC found that 15% of workers had seen an increase in employer monitoring since the start of the pandemic. In addition, one in five firms have admitted to implementing or planning to introduce “secret software used to spy on staff”.

New Year, New job? Top 10 tips for a Senior Executive negotiating a new employment contract

As 2020 drew to a close, many people had high hopes for 2021.However, the virulent and unforgiving COVID-19 pandemic has ensured it has not been an easy start to the year for most.

Some senior executives will be looking for a change, others may have fallen victim to one of the rounds of redundancy which have resulted from the pandemic.

The SRA’s updated NDA warning notice introduces welcome clarity

On 12 March 2018 the SRA published its warning notice on the use of non-disclosure agreements (NDAs). This was in the wake of the widespread publicity at the time given to NDAs which had been considered too draconian in reach and effect.

Senior managers and certification regime Insights

View all

Blogs

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

What have we learned from the Senior Managers and Certification Regime?

FCA Business Plan 2019-20: A reflection of recent enforcement action

How to write a reference – Hincks v Sense Network Ltd

Transforming culture in financial services – keeping up with the debate

FCA proposes extension of senior managers regime

The extension of the Senior Managers and Certification Regime

Running the Marathon – lessons for professional and financial services partnerships

FCA and PRA regulatory references - what do the new rules mean in practice?

The Senior Managers and Certification Regime: the latest

FCA’s use of private warnings under scrutiny

Senior Managers Regime – the FCA predicts more enforcement litigation in the new regime

Next phase of the new accountability regime for UK financial services

Privacy by design to safety by default: A process improvement approach to data protection

FCA 2016-17: Culture and Governance take centre stage but AML and financial crime remain key priorities

Strengthening accountability in banking: Senior Managers and Certification Regime now in force

Senior Managers Regime: first stage now in force

Are you ready for the Senior Managers Regime?

Senior Managers and Certification Regime: rule changes required

Senior Managers and Certification Regime - FCA focuses on enforcement and DEPP

Successful challenge to FCA prohibition order

Whistleblowing in banks and insurers: FCA and PRA confirmation of their new rules

Holding individuals to account in financial services - unexpected shift in burden of proof

European regulation of insider dealing and market manipulation: build up to the new market abuse regime from 2016

Regulatory references in the financial services industry – PRA & FCA consultation

New whistleblowing rules from FCA

FCA flexes competition muscles

FCA reviews management of financial benchmarks

Annual Report for Financial Conduct Authority (FCA) - international cooperation, market abuse, convictions, senior managers regime, whistleblowing and a historic year for fines

FCA issue rules and guidance on bankers remuneration and clawback obligations

Financial professionals: don’t bank on your bonus

Fraudsters on the inside

Deutsche Bank £227m fine highlights the risks of signing attestations - for individuals and financial institutions

Banking Regulation: Senior Managers and Certification Regime – timetable announced plus extension to include UK branches of foreign institutions

Senior Managers Regime: Tougher regulation of senior bankers and non-executive directors (NEDs) confirmed

Close Load more

Skip to content Home About Us Insights Services Contact Accessibility