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Dean Williams ComplianceOfficer NACFB

It’s been a little over six months since the implementation of the FCA’s Senior Managers & Certification Regime (SM&CR) came into effect. By now, NACFB Member firms should have established their SM&CR frameworks for ongoing compliance.

Last month, the Treasury agreed to delay, from 9 th December 2020 until 31 st March 2021, the deadline for solo-regulated firms to have undertaken the first assessment of the fitness and propriety of their Certified Persons. This should not however lead to complacency and where firms are able to meet the original deadline, they are encouraged to do so.

The obligations are not too overbearing. We will step through those expectations for Members, focussing on those deemed a ‘core’ firm by the FCA. As a reminder, a core firm is a brokerage with full permissions (not limited) and with intermediary regulated business income of less than £35 million, calculated as a three-year rolling average.

From the outset, the SM&CR was designed to reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct and competence. This places an onus on senior personnel to take reasonable steps to ensure compliance with regulatory standards and ensuring fair outcomes are always achieved for customers. Having had time to implement SM&CR frameworks, firms should be able to ensure they are meeting the following requirements:

1. All senior managers should now have been identified and approved by the FCA. Any subsequent senior management appointments made following the 9 th December 2019 should also have been notified to, and approved by, the FCA. Firms can check existing senior manager approvals remain up to date with the regulator by visiting the FCA Register (register.fca.org.uk). When there have been internal changes, these too should be confirmed with the regulator without undue delay. This can easily be done via the FCA’s Connect portal.

2. Each of your appointed senior managers must have a clear and concise Statement of Responsibilities (SoR), outlining their roles and responsibilities within your organisation. Do note, these documents should be self-contained and not refer to other documents.

3. All prescribed responsibilities required by the FCA should have been assigned and now owned by an appropriate senior manager, as reflected within their SoR. If a senior manager’s role and prescribed responsibilities has changed significantly since submission of their SoR to the FCA, you should have updated your internal SoR and notified them of such changes.

4. If you have appointed a new hire to a senior manager role since 9 th December 2019 (this does not include internal hires), you should have obtained regulatory references from past employers, and also have completed criminal records and competency assessments and be readily able to evidence them.

5. You should have by now identified all certified staff within your organisation, namely those that perform a function which could pose a risk of significant harm to the firm or its customers. For NACFB Members, this will typically include those roles subject to qualification requirements, for example, mortgage advisers.

6. You should also have established systems and controls to allow you to complete annual fitness and propriety assessments on all senior managers and certified staff, confirming their ongoing honesty, integrity and reputation, their competence and capability, and finally financial soundness. Once again you should be able to evidence such assessments.

7. You have trained all relevant employees in respect to their obligations relating to the SM&CR conduct rules, are able to evidence such training and have established a means of recording and reporting such breaches to the FCA when required. This is within seven business days for senior managers and annually for other individuals. The NACFB Compliance website maintains a dedicated SM&CR hub containing a range of materials for download, including:

• Template documentation, including Statements ofResponsibilitiesaswellascertificatesof fitnessandpropriety;

• Guidance documents on the application of prescribed responsibilities and certifiedfunctions;

• StepsMemberfirmsshouldtakewhenconsidering anindividual’sfitnessandpropriety;

Conductrulesandbreachreportingguidance;

• A summary of FCA materials and guidance, suchastheFCAguideforsolo-regulatedfirms.

The Association would expect Member firms to have systems and controls proportionate to the size of their organisation and appreciate that smaller firms may find it difficult to determine what is proportionate. Accordingly, we wish to invite all Members to contact our compliance team with any SM&CR related queries. The Association’s compliance team remain on hand to answer all queries individually and maintain an up to date SM&CR FAQ compliance hub for the benefit of others.