Senior Managers and Certification Regime (SMCR)
Since December 2019, the FCA has been regulating all firms licensed under the Financial Services and Markets Act (FMSA) via the Senior Managers and Certification Regime – SMCR.
The FCA has published a guide to how SMCR affects regulated organisations: prior to December 2019, this was included all building societies and UK-incorporated banks and credit unions, as well as some investment banks and insurers. However, with it now covering an estimated 50,000 organisations, senior management from across the spectrum of brokerages to consumer credit will need to have a robust solution in place.
The SMCR was introduced in order to make it easier to hold key figures in the financial sector to account when problems occur. Whilst the introduction at the end of 2019 was quite abrupt, SMCR-compliance now fits neatly into FCA screening packages.
SMCR Employment Screening
SMCR contains several obligations: chief among them is to make sure that “employees are fit and proper” to carry out their role, within the SMCR guidelines. Organisations must take the required steps to ensure that employees are “fit and proper” according to their critical roles in the business – and that’s where a robust screening package can help.
Credence has been providing advice to our FCA-regulated clients since SMCR was introduced in 2019, and has the expertise to put together bespoke packages to fulfil the “fit and proper” requirement. You can be confident that the screening of Certified Persons fulfils their obligation to self-regulate, and that the information provided in application for Senior Management Functions is true.
CRC & SMCR
SMCR requires standard level criminal record checks – showing spent and unspent convictions – for people who will be performing a Senior Management Function. If it’s for a non-executive director who is not going to be in a Senior Management Function, it’s still mandatory to conduct a criminal record check, although only at basic level.
On the other hand, if the person will be taking on a Certification function, criminal records are unnecessary. Nonetheless, it’s common practice for organisations to carry them out – although they can not be standard level, only basic.
Firms must decide what other checks they wish to carry out in order to assure themselves of a potential hire’s fitness and propriety.
The FCA handbook has these as the Fit and Proper criteria:
1. Honesty, integrity, reputation
2. Competence and capability
3. Financial soundness
Other Checks to Consider
Thie above may sound vague, but the FCA gives guidance on checks that can confirm a person’s proprietary:
1. Directorship checks
2. Criminal record checks
3. Qualification certificates
4. Financial integrity checks
As part of our standard FCA screening package, Credence also provides:
1. Negative media checks
2. Sanctions database checks
3. Financial services register checks
For organisations that need to comply with SMCR, rescreening is essential. The FCA expects that organisations reassess their key persons regularly – in the event that they are a Certified Person, the company must provide the FCA with annual proof that shows they continue to be appropriate to perform their role.
Whilst HR departments are free to choose how this assessment is conducted, Credence recommends rescreening where there has most likely to have been a change whilst the person has been working, such as:
Negative media searches, directorship checks, financial integrity and services checks and compliance database checks.
If you would like more information on SMCR, or how a bespoke FCA/SMCR package can be put together to suit your needs, please do not hesitate to contact our team any time.