Time is ticking on SM&CR implementation – but it’s not too late

By the end of next month, insurance intermediaries are required to train all their staff on Conduct Rules and assess the fitness and propriety of their Certified Persons. The Senior Managers and Certification Regime (SM&CR) deadline for solo-regulated firms has been pushed back from 9 December 2020 until 31 March 2021, to give firms affected by Covid-19 more time for preparation. Insurers have been subject to these requirements since the end of 2019.

What is SM&CR?

Senior Managers and Certification Regime is an integral part of the FCA’s effort to improve culture, raise standards and improve clarity around accountabilities. SM&CR has been a key area of focus for all financial services firms, and it remains a hot topic for the regulators. Their goal is to reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct and competence.

What do firms need to do before the deadline?

Solo-regulated firms should ensure that:

• Relevant staff are trained on the Conduct Rules and how they apply to their roles,
• Staff in certified roles are fit and proper and are issued with a certificate,
• Firms have submitted data to the FCA of key people working in financial services.

The deadline is an opportunity for insurers and intermediaries to look back at what they achieved and to ensure their implementation meets regulatory expectations.

What do we see in the market?

In our experience, some firms still have work to do to meet the regulators expectations. While a number of firms may have implemented some aspects well, other parts of the regime aren’t as well developed.

Firms are concerned about reporting conduct rule breaches and whether they are out of step with other firms who have similar issues but may not identify them as breach. This is a tricky area as no firms want to be out of step with their peers but ultimately it is about aligning conduct rules breaches and your disciplinary process. The regulator is more likely to scrutinise a firm which is reporting a lower number of breaches than would typically be expected for an organisation of its size.

We have seen good examples where firms are tailoring their conduct rules training to the roles of individual but on the whole, training remains fairly generic. More importantly, while some firms have taken steps to embed the conduct rules in their business, for example, by discussing them regularly at team meetings, this remains an area where some firms are at risk of non-compliance.

Implementing the fit and process poses several challenges, not least because the regime doesn’t neatly sit in ‘Compliance’ or ‘HR’ but straddles both.

We have also seen confusion around fit and proper certificates. Sometimes the contents of the certificates are missing key information such as a date of the certificate or details of the certification function. Firms don’t always fully appreciate that the certificate applies to the role and not the individual. We have also seen instances where firms have issued certificates to senior managers as well as their Certification staff.

Ask yourself the difficult question

Tick-box training won’t satisfy the FCA nor the large number of employees that will fall under the glare of the regulator.

Can you confidently say your employees understand how the conduct rules apply to them in their role? Are they embedded in your organisation? Are you reporting breaches in line with regulatory expectations? How aligned is fit and proper with performance management and your disciplinary processes? Is there an appreciation of the potential consequences of poor implementation? Is your management responsibilities map appropriate and embedded into the day to day running of the firm?

The solution

Sicsic Advisory has deep experience of implementing SM&CR across financial services. The SM&CR team comprises of ex-regulators who contributed to the SM&CR implementation at the FCA along with seasoned professionals experienced in implementing large scale regulatory projects.

Bringing together our deep knowledge of the regulation and practical implementation across a large number of firms, we have developed an approach to SM&CR to support firms to complete their implementation. Our services range from conducting in-house training to performing SM&CR health checks aimed at providing firms with comprehensive yet succinct reports.

Our approach is practical, pragmatic, tailored to their business and proportionate.

Based on our experience, we have developed a gap analysis that can assess your readiness quickly providing you with opportunity to respond before the deadline. After the deadline, as focus moves from design and implementation to embedding, we can support you in developing or testing your approach to integrating SM&CR into business-as-usual processes.

The March deadline is an opportunity is an to review and take stock. There is still time to get assurance on your SM&CR plans.