Credit Management January February 2020

OPINION
SENIOR
MOMENTS
What steps should firms have
already taken regarding the
introduction of SMCR?
AUTHOR – Claire Aynsley
IT may have seemed as though
it was a long time coming, but
it’s finally here, and the first
deadline has already passed.
I’m talking, of course, about
the new Senior Managers and
Certification Regime (SMCR) which
formally started on 9 December 2019.
And if you have not already completed
your initial actions, then you need to get
your skates on or risk falling foul of the
Regulator.
SMCR, as I have written previously,
its not solely a compliance issue; it will
also significantly impact a company’s
Human Resources (HR) function as well
as requiring input from legal personnel. It
creates a number of challenges: it creates
cultural and motivational issues; future
appraisal issues; and issues as regards
how managers are remunerated.
It is asking senior managers to take on
roles and responsibilities that they may be
uncomfortable doing, or who may not be
equipped with the necessary skills to take
on the job envisaged. Individuals who will
be certificated will appear on a public
register, and some may be uncomfortable,
too, with having their names so readily
available.
The SMCR does not just impact
individuals. All staff members (apart from
ancillary employees such as a receptionist
or cleaner) are bound by the new Conduct
Rules. Even though such rules appear to
be quite general (e.g the need to act with
integrity, act with due care, skill and
diligence, be open with regulators, pay
due regard to interests of customers and
treat them fairly, observe proper market
conduct etc.) every company will need to
demonstrate that these rules have been
properly communicated and embedded,
with culture being the core focus. Every
member of staff will be required to
evidence adherence to Conduct Rules,
if challenged. And a new disciplinary
process will be required for anyone who
breaches those Rules, and a further
process identified as regards whether the
breach is notifiable to the FCA!
So what actions should firms have
completed by the formal deadline, and
what are the next steps?
SENIOR MANAGEMENT FUNCTIONS
First off, by now, firms need to have
identified their Senior Management
Functions (SMFs). It is worth noting
that many existing approved persons
can be grandfathered over to the new
regime. If any firms have someone they
expect to be a SMF who is not already an
approved person, they may want to look
into the viability of making that person
an approved person and following the
grandfathering process (as opposed to
starting from scratch).
Businesses also need to have identified
their certification staff. If in doubt,
firms are encouraged to err on the side
of caution, and as they become more
comfortable with the regime, they can
amend their certification population
accordingly, if necessary.
Firms should diarise the checking of
the FCA Register. Given the significant
volumes of firms moving to the new regime
and an even larger number of approved
persons expected to be converted to SMFs,
there could be initial teething problems
with the conversion. Firms are therefore
encouraged to diarise a point in this first
month of implementation to check the
FCA Register and make sure that their
details have been moved to the new
regime correctly.
With a longer timeframe to put them
in place, tasks such as identifying the
remaining staff required to comply
with the Conduct Rules and providing
the necessary training, carrying out
certification and uploading certification
staff details to the FCA can wait for the
time being. But they shouldn’t wait too
long. Firms should still be cautious about
leaving such elements to the last minute
(uploading certification staff details at the
last minute could be problematic if there
are system issues).
By now, firms should have ensured
that the relevant Conduct Rules staff
(SMFs; certification staff; non-executive
directors) are trained on the Conduct
Rules and that they understand the
implications. When it comes to training
remaining staff on the Conduct Rules (an
action not required for another 12 months)
it is suggested that firms may want to look
at doing this ahead of the implementation
date (e.g. October/November 2020), to
ensure it is not forgotten and avoid the
need for repeat training.
Statements of Responsibilities need
also to have been considered. Ideally
these should be short and succinct. They
should be aligned with the job description
but not necessarily identical. It is
important to make sure that Statements
Advancing the credit profession / www.cicm.com / January/February 2020 / PAGE 10