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Senior Manager and Certificate Regime

The Senior Managers & Certification Regime (SM&CR) has been introduced to improve the culture across financial services, designed to strengthen market integrity by making individuals more accountable for their actions, conduct and competence.

For all FCA-regulated financial services firms, there will be a need to demonstrate their staff at SM&CR level are ‘fit and proper’ (FIT), along with additional requirements to internally assess and certify the fitness and propriety on an annual basis.

There are no new expectations when assessing whether staff are FIT. Focus will remain on an individual’s honesty, integrity and reputation, competence and capability as well as financial soundness.

Competence and capability

Firms will be required to employ staff with the knowledge, skills and expertise necessary for the specific role they are intended to perform. Robust recruitment and assessment processes, along with demonstrable records, will provide validation for the suitability of individuals. Firms will need to make sure they retain copies of necessary qualifications on file.

Senior managers’ statements of responsibilities should be drafted to set-out accountability for the functions they personally direct, including what they are responsible for and how they fit in with the firm’s overall governance arrangements. A job description could be used to outline clarity of roles, including the main purpose of the role and key responsibilities, as well as listing key skills, qualifications and experience required by the job holder.

Induction, training, development plans, appraisals and all the relevant records will be critical to ensure and demonstrate the competency of staff on joining the firm and ongoing. Firms will also need to consider training staff to understand how the conduct rules are relevant to their individual roles.

Honesty, integrity and reputation

Criminal records checks (CRCs) are an important tool for firms when assessing fitness and propriety. The FCA will require a CRC to be carried out by the firm for every application for a Senior Management Function. Firms could choose to repeat checks periodically or annually as part of their ongoing checks. CRCs aren’t required for the SM&CR, however would be considered best practice.Where candidates have spent considerable time overseas in the last six years, firms should consider carrying out CRCs in those particular jurisdictions. Criminal offences should be considered on a case-by-case basis and in relation to the circumstances, explanation offered, passage of time, evidence of rehabilitation and the adverse impact on the firm. Firms will need to provide regulatory references for all senior managers and staff in the regime. Firms should request a reference from all previous employers in the past six years using a standard template.

It’s important to understand any gaps in employment and ask for additional evidence, such as travel documentation or proof of job seekers allowance to validate gaps. A reference will provide details of any employment issues, such as if a person has been previously disciplined, dismissed or had any customer complaints.

Where a candidate was a sole trader, firms don’t need to request a reference. However a firm may wish to consider asking for additional evidence to confirm dates they were operating as sole trader, for instance from their accountant.

It’s important to remember that if a candidate provides false information on a form during the recruitment process, a firm should consider this when assessing honesty, integrity and reputation.Firms will also need to ensure their employee data privacy notice holds guidance on how all personal data and sensitive personal data will be used, collected and stored within the firm. Retention periods will also need to be defined for data once a staff member has left the company.

Having disciplinary and grievance procedures in place, and ensuring that these are consistently applied, will evidence that any misconduct is dealt with and managed accordingly.

Financial soundness

Evidence should demonstrate any concerns as to whether the person has been a director, partner, or concerned in the management of a business that has gone into insolvency, liquidation or administration.

Firms will also need to determine if an individual has been the subject of any judgment debt or award, that remains outstanding or was not satisfied within a reasonable period or if they have been involved in proceedings relating to bankruptcy. It will be essential that they supply a statement of assets or liabilities.

Further guidance and support

The very nature of the SMCR is personal to individuals and could be emotive, having clear processes, procedures and clear communication with staff will be important to ensure smooth application and compliance with the regime.

The People Department are able to provide HR services to assist in a number of areas such as on-boarding checks, documentation and policies to provide support to firms, call 0161 884 1888 or email [email protected].

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Kate Sparkes

Head of HR & Development

26 Jun 2019