R&C: Could you provide an overview of the Senior Managers and Certification Regime (SM&CR)? What are its core components?

Pardy: There are three key elements to the SM&CR regime. First, the Senior Managers Regime (SMR) will replace the Approved Persons Regime (APR). Its roots come from the Parliamentary Commission for Banking Standards review published in 2013. The review recommended to Parliament that a new regime was introduced into financial services, with greater levels of transparency, ownership and individual accountability. The second element of this regime sees firms required to implement an internal Certification Regime (CR) for certain types of staff members. The CR is intended to ensure that regulated firms assess and ‘certify’ key staff on an annual basis as fit for purpose to continue to carry out their role. The CR will apply to those that fall into predefined ‘significant harm functions’ and will encompass annual assessment in the areas of Fitness & Propriety, Honesty & Integrity and Competence & Capability. Third, the new SM&CR regime introduces the concept of Tier 1 & Tier 2 Conduct Rules to the majority of staff across all financial services businesses. This means that the Financial Conduct Authority (FCA) can now take action against any individual covered by the Conduct Rules in a regulated business. In addition, firms will need to report any Conduct Rules breaches to the FCA on an annual basis. This requirement comes in addition to having to report Conduct Rules breaches to the Prudential Regulation Authority (PRA) or FCA within seven working days for those in the SMR.

Oct-Dec 2018 Issue