SMCR – First Quarter Down

Firms’ implementation of FCA’s Senior Managers and Certification Regime (SMCR) should now be approximately 25% complete.

We’ve written previously (see our January 2018 Newsletter and Compliance Monitor Articles of November 2016 and September 2017) of what firms need to do to ensure a stress-free Christmas 2019, by when this regime will have been fully implemented.

By the end of this March, firms should have already concluded the initial steps of identifying who their Senior Managers are, and who (almost by default) are their Certification Staff. Hence 25% complete.

The next two quarters will need to be devoted to the far more labour-intensive task of drafting Statements of Responsibility (SoR) for each of these senior managers. Firms with job descriptions already in place will be able to use these as an initial draft.

FCA has given some recent guidance (FG 19/2 of this March) on what these Statements should look like – or rather, not look like. Beyond these very high-level prescriptions, there’s very little help from FCA – hence the need to spend time drawing these up and agreeing them with the staff concerned.

Once these are done, firms can turn to the processes they have for ensuring the fitness and propriety and training and competence of all staff covered by the regime. This should entail relatively minor adjustments to most firms’ existing processes.

For most firms, documentation prepared to support these changes does not have to be submitted to FCA in advance of 9 December (the implementation date). But the SoR will need to be submitted for any new senior manager appointed by the firm after that date.

What if…?

In parallel with the tasks above, part of SMCR is that all staff in scope be trained in the implications of the Conduct Rules.

This training can’t be generic (“these are the conduct rules – follow them”). It has to be specific to their role. To that end, it’s unlikely that firms will find off the shelf training packages sufficiently acute as to satisfy their need.

It’s been our view that one way of illustrating potential issues for staff is through the use of scenarios.

Scenario training can be used to illustrate potential outcomes which might be in conflict with the Conduct Rules. Fulcrum Compliance will be incorporating a number of such ideas in its update training which will be rolling out to clients this year. But these can only cover a finite number of examples. Your best plan is to keep this requirement in mind and to use any real life examples at your next staff meeting. Don’t wait for a training “event” – talk about it at your routine weekly or monthly meeting!

Brexit – last orders?

By the time you read this, the UK’s path to Brexit should be clear. Or not.

Irrespective, firms with extensive EU-based clients and operations will have been preparing for multiple scenarios – including a hard Brexit – for some time.

For firms with occasional EU interaction (an EU based client being the most likely), there is an emerging pattern in the ongoing EU 27 states of what will happen in the event of a hard Brexit.

These range at one end from passporting style measures (covering new and existing clients, all investment services and all client types) to those where no transitional arrangements will exist at all (thus in the event of a hard Brexit, you can’t provide a service to clients in those jurisdictions).

We wrote in our October 2018 Newsletter that firms need to identify who their non-UK EU clients are.

Then in the event of a hard Brexit it’s a case of dealing with them jurisdiction by jurisdiction. If there is a transitional period, firms will have the length of that period to put in place alternative arrangements.

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