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5 Key Considerations for HR When Building an SMCR Compliance Plan

Date Published: February 04, 2020 | Last Updated: January 06, 2024 | By Georgina Wilson

HR Managers should now be fully aware of the Senior Managers & Certification Regime (“SMCR”) that has replaced the Approved Persons regime for most financial sector firms regulated by the FCA/PRA.

This regulation will make a significant impact on the UK financial services industry and indeed any organisation now offering finance under FCA regulation.

The SMCR is a regulatory framework covering the conduct and responsibility of key employees. It is an FCA/PRA regulation with two core focus deliverables:

1.   To encourage a culture where staff at all levels take personal responsibility for their actions; and

2.   To ensure companies and employees clearly understand and can demonstrate where principal responsibility lies.

The framework has been implemented in stages to replace the Approved Persons Regime and has been in effect for major banks since 2016 and insurance companies since December 2018. It has now been extended to include all FCA-regulated financial services companies as of December 9th 2019. As such, many companies are still in planning when it comes to SMCR compliance, and HR departments are looking for guidance on the vital elements that they should consider during the process.

Ensuring compliance with the SMCR must now be high on the HR agenda, especially now all FCA regulated companies, not just the finance and insurance sectors, are expected to comply.

Here are our five key considerations for HR when building an SMCR compliance plan:

1) Ensure the HR team are involved if another department owns the process

From the start of the process, include the human resources and legal departments in the implementation plan as the regulations influence the roles and responsibilities of all employees. This action will help ensure that the SMCR specifications are integrated into the annual HR process, particularly when it comes to harmonising job descriptions and screening new candidates.

2) Make sure all employees know the conduct rules

Ensure you implement processes and controls that are necessary to ensure everyone knows the rules. The rules of conduct extend to all employees to improve individual behavioural standards. For maximum effect, businesses need to have sufficient training and communication programmes in place so that all staff are informed and trained on how the rules of conduct apply to them and the behaviours that they need to display.

3) Identify any organisational structure-related barriers

Overcoming structural impediments is vital as the SMCR holds senior managers responsible. They will have to supervise their staff and track their actions and activities more closely. Within SMCR, there is no shirking of accountability.

4) Don’t under-estimate the amount of time needed to determine responsibilities

Identifying accountability and deciding who’s responsible for what takes time to work out. This challenge also includes mapping and constant monitoring of employees’ roles. Roles are often misunderstood because some of the duties assigned by the Senior Manager Regime need to be shared or broken together, more often than not, which takes time to decide, sign up and register.

5) Create a “reasonable steps” framework to support ongoing SMCR compliance

Finally, think about creating a reasonable steps framework to support compliance with the Senior Managers Regime. Help managers stay compliant by evidencing the reasonable steps they need to take in discharging their duties, monitoring delegations, and other aspects of their roles that require evidence. This way, if the FCA investigates an issue, the firm and the employee can quickly provide their evidence and hopefully avoid a drawn-out investigation.

If you need help with your SMCR compliance process or background screening for SMCR, give us a call today and arrange a consultation.