The UK Financial Conduct Authority’s Senior Managers and Certification Regime is now two years old. Under the regime (which currently applies to UK banks, building societies, credit unions, branches of foreign banks operating in the UK and the largest investment firms regulated by the PRA and the FCA), there are three strands:
- Under the Senior Managers Regime (and yes, the lack of an apostrophe pains me every time, but that’s how the FCA writes it), the most senior people performing key roles need FCA approval before starting their roles
- Under the Certification Regime, firms need to certify on an annual basis that employees who aren’t senior managers but whose role means it’s possible for them to cause significant harm to the firm or customers are fit and proper
- Firms need to ensure that staff are trained in the Conduct Rules (high-level standards of behaviour) that apply to them, and that the FCA is notified if the Conduct Rules are breached.
The FCA is currently consulting on extending the SM&CR to insurers, and to solo-regulated firms (i.e. firms regulated only by the FCA and not by the PRA). If you want to express a view, get it in by 3 November 2017.
You might think that all of this would be most unwelcome – simply another layer of admin, with job descriptions to be written and agreed and monitored. But the results of a survey published at the start of August 2017 by LexisNexis Risk Solutions has found the opposite. Nearly 200 respondents from businesses already affected by the SM&CR were overwhelmingly in favour of it, with 71% of them saying that it has had a positive effect on their industry. 75% of respondents believe the SMR has had a positive impact on their firms’ appetite for risk, and 63% agree it has improved collaboration between business and compliance units. On this last point, LexisNexis MD Dean Curtis said: “Financial crime professionals have always been highly accountable, but by making other ‘front line’ senior individuals just as accountable, the SMR has enhanced the compliance culture and improved communication and collaboration across different service lines. As a result, issues raised by MLROs that impact compliance fall on more sympathetic ears.”
As the UK considers – let’s be honest, intends – extending the SM&CR, and as other jurisdictions mull their own versions, this must be welcome news for MLROs.