Question: What do you think about replacing the certification regime with something more “proportionate”?
During a recent webinar, COMPLY’s in-house SMCR experts Jessica Freckleton and Samantha Scrivin broke down the implications of a shifting SMCR regime, asking the audience to answer that exact question. And their response?
- 17% stated: Regardless of any reduced obligations, we would keep our F&P processes the same.
- 10% stated: We are happy with the certification regime at present.
- 73% stated: We welcome any consultations to reduce the administrative burden of SMCR.
But, what changes can you expect to come? And which components of SMCR are likely to shift this year?
In this blog, we’ll outline the potential changes to likely to impact firms and how technology can help you implement a comprehensive, scalable SCMR programme.
Potential Changes to the FCA’s SMCR
Discussion Paper 23/3: In December 2022, the government announced, as part of the Edinburgh Reforms, a review of the effectiveness and scope of SMCR. The joint Discussion Paper, issued by the FCA and PRA sought feedback on the effectiveness and scope of the SMCR regime.
Respondents to this DP showed wide support for SMCR and its aims, and a general agreement that the regime is meeting its objectives. We await further review and potential impact to the regime.
Change to the Certification Regime: In a 2024 Mansion House Speech, Chancellor Rachel Reeves stated “First, while the Senior Managers and Certification Regime has helped to improve standards and accountability…
… some elements of it have become overly costly and administratively burdensome.
So the Treasury, the FCA and the PRA will shortly publish the outcomes of our review…
… including a commitment to consult on removing the current Certification Regime from legislation.”
While there has been no further indication of what these changes might mean or the timing of the changes, it is clear that this announcement is specific only to the Certification Regime and we do not anticipate any changes to the Senior Manager Regime.
This proportionate approach to the Certification Regime could include:
- Fewer Certification Functions
- Less frequent F&P assessments
- Removal of regulatory references for Certified Functions
- Removal of requirement to issue a certificate once signed off
Non-Financial Misconduct: The FCA’s proposals around non-financial misconduct centre around incorporating NFM into three key parts of the FCA Handbook and regulatory framework:
- The Code of Conduct (COCON);
- The Fitness and Propriety test for employees and senior managers (FIT); and
- The suitability Threshold Conditions which firms must meet to be authorised (COND).
Using Technology to Enhance Your SMCR Processes
Every year your firm should be reviewing its processes, ensuring that your framework is in the best shape possible.
We recommend you ask yourself:
- When were background checks last completed?
- Have all staff completed recent attestations on time?
- When was the F&P assessment last reviewed?
- Has the FCA’s Directory been checked in the last year to ensure the list of Directory Persons is up to date?
- Does staff training really focus on individual responsibilities and conduct?
- Are there clear processes for reporting breaches and conducting investigations?
- Are there clear whistleblowing procedures in place?
- Are there sufficient record keeping processes?
However, even with the most comprehensive processes, one question remains: Is there a suitable software solution that can help SMCR compliance and streamline processes?
Given the scope of the regime, and the administrative burden it can place on teams, many firms have sought out technological support to help streamline, enhance, and scale their program.
So, what are these tech-forward teams gaining by implementing an SMCR solution (like that offered by COMPLY)?
- Identify Gaps: Digitizing your manual processes allows for the quick identification of gaps in compliance. If current employees are promoted or transitioned to different managerial functions, a compliance officer can quickly determine whether their employees have been properly assessed for fitness.
- Increase Transparency: Leverage real-time, specific SMCR dashboards to monitor employees’ certification progress. Plus, generate custom reports to analyse employees’ responses to specific questions.
- Improve Efficiency: Automate the certification production, encouraging employees to complete their certifications through scheduled events. Additionally, the module sends automated notifications to employees, which means compliance teams can spend more time on strategic compliance initiatives and less time chasing down employees who haven’t completed their forms.
- Monitor Breaches: Robust monitoring ensures your firm remains diligent in resolving potential conduct rule breaches, evidencing when a problem arose, and the response to that problem.
- Build an audit trail: Run reports to evidence compliance with all SMCR regulatory requirements.
Ready to power up your SMCR processes with COMPLY’s leading solution? Let’s talk.