Brokers warned clock is ticking on SMCR

With 50 days to go before the implementation of the Senior Managers and Certification Regime (SMCR), brokers have been warned that if they are not well underway with their preparations they are in danger of failing to meet the deadline. 

The SMCR will apply to all solo-regulated firms, and financial regulatory consultancy Bovill has said there are areas where the market must ensure they are meeting the requirements. 

It has identified five core issues which are around: 

• Statements of responsibilities  

• Identification of certified staff 

• Training and competence  

• Conduct rule breaches  

• Firm culture  

Under the scheme every senior manager must have a Statement of Responsibilities (SoRs): a single document that clearly sets out their role and what they are responsible for, which must be submitted to the FCA via a form on the Connect website.  

Bovill said while the early sections of the form are straightforward to complete – they capture details of the individual, the role they perform and their Prescribed Responsibilities under the regime. However, there is also a section ‘Other Responsibilities’, which describes the activities or areas of the business for which the individual is responsible. It is here where some have been hitting problems. 

Added to that the FCA has asked for the SoRs to be concise with an expectation that they do not exceed 300 words. 

Wordier statements

Maurice McDonald, a managing consultant at the firm told Insurance Times: “We find that this can be an issue. The wordier SoRs may well point to a degree of caveats around how rather than what they are responsible for. If you are a senior manager responsible for a business area it can be explained in 300 words.

The need to certify staff has proved to be one of the most complex and taxing issues for investment firms and banks which have had to undergo this process and Bovill believe that the same will be the case for the insurance industry. 

“There are a number of job types posing such a challenge, with the ‘significant management function’ and ‘client dealing function’ categories currently causing the most difficulty,” it warned. In the first instance, significant management functions are not to be confused with senior management functions.” 

The area of training and competence is critical to complying to the regime and McDonald said there were issue for the market. 

“You may well have identified those members of staff which fall under the need for T&C but you also have to understand whether the training you have undertaken meets the requirements with SMCR,” he added. “Ensuring staff qualifications and competencies are aligned with the requirement of the T&C regime will be at the core of the regulation’s annual certification process.” 

The regime will also look at a firm’s disciplinary processes, and the major concern is around the fact that any proven misconduct, however minor may well follow an individual throughout their careers. If there is misconduct discovered after an employee has left a firm, then the firm has the obligation to inform both the FCA and the former employee’s current employer. 

Minor misdemeanours 

As such Bovill believes that this could be an issue where minor misdemeanours are discovered.  Where in the past a written warning may have been issues this might need to be reconsidered given the impact it can have on an individual’s career. 

A firm’s culture will also form part of the SMCR regime’s process and as such it must be addressed. 

“Culture can appear an abstract concept that is impossible to tackle in practice. It is crucial therefore that you bring it to life for your firm,” said Bovill.  “After all, any work on SMCR will only paper over the cracks if it does not involve efforts to embed a healthy and firm-specific culture.” 

McDonald said: We have been working with a number of clients on the issues that have been created by the requirements around SMCR, but we are still getting approaches from firms who are looking for help in starting the process. 

“Time is running out and if you have not identified who the senior management in your firm is and what they responsibilities are by now it is almost too late.”