By 9 December this year, all FCA firms under SM&CR must submit a SoR (Statement of Responsibilities) and Enhanced firms must also produce a Responsibilities Map. Samiha Shaikh offers a guide to priorities.
Following on from our previous articles on the SM&CR, detailing the outcomes from the Final Policy statements by FCA for solo regulated firms, the FCA released further guidance to aid firms in their implementation of the regimes.
In March it published ‘FG19/2 Senior Managers and Certification Regime: Guidance on Statements of Responsibilities and Responsibilities Maps for FCA firms’. The document provides practical advice and information on preparing Statements of Responsibilities (‘SoRs’) and Responsibilities Maps. It includes some key questions to ask yourselves and contains case studies and examples of both good and poor practice.
The table on the opposite page shows some key elements of the guidance, relevant to Core and/or Enhanced firms.
So how are you getting on so far? From our conversations with broking sector clients, contacts and the FCA, we believe that many firms, particularly smaller ones, are not making sufficient progress with their SM&CR implementation plans. Although smaller firms are likely to fall into the Core category, and therefore have fewer requirements than Enhanced firms, it’s vital that everyone, regardless of size, is ready for SM&CR by the 9 December deadline.
Let Senior Managers run it
We’ve also observed some other trends. In many firms, compliance or HR functions are leading their SM&CR implementation plans. Although they clearly have an important role, it’s essential that Senior Managers own and are driving these projects. Experience has shown that in the banking sector, SM&CR was more effectively implemented and embedded in those instances where senior management was fully engaged.
Opting for Enhanced
Some firms are paying close attention to the thresholds for being an Enhanced firm (for example, total intermediary regulated business revenue of £35m or more per annum). This reflects the current acquisition and consolidation activity in the broking sector and the resulting growth of firms and their revenues. Because of this, some firms close to the threshold are choosing to implement the Enhanced firm requirements of SM&CR.
Even though SM&CR implementation is more of a challenge for larger, complex firms which fall into the category of Enhanced, it’s still being seen as a positive change to provide greater clarity over individual responsibilities and accountabilities.
What are your priorities right now?
As the countdown to the deadline continues, you should focus on progressing your implementation plans. The FCA expects SM&CR to be fully operational by 9 December. There has been plenty of consultation and notification of the requirements and timelines, so the FCA doesn’t see any reason why firms should fail to comply.
Summary of FG19/2 Guidance
Should be clear and easy to understand.
Should contain enough information to clearly describe actual responsibilities, without unnecessary detail.
Should be self-contained and not refer to other documents.
Not the same as a job profile – should focus on what the Senior Manager is accountable for.
Must be appropriate to the Senior Manager’s role.
Any prescribed responsibilities that are shared or divided must be appropriately justified and clearly explained.
Must be applicable to the legal entity.
Overall responsibilities (Enhanced firms only):
Must clearly describe responsibilities for the main functions and activities of the business. Ensure that a Senior Manager is accountable for every area of a firm’s activities, with no gaps.
Any overall responsibilities that are shared or divided must be appropriately justified and clearly explained.
Should not be allocated to a second or third line function.
Other responsibilities (Core firms only):
Must clearly describe any other business functions or activities for which the Senior Manager is accountable.
Must have a clear distinction if other Senior Managers are responsible for similar areas.
Must be applicable to the legal entity.
Provides an overview of how a firm is managed and governed.
Should be a practical document that is clear and easy to understand.
Contain key information about governance bodies, senior management reporting lines and Senior Managers’ responsibilities.
Prepared at legal entity level but if part of a group, should show the firm relates to the group.
Mixture of graphics and text.
Should have neither very long, complex maps nor be too minimal.
Key priorities are:
Ensure that Senior Managers are fully engaged in your SM&CR implementation projects and plans. At the same time, your project team should also include staff from across the business, including compliance and HR who will be affected by the administrative and practical aspects of SM&CR.
Prioritise the elements of SM&CR that must be implemented by 9 December. You’ll have a further
12 months to complete certain elements such as the initial certification process for Certification staff and training for other Conduct Rules staff.
If you’re not sure where to start, consider undertaking a wider review of your firm’s governance arrangements. This might be a useful springboard for your SM&CR implementation plans.
Don’t over-complicate your SoRs and Responsibilities Maps. The recent FCA guidance emphasises that they should be clear and easy for regulators, Senior Managers and others in the firm to understand.
Seek assurance from your internal audit functions or from external sources over your SM&CR implementation. For example, through a project assurance review, readiness review or gap analysis against SM&CR requirements or review of documentation (for example, SoRs, Responsibilities Maps, handover procedures).
Think about what SM&CR will look like in the context of business as usual. It’s not all about getting over the line. It’s about how you implement and embed the accountabilities and practices on a day-to-day basis.
Do get in touch if you need support with your SM&CR implementation plans. Written by Samiha Shaikh in our London office.