Financial services

A guide to the Senior Managers & Certification Regime

David Morrey David Morrey

The proposed regulations represent a profound change in the UK regulatory structure and will affect firms in their relationship with the regulator, in the way they operate, and in their relationship with those who work for them.

On 26 July 2017, the FCA published its long awaited consultation paper on extending the Senior Managers and Certification Regime (SM&CR) – already applied to deposit takers and insurance firms since March 2016 – across the remaining 47,000 regulated firms. The consultation period closed in November 2017, and in December the FCA and PRA published their consultations on the transition arrangements for moving into the new regime. Included are new chapters on the transition arrangements and insight from discussions with firms.

The way ahead – what to watch out for

For the majority of firms, implementation is not likely until 2019. However, firms should start thinking now about the regulation’s impacts, both directly and in their future relationship with the regulator. This is not primarily for the usual reason ensuring the necessary changes to business systems and processes are completed in good time. Rather because for many firms the long-term cultural impact of the SM&CR is likely to be significant and there is a risk of creating unwanted incentives and consequences if sufficient thinking is not done upfront.

Starting with understanding the detail of the FCA regime – there are six variations or flavours, depending on your size and business - we will advise you on the compliance approach most suited to you, together with our view of its potential impact on your firm’s culture and values.

Navigating the new regulations

How to thrive in the new regulatory climate [ 1853 kb ] provides guidance to navigate the new accountability regimes, including a summary of what they will mean for your firm. Reflecting on the profound nature of this new regulatory approach, we dig below the surface and provide insight into how it may change the way your firm operates – practically and behaviourally – and how the regulator may apply it.

Read the handbook for more detail:

  • Firm Classification – Which regime / “flavour” applies to your firm?
    Helping you understand which flavour of the SM&CR will apply to your firm and why.
  • Senior Managers Regime
    The impact of this will vary greatly depending on whether your firm is subject to the Enhanced requirements.
  • Certification Regime
    The change that will probably have the greatest impact on how your firm operates. We explain the differences as the range of functions it covers will be more than currently covered by the APER.
  • Fit and Proper Requirements
    How requirements are being extended to certified staff, and the regulator’s expectations of what this will involve.
  • Conduct Rules
    The difference between the two tiers of Conduct Rules – those that apply to all the people who work for your firm and those that apply only to Senior Managers.
  • Approval, Authorisation and Conversion (formerly referred to as “grandfathering”)
    How firms go about the conversion of their existing controlled functions from the outgoing APER into the SM&CR as Senior Manager Function holders.
  • How regulators may apply the SM&CR in practice
    This will depend in part on the size and complexity of your firm but also on the way in which the FCA prioritises different issues, and the resources it has available.
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Download PDF [ 754 kb ]