The Senior Managers and Certification Regime (SMCR), first launched by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) in March 2016 for the banking sector, will complete its rollout to the remaining 47,000 FCA solo-regulated firms on 9 December 2019.
The SMCR requires all staff at all levels to be trained. Firms that are new to the regime must implement effective training by the 9 December deadline and all impacted firms must have training programs to demonstrate ongoing compliance.
LEO GRC (formerly Eukleia) has worked extensively with a wide range of firms to provide both ‘ready to go’ and custom SMCR training solutions. We have seen the training challenges firms face under the SMCR and have developed a range of tried and tested solutions to meet those challenges.
This guide includes links to useful resources that we have developed and published in relation to the SMCR and covers:
- What are the main aims of SMCR?
- SMCR timeline and key dates
- SMCR: What we’ve learned so far
- Applying the SMCR to different roles
- SMCR: Why a blended learning approach works
- SMCR: Exploring the grey areas
What Are the Main Aims of the SMCR?
When the final SMCR rules for the banking sector were unveiled, Martin Wheatley, the former chief executive of the FCA, said they would “embed personal accountability into the culture” of banks. He also described their potential for “improving standards across the industry”, and said they would emphasize the importance of effective decisions, good behavior and a sustainable culture of responsible behavior.
The SMCR replaced the long-established Approved Persons Regime (APR), designed to address many of the criticisms leveled at its predecessor. Requiring an entirely new mindset, the ability to communicate this integral change to everyone within an organization has been seen as crucial, along with offering tailored training with messaging relevant to individual job roles.
SMCR Key Dates
March 2016 - First applied to banking sector
December 2018 - Extended to the insurance sector
December 2019 - Final rollout to FCA solo-regulated firms
SMCR: What We’ve Learned So Far
As we approach the final rollout, most firms will have their training and implementation plans well underway. The FCA ‘stocktake’ report, released in August 2019, is a useful guide to the FCA’s expectations. The feedback was broadly positive, but highlighted five areas where shortfalls were observed:
- Conduct Rules training
- Measurement and evidence of culture change
- Fit & Proper assessments
- Regulatory References
- Responsibilities Maps and understanding the ‘reasonable steps’ test
SMCR Training Challenges
A tailored approach to training is key given the different roles and responsibilities that lie within an organization. Take an in-depth look at training challenges presented by the SMCR (and discover practical advice on how to successfully manage those challenges) with our webinar.
As lessons were learned from the initial rollout in 2016, specific needs were identified to address the role of Line Managers in SMCR training. This was one of the areas called out in the FCA stocktake.
Insurers and asset managers have had the opportunity to learn from the experience of the banking sector.
SMCR: Why a Blended Learning Approach Works
As a specialist in providing custom learning solutions for the governance, risk and compliance sector, we've been fortunate to work with a large range of firms on their SMCR training programs since 2016.
SMCR: Exploring the Gray Areas
As we’ve journeyed through the implementation of the SMCR, it has become clear that certain areas have raised more questions – or were more open to interpretation – than others. Part of the reason for this is the lack of significant governance-related disciplinary cases that could serve as precedents.
Andrew Tyrie, Chairman of the Parliamentary Commission on Banking Standards (PCBS), stated in 2013 that “A lack of personal responsibility has been commonplace throughout the industry. Senior figures have continued to shelter behind an accountability firewall”. Could the same criticism be made under the SMCR?
Another aspect that has raised questions and caused practical problems is the scope of ‘conduct’ in the context of the Individual Conduct Rules and the annual ‘fit and proper’ assessment for Senior Managers and Certified Persons. This must be seen in the context of the evolving debate about ‘non-financial misconduct’ which has also added to this challenge.