The Financial Conduct Authority (FCA) have been rolling out their new regulatory regime, the Senior Managers and Certification Regime (SMCR) over the last year in the UK.
This new set of conduct rules and regulations set out new standards for the UK’s financial sector. This new set of regulations will require businesses to train their necessary staff and employees in their responsibilities. Many businesses have therefore logically turned to online e-learning for SMCR to undertake and facilitate this.
Since the 2008 Financial Crisis in the UK, there were calls from consumers, businesses and even the government for accountability and responsibility in the sector to be improved. The FCA have been transforming regulations across finance in the UK, which many argue really started to become increasingly apparent with the swingeing regulations across the payday sector in 2014.
Protecting customers and consumers has been at the heart of the FCA’s approach to the introduction of new regulation. With regards to the SMCR regime however, there is a strong focus on personal accountability and responsibility unlike anything ever done before.
Who Does SMCR Affect?
All FCA-authorised firms in the UK who are classified as solo-regulated firms must comply with this new regime. This means that at all levels within such companies, staff and employees will all need to properly and fully understand their roles and obligations. Furthermore, to reflect the increased responsibilities they are responsible for with the running of the company, senior managers will be required to take on increased responsibilities.
However, any employee or adviser that is customer facing must comply with these regulations under SMCR. This includes any member of staff who could potentially cause damage and financial harm to their company, clients and therefore the wider industry. Typically, this includes (although is not limited to):
- Mortgage advisers and intermediaries
- Insurance brokers
- Any company providing consumer credit
- Asset managers
- Financial advisers
- Pension advisers
Classification of Firms Under SMCR
To reflect the different levels and requirements under the SMCR, companies are classified as one of three types of company which are:
- Core Firms – This covers most companies and the regulations and requirements for Core Firms under SMCR. The conduct rules and requirements covering Core Firms also sets out the FCA’s baseline requirements for all companies under the wider regime
- Enhanced Firms – Applying to smaller numbers of solo-regulated financial firms, this classification covers those companies who are more complex in nature. This means that the necessary and pertinent regulations must be reflective of this. Thus, these companies will be subject to more complex oversight
- Limited Scope Firms – Applying to a very small number of solo-regulated firms, Limited Scope Firms are those who already benefit from exemptions under the Approved Persons Regime
Who Doesn’t Need to Comply with the Regime?
There are a small number of staff who may work at financial firms, including solo-regulated, FCA-authorised firms who are not subject to SMCR’s rules and requirements. These staff are known as ancillary staff and are those who do not carry out any functions covered by the SMCR. Ancillary workers in the UK include:
- Cleaning staff
- Catering staff
- Security staff
However, should they wish to, firms are able to voluntarily opt these staff in to be trained under SMCR but there is no explicit requirement of them to do so.
Why Have the FCA Introduced SMCR?
In past years, the culture in the UK Financial Sector and the wider view of most of compliance very much revolved around box-ticking and form filling. This was the case in all nature of companies that now qualify for SMCR ranging from farm insurance providers (more information here) to mortgage brokers and even dentists and car dealerships offering consumer credit.
The FCA want the sector and companies to move away from this and to take on more responsibility. Rather than deferring all things compliance and financial responsibility to the compliance person or department within a company, companies will need to be more open and transparent.
Staff and advisers will need to be appropriately trained and will need to have a necessary level of understanding with regards to what they are and are not responsible for. Moreover, should they breach any of the four key Conduct Rules under the regime, they face being personally reprimanded by the FCA. this can come in the form of hefty fines, being suspended from practicing in the industry or being struck off altogether. Key to the regime and a key tenant of it is to ensure there is no longer a blame culture or the ability for those genuinely at fault to pass the buck to those that are not.