The FCA has provided updated guidance on the SMCR for solo-regulated firms, with new information on good and bad practices in two key areas.
By David Berman and Anna Lewis-Martinez
On 14 August 2020, the FCA updated its webpage on the Senior Managers and Certification Regime (SMCR) for solo-regulated firms. The updates include tables setting out good and bad practice (using positive and negative indicators) relating to training staff on the conduct rules as well as assessing the fitness and propriety (F&P) of Senior Managers and Certification staff.
Fitness and Propriety
The FCA reminds firms that they should demonstrate they are making regular, thorough and consistent assessments of the F&P of Senior Managers and Certification Staff as required under the Certification Regime. The FCA highlights the following as positive indicators and good practice in relation to F&P assessments:
- F&P checks identify new issues with staff — some fail
- Relevant Senior Management Functions (SMFs) actively oversee the F&P process and ensure appropriate reporting
- Competence assessment demonstrates that thought has been given to each specific role (including managers)
- Development plans are put in place as a result of F&P assessments
- Managers are adequately trained in the firm’s approach to F&P and understand what is expected of them
- A detailed F&P process has been introduced and integrated into existing HR/performance management processes, and it covers what happens if someone fails F&P
- F&P panels — which include senior managers — are convened to consider marginal cases
- Firms have appropriate criteria and a robust process for identifying certification staff on an ongoing basis
- Regulatory references disclose misconduct/relevant concerns and are produced in a timely manner
The FCA clarifies that small firms may need to interpret some of these indicators in a proportionate way, but firms should still give thought to the intention of the indicators, and this should not reduce the effectiveness of their fit and proper assessments or of the Certification Regime.
The conduct rules set minimum standards of individual behaviour in financial services. When training staff on the conduct rules, the FCA highlights the following as positive indicators:
- Relevant SMF can demonstrate appropriate involvement in / oversight of training
- Training is interactive and uses realistic scenarios
- Examples/scenarios draw out nuances of how the rules apply to each type of role
- Line managers are involved in training delivery, not just HR or the project team
- Training is reinforced regularly and built into on-boarding
- Effectiveness of conduct rules training is assessed
- Training is put in the context of the overall regime
- Conduct is linked to F&P and performance assessments
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