With COVID-19 forcing nearly 50,000 solo regulated firms in the UK into reprioritising activities to ensure continuity and operational resilience during the pandemic, the Senior Managers and Certification Regime (SMCR) implementation understandably took a back seat, particularly considering the FCA’s extension to March 2021.
Yet, at what point does the extension create a false sense of security in delivering in full and on time? Particularly with the continued threat of a potential second wave demanding more triage to core business activities.
Our perspective is that the extension offers firms a chance to reflect and ask if they have the time, resource capacity and expertise to deliver on all SMCR requirements by 31st March 2021. If the efforts to date towards SMCR implementation are anything to go by, that will be a resounding ‘no’ for a sizeable number of solo regulated firms.
The pushback from many firms when asked about SMCR implementation is twofold. Firstly, the work is overly burdensome from both a time and resource perspective and secondly, there is a feeling that smaller firms operate under the radar and that the FCA would rather make a show of a bigger firm. We spoke to several firms where they have a false confidence in a ‘gut feel’ for who should be in the Regime, rather than fact-checking the specifics of the FCA’s regulation.
Even in the midst of a pandemic, that pushback creates a problem for firms who have no SMCR plan in place. There are many examples of the FCA clamping down on firms even to the point where they are preventing new business transactions.
This is a flagship piece of regulation for the FCA which seeks to “raise the bar permanently around conduct, competence and culture”. Just weeks after announcing the extension they went on record to say that the extension period should be used to ensure the “highest standards” for implementation.
This lack of activity has the potential to create issues further down the track. But the positive is that there is still enough time to get it right. Particularly for firms who show a desire to embed the SMCR regime, supported by an implementation plan.
Doing a health-check is the first step to take for firms who think they are behind the curve. They should consider these 5 key areas:
- Senior Managers – What steps have been taken to recruit, assess, promote and replace certified staff? The FCA advises that firms should assess and remove staff from certified roles who “are not fit and proper”. This should happen before March 2021.
- Certification – Who comes into scope for certification? How is the Fit & Proper assessment going to be carried out consistently and fairly across the firm?
- Conduct Rules – Have we developed the required breach management frameworks and adjusted conduct training programmes to reflect FSMA requirements?
- Evidencing compliance – How robust is documentation to evidence our approach to SMCR compliance? Have we defined ownership of the necessary activities?
- Infrastructure – How have we amended recruitment, onboarding and HR processes to reflect the new regime? What systems changes need to take place to support the new reporting requirements?
FourthLine can support firms across all aspects of SMCR implementation:
- Technical Interpretation: We are experienced in providing advice and guidance on a range of interpretations and technical queries.
- Compliance frameworks: Our team has developed a number of compliance framework tools for use across SMCR, including F&P compliance interpretations, questionnaires and certificates.
- Resource augmentation: Our flexible resources support SMCR compliance change programmes, delivering key policies and procedures, core function process mapping, systems and controls, monitoring, record keeping and reporting.
- Training, learning and development: Our team can scope and deliver your end-to-end SMCR training requirements.
- Recruitment: We have recruited over 1000 risk and regulatory positions including CF and SMF hires. Our network of SMF16 and SMF17 candidates spans multiple FS sectors.
- Pre and Post implementation reviews: Our team has experience of performing topical or end-to-end reviews across all Three Lines of Defence.
If you are interested in the ways in which FourthLine can support your firm’s SMCR implementation, schedule a chat with Dan today.
Download our Free Insight Deck; "SMCR implementation for solo-regulated firms:How ready are you?"