SMCR

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As the pace of reform increases, we take a look at key developments and the timeline ahead.

Significant progress has been made on the Edinburgh Reforms since they were announced in December 2022, with developments gathering pace before the summer break. Given the breadth and speed of the reforms, now is a good time to take stock of where things stand and what we can expect in the months ahead. In this publication, we highlight some of the key developments and set out expected dates for future progress.

The tone of the papers suggests that a fundamental reform of the Regime will be unlikely.

By Rob Moulton, David Berman, Jonathan Ritson-Candler, and Charlotte Collins

On 30 March 2023, the PRA and the FCA published a joint Discussion Paper (FCA DP23/3 and PRA DP1/23) seeking feedback on the Senior Managers and Certification Regime (SMCR). In parallel, HM Treasury published a Call for Evidence on the Regime. The Discussion Paper focuses on the operational aspects of the SMCR, whereas the Call for Evidence looks at the legislative aspects. Together, the papers seek comments on the SMCR’s performance, effectiveness, scope, and proportionality. The closing date for responses is 1 June 2023.

The timetable sets out three tranches of extensive regulatory changes to UK and EU law in 2023 and 2024.

By Rob Moulton, Becky Critchley, Denisa Odendaal, and Dianne Bell

The “Edinburgh Reforms”, a series of announcements made on 9 December 2022 by the Chancellor of the Exchequer (see here), set out the UK government’s reforms to drive growth and competitiveness in the financial services sector. The Reforms build upon the reform agenda that the government is taking forward through the Financial Services and Markets (FSM) Bill and which implements the Future Regulatory Framework Review.

The case provides instructive practical examples of the “reasonable steps” companies can take according to the FCA and a reminder of the FCA’s cultural expectations of CEOs.

By David Berman, Jonathan Ritson-Candler, and Sean Wells

On 16 November 2022, the FCA issued a final notice (Final Notice) to the former CEO of Sonali Bank (UK) Limited (SBUK), Mr Prodhan, for anti-money laundering (AML) failings for a period running from 2012 to 2014 (the Relevant Period).

The Final Notice provides a reminder to firms of the FCA’s expectations in relation to AML compliance; in particular:

  • the role of senior management oversight of the Money Laundering Reporting Officer (MLRO);
  • the individual accountability of the senior manager tasked with overseeing the firm’s AML and financial crime compliance; and
  • the importance of senior management engendering a strong compliance culture, including in relation to AML.

This annual publication outlines some of the primary focus areas in 2021 for UK-regulated financial services firms. Some of these topics are attracting attention because they are an emerging trend, or because they are at a key stage in the implementation cycle. Other topics are longstanding, but remain at the top of the PRA’s and FCA’s priority lists.

While this publication looks beyond Brexit and COVID-19, inevitably, in the short term, these issues continue to be dominant themes.

We hope…

The PRA has released a largely positive report, along with nine follow-up actions and recommendations on the SMCR for PRA-regulated firms.

By Rob Moulton, Katy Sanders, and Anna Lewis-Martinez

The PRA reviewed the operation of the Senior Managers and Certification Regime (SMCR) against its original objectives and examined whether there have been any unintended consequences. The evaluation covered the period 2019-2020, included evidence from internal and external sources, and examined each component of the SMCR (including across the life cycle of firm and supervisory activity).

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.

UK Regulators announce new measures after acknowledging firms affected by COVID-19 will need to keep their governance arrangements under review.

By Rob Moulton and Anna Lewis-Martinez

On 3 April 2020, the FCA and the PRA released a statement announcing several new governance measures for dual-regulated firms amid the COVID-19 outbreak under the Senior Managers and Certification Regime (SM&CR). The new measures provide for more flexibility, while acknowledging that firms will need to keep their governance arrangements under review.

All firms should take note of the FCA’s latest feedback on SMCR implementation.

By Rob Moulton, Charlotte Collins and David Berman

In its latest piece of feedback on firms’ implementation of the SMCR, the FCA indicated that firms must improve their implementation of the Certification Regime and, most particularly, the Conduct Rules. While the FCA’s review focused on SMCR implementation within banks, which have been subject to the regime for more than three years, the findings are relevant to all firms, whether already subject to the SMCR or due to become so this December.