The impact of SM&CR on solo-regulated firms’ HR

Having introduced the Senior Managers and Certification Regime across financial institutions and dual-regulated insurers in recent years, the FCA is about to replace the Approved Persons Regime for solo-regulated firms on December 9th 2019.

This change will have a huge impact on HR departments, who will need to ensure that everyone working in the financial services sector works to a high standard of personal conduct.

Who does SM&CR apply to?

It will apply to all solo-regulated businesses, from sole traders upwards. For these businesses, the regulations are applied in a way that best suits the size of the firm:

  • Limited Scope: these firms will be exempt from some baseline requirements and will typically have fewer Senior Management Functions. Firms that already have exemptions under the Approved Persons Regime will be Limited Scope.
  • Core: firms in this tier will have to comply with the baseline requirements.
  • Enhanced: this will apply to a small number of firms whose size, complexity and potential impact on consumers or markets warrant more attention. These firms will have extra requirements.

How will I know which category applies to me?

You should already have been contacted with an assessment. You can notify the FCA via its website, if you have any queries about your assessment.

What does this mean for my HR function?

You must ensure that everyone working within your firm meets the appropriate requirements: The Conduct Rules set standards of behaviour within financial services and will apply to nearly all employees in your business.

The Senior Managers Regime is designed to ensure that there is a dedicated statement for everyone in a senior role, setting out their responsibilities and accountabilities.

The Certification Regime applies to people who have the potential to cause harm to your firm, your clients or the market. It is your responsibility to make sure that these people are fit to carry out their role, and you must certify this at least every year.

What should I be doing?

You have probably already done many of the initial elements – including submitting forms K and O, which must be filed with the FCA by November 24th. You will be automatically converted to the new scheme on December 9th.

I don’t have time to sort all this new HR out – what should I do?

SM&CR means making significant changes to many of your HR policies and procedures, including:

  • Disciplinary procedure
  • Referencing and background checks
  • Employee handbook
  • Whistle-blowing policy
  • Training and competence policy

In addition, you may need to create new policies and procedures to cover the requirements of SM&CR.

It also impacts your performance management process, your recruitment and on-boarding procedures and your contracts. In fact, SM&CR has an impact on practically every aspect of your HR function, and you will need to get your firm up to speed quickly and efficiently to make sure you are compliant.

If you’re not sure about how to integrate SM&CR into your financial firm, contact us today for quick, reliable HR advice and practical help.

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