Richard Palmer, OneAdvent’s head of compliance and risk, discusses the proposed changes to the regime and what this might mean for the industry.
The Senior Managers and Certification Regime (SM&CR) was introduced in late 2019 to replace the previous Approved Persons (AP) regime within regulated firms. Both the PRA and FCA are currently reviewing responses, following a consultation that ended earlier this month, which outlined proposals to reform the SM&CR.
The first obvious question to ask is why does the SM&CR need to be reformed so relatively soon after being introduced? After all, it seems to have been very well received – almost 90% of respondents to the FCA’s 2023 discussion paper (DP1/23 Review of the SM&CR) said that the new regime makes it easier to hold individuals to account and nearly 80% identified the usefulness to firms of the fitness and propriety requirements of the regime.
There are a number of ways in which the FCA believes it can improve the SM&CR process during this, phase 1 of the reforms. For instance, they want to give firms more time in which to make new applications and to strip out some of the duplication in the current system. They also propose to allow firms more time in which to report updates to both Senior Managers and Certified Staff. There is a proposal to extend the time for which criminal records (CRB) checks are valid, and the definitions of the Senior Management Function (SMF) roles are being made clearer. Additionally, they promise guidance on how to streamline the annual fitness and propriety checks which need to be carried out for senior managers.
The proposals are clearly intended to reduce the administrative burden on firms, particularly from the point of view of time-critical notification obligations, which aligns with the FCA’s recently stated ambition to help improve the international competitiveness of the UK financial services industry. (To this end, they have also requested feedback from firms regarding their experiences with the appointment of overseas senior managers, and the outcomes from this will presumably be included in phase 2 of the reforms).
In the meantime, phase 1 will no doubt be widely welcomed as a first step to further improving the SM&CR regime, which the market clearly considers to be already functioning well.
For more understanding on the proposed changes and what is expected in phase 2, click here: https://www.fca.org.uk/publication/consultation/cp25-21.pdf
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