The essence of senior managers & certification regime (SMCR) is identical to that of APER: ensuring that companies adhere to the conduct of business rules (COBs) and that individuals demonstrate the requisite fitness and propriety – including at the recruitment stage.
However there is a significant difference with SMCR and that is the annual certification process, which requires regulated firms to certify once a year that employees who are in roles where, in the FCA’s words, ‘it’s possible for them to cause significant harm to the firm, its customers or the market more generally’ are fit and proper to perform their role.
These employee roles are known as ‘certification functions’ and firms are not only responsible for identifying employees who should be certified annually but also checking and certifying that they are fit and proper. Part of that process will involve obtaining regulatory references and criminal record checks (and ensuring that firm has the internal systems and controls functions to ensure that is carried out properly). An inevitable complicating factor to this process will be where a ‘certification function’ is the subject of internal disciplinary procedures.
It is not an exaggeration to say that SMCR has been a sea change in financial services conduct regulation. The FCA remains the ultimate arbiter of fitness and propriety but the certification process has created a heavy burden for firms with the corresponding increased risk of failing to meet regulatory requirements.
Richardson Lissack is able to provide unique insight and expertise in advising on SMCR compliance. Our Head of Financial Services Regulation was an FCA enforcement lawyer who advised on individual fitness and propriety in relation to numerous authorisation applications. We can advise both on a bespoke basis, and as part of a firm’s regular employee recruitment programme.