SMCR implementation and compliance raises a number of different and potentially complex issues that Firms and individuals will need to deal with.
In respect of the Senior Managers Regime, key issues include:
- assigning each Senior Manager a "Senior Management Function" (precisely which functions depend on the size and type of your firm (assessed on a legal entity basis, rather than on a group basis);
- allocating "prescribed" (by the FCA) responsibilities among your Senior Managers;
- ensuring all Senior Managers have "Statements of Responsibility" setting out what they are responsible for;
- ensuring your senior managers understand that they will be held responsible by the FCA in the event of a failure of the firm in the area for which they are responsible (the so called "Duty of Responsibility");
- enhanced due diligence prior to hiring decisions in respect of Senior Managers, including criminal records checks and more onerous regulatory references;
- the extra-territorial scope of SMCR;
- handover policies and procedures among incoming and outgoing Senior Managers for "enhanced firms"; and
- comprehensive and maintained "Management Responsibility Maps" for "Enhanced" Firms detailing firm governance arrangements, the people involved in those arrangements and what those people are responsible for.
In respect of the Certification Regime, key issues include:
- understanding the nine "certification functions" and mapping your employee population to them;
- putting in place systems and procedures to all the firm to act as a "mini-regulator" with the responsibilities for "F&P" assessments at least annually and on an ad-hoc basis as required (such in context of investigation, disciplinary and grievances);
- extra territorial scope for "Material Risk Takers" under the UK remuneration codes;
- background checks to ensure fitness and propriety (but not obliged to conduct criminal record checks); and
- the enhanced regulatory reference regime, with increased obligations when giving and retaining information about former employees.
In respect of the Code of Conduct, key issues include:
- its application to regulated and unregulated activities;
- ensuring that all levels within the Firm are fully and appropriate trained and understand and can comply with the parts of the Code of Conduct that apply to them;
- potential for FCA enforcement action against individuals for breaches;
- the need for the Firm to assess whether misconduct constitutes a Code of Conduct breach and to notify the FCA appropriately.
For more information please contact our SMCR team.