In 2016, the Financial Conduct Authority launched the Senior Managers and Certification Regime (SMCR).
Initially applied to all UK banks and building societies, the regulations aimed to set a new standard of conduct for those working in financial services.
In turn, it hoped to protect consumers and strengthen the integrity of financial services, following years of perceived malpractice that culminated in the 2008 financial crash.
This year, the regulations are to be extended. From the 9th December 2019, the SMCR will apply to all FCA (Financial Conduct Authority) solo-regulated UK financial services firms – bringing almost 50,000 further businesses under the regulation’s remit.
It’s a move that will have a significant impact for HR departments throughout the financial industry, so in this blog, we’ll look at the effect the regulations will have, and how your HR team can prepare ahead of the December deadline…
What is the SMCR?
Designed to increase individual accountability within financial organisations, The SMCR comprises three core elements – The Conduct Rules, The Senior Managers Regime and The Certification Regime.
The Conduct Rules set basic standards of good personal conduct, and are applicable to all employees engaged in financial service activity.
The Senior Managers Regime dictates that senior management personnel must be approved by the FCA before starting their roles. Each manager must also be governed by a clear ‘statement of responsibilities’ that outlines their areas of accountability.
The Certification Regime, meanwhile, applies to financial services employees whose role could potentially see them cause significant harm to the business or its customers. While they won’t need to be approved by the FCA like Senior Managers, they will need to be internally certified as ‘fit and proper’ at least once a year.
Compliance failures in any of the three areas can result in penalties for both the organisation and the individuals involved.
All three of the SMCR’s individual elements have considerable implications for those working in HR – and the first task at hand will be to identify which members of staff fall under each category.
Conduct Rules will broadly apply to everyone in the business, but the Senior Managers Regime and Certification Regime will only apply to those in certain positions, so roles must be clearly identified prior to recruitment in order to ensure compliance.
Other changes to the recruitment process include the necessity for competency assessments and screenings to enable certification, and these processes should be highlighted within the new job descriptions.
Of course, it’s not just new starters that need to be certified fit and proper.
All existing staff operating in ‘certification roles’ (those that could theoretically do harm to the business or customer) must be certified to – which will be a sizeable undertaking for larger organisations.
Once the rules come into force on 9th December 2019, you’ll effectively have twelve months to carry out these assessments and issue the certifications for the first time. Thereafter, you’ll have to conduct the assessments every year, meaning SMCR should become a key part of your annual performance management and appraisal process.
Another key impact on the HR department is the requirement for employees (both new and existing) to be trained on the SMCR Conduct Rules.
New courses will need to be created (and attendance enforced) to educate staff on the rules, and how they apply to specific roles. It’s also stipulated by the FCA that Conduct Rule training should be tailored to suit various job roles – a one-size-fits-all approach is not sufficient.
As well as training on Conduct Rules, managers will also need to be educated on the Certification Regime, to help them identify where and when employees may require re-assessment (such as a switch in the role).
How to prepare – and how technology can help
With the SMCR extension just months away, financial firms should now be busy getting their house in order. While HR in such organisations is likely already tied up in red tape, it’s essential to find time to prepare for the new regulations.
And, though there’s no dedicated SMCR software to support your endeavours, technology can still lend a helping hand.
Indeed, once you’ve established the fundamental process changes required for compliance, technology is key to embedding them across your organisation.
For example, adjustments to your core HR platform can help automate the flagging of certified roles, establish training as a fundamental part of on-boarding, and incorporate certification processes into annual employee reviews.
Incorporating SMCR into your workflows in this manner may seem burdensome in the short term, but once configured correctly, your software will play a vital role in supporting your ongoing compliance.
The Senior Managers and Certification Regime (SMCR) extension come into play this December, requiring almost 50,000 UK businesses to put in place new processes that foster a culture of increased accountability.
With implications right across the workforce, HR departments will be required to drive the change, in collaboration with senior management, risk and legal teams.
To help you prepare for the new regulations, a range of useful resources are available via the FCA’s website – but HR leaders may also look to their HR software provider for a helping hand.
Technology is sure to play a key role in enforcing the new certification and training processes required under the SMCR regulations – so a flexible HR system and a supportive vendor will be a key asset in helping you maintain compliance.