The compliance change all regulated firms need to know about

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The compliance change all regulated firms need to know about

Published 3 June 2019

Most FCA solo-regulated firms will have to implement SMCR by the end of this year. David Sims, employment partner and head of the SMCR practice at law firm DAC Beachcroft tells you everything you need to know.

REGULATION never stops, and this can make it hard for smaller financial companies to stay on top of the latest developments. This may explain why the upcoming Senior Managers and Certification Regime (SMCR) has gone largely unreported among peer-to-peer platforms and other fintechs. But with an implementation deadline of 9 December, and an estimated six month integration period, there is no time to lose.

David Sims, a partner at the employment group at law firm DAC Beachcroft, has already started working with some larger firms to prepare them for the new regulatory requirements, and he has some advice for P2P platforms and fintech firms that have yet to make a SMCR plan.

“The first thing you need to know about SMCR is that its aim is to drive cultural change,” says Sims. “It requires firms to assign responsibility for every aspect of the business, gives firms more responsibility for ensuring key staff are fit and proper, and applies conduct rules to virtually every staff member.”

SMCR was born out of the Parliamentary Commission on Banking Standards, which was created to investigate the reasons behind the financial crisis. “They concluded that the current regime wasn't fit for purpose,” says Sims.

The commission found that it was difficult to identify who was responsible for the various problems faced by UK banks during the financial crisis. So they decided to create a new regime which would hold senior managers accountable in a much more easily identifiable way.

Under SMCR, it is the firm’s responsibility to ensure that senior managers, certified persons and other members of staff can carry out their roles effectively and in compliance with the regulation. This will involve ongoing training, and the implementation of new processes and internal systems.

“For most small firms, it ought to be relatively easy to implement the responsibilities mapping requirements of SMCR,” says Sims. “A greater challenge for those smaller firms is the requirement to set up new systems and procedures that perhaps they don't have at the moment, for example to satisfy the new fitness and propriety requirements of SMCR.”

Some of the larger firms have already started putting SMCR planning into place, and Sims says that “if you’re a large firm, my advice would be if you haven’t started doing this yet, start now.”

For smaller fintechs, Sims recommends budgeting at least three or four months to get all of the systems and processes in place.

“If you are a small firm with a relatively simple governance structure then a couple of quarters should leave you with enough time to implement,” he says. “There are HR aspects, legal compliance, governance issues and number of policies and procedures to create and update.

“From a regulator's perspective this is about cultural change and so firms need to buy into that. Plan early, don't be afraid of it and it could have a positive impact on your business.”

Authors

David Sims

David Sims

London - Walbrook

+44 (0)20 7894 6327

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