As of 9 December 2019, the Financial Conduct Authority (FCA) extended its Senior Managers and Certification Regime (SM&CR) to ensure it now encompasses solo-registered firms too.
The change has been implemented with the goal of setting a universal standard of personal conduct within the finance industry. The SM&CR was already effective in banking firms prior to 9 December 2019.
Under the new rules, this system will therefore also apply to any FCA solo-registered firm that is authorised by the Financial Services and Markets Act 2000 will need to ensure they carry out all the necessary checks on their employees. This process is commonly referred to as ’fit and proper’ checks.
What is SM&CR?
The SM&CR serves as a replacement to the Approved Persons Regime (APR). It builds upon the FCA’s objective to enforce standards across the finance industry whilst providing a method for firms to hold their staff accountable.
SM&CR demonstrates ways in which firms are advised to regulate their employees in order to minimise detriment to others and improve the level of trustworthiness attributed to the financial market. It does so by striving to encourage staff to acknowledge ownership of their actions, improve behaviour across the entire office hierarchy and ensure firms and all the individuals they employ comprehend and can demonstrate who has which role within the office.
If you require any further details regarding the recent amendments made by the FCA, please see the latest FCA guide to the Senior Managers and Certificate Regime. This guide explains the specifics of the associated checks and what is expected from firms that the SM & CR now apply to.
Which firms are now included within the SM&CR?
This will depend upon the remit of the work carried out by the individual firm in question. The FCA also supply a helpful decision-making tool for those who would like further clarification. The FCA’s tool assists in determining whether a firm is classified as Limited Scope, Core or Enhanced Firm. It’s crucial to note that irrespective of the classification that applies, all firms must nevertheless adhere to the Fitness and Propriety section of the SM&CR.
What is the ‘Fit and Proper’ Test?
The ‘fit and proper’ test is an employers’ guide that is used when determining an individual’s fitness and propriety to complete the duties associated with their role.
The elements of the ‘fit and proper’ test comprise of:
- Honesty, integrity and reputation
- competence and capability
- financial soundness
Which Job Roles are Affected by the SM&CR?
- Senior Managers
- Non-Executive Directors (NEDs)
- Certification staff
Which Checks Should be Carried Out?
The FCA requires firms that meet the set extended criteria of SM&CR to meet the following
requirements as a minimum:
Criminal Record Checks
Individuals applying for Senior Management positions must declare their criminal history, which is then evidenced by the corresponding firm by arranging for a criminal record check to be carried out. For applicants that have lived abroad, firms need to decide if a criminal record check is needed from the relevant country the individual previously lived and/or worked in.
References must be obtained from all previous employers covering at least the last six years. In cases where the candidate has breached Conduct Rules, firms are obligated to disclose any and all disciplinary actions that were taken during the previous six years. Firms must also disclose any findings that indicate the applicant’s conduct is anything other than fit and proper.
How Can Care Check Help with SM&CR checks?
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