SMCR – asset and wealth managers, your time starts now

SMCR is already BAU for banks. Now it’s coming to FCA solo regulated firms from 9 December 2019.  Are you ready?

As a replacement for the Approved persons regime, you could argue the Senior Managers and Certification Regime – or SMCR – is no big deal. After all, there are plenty of other priorities to think about, especially as SMCR won’t be a requirement until December 2019, with a transitionary arrangement extending even beyond that.  But our banking sector experience suggests such an attitude could be a costly mistake.  While everything is possible given time, being properly prepared will take exactly that – time.  And for asset and wealth managers, that time starts now.

Why the urgency? As the title suggests, SMCR has two distinct segments: the Senior Management and the Certification:

The Senior Management segment remains an FCA based process, with application forms and an interview process.  Interestingly, the FCA has already signposted that the duty to consider Value for Money, a remedy under the Asset Management Market Study, will be embedded in SMCR .

It is the Certification element that may generate the biggest implementation challenge, as the firm itself will carry the responsibility for the administration, ongoing management and associated self-reporting.

These are just the top half dozen highlights of what that means in practice:

  1. creation of an interlocking set of statements of responsibility for all regulated activity across all entities within SMCR, whether the activities are performed in-house or outsourced, with the associated implications for structure;
  2. ongoing maintenance for subsequent personnel and organisational changes;
  3. consideration of the impact on governance, HR policies, T&C schemes and processes / record keeping including those that apply to joiners, leavers and in appraisals;
  4. training which spreads across the entire organisation with the inclusion of conduct within the regime.
  5. regulatory reporting;
  6. preparation of regulatory applications and support for senior managers before regulatory interviews.

Importantly, outsourcing does not remove you from the scope of SMCR.  Your firm will still be responsible for services you outsource – and will need to allocate that responsibility to one of your senior managers.

Overall, the breadth of these impacts makes SMCR a significant challenge when it comes to how, not just what, to implement, as the regime is proportionate with the less stringent requirements required of sole traders vs. large asset and wealth managers.

Catalyst is uniquely positioned to assist asset and wealth management clients with SMCR in a smart and cost effective manner, using our market-leading experience of regulatory driven change in the banking sector, which implemented SMCR back in 2016.

We combine this expertise with industry-leading business and operating model design experience across the asset and wealth management sector with regulatory knowledge, training expertise and implementation skills.

If you’d like to discuss your requirements and find out more about how we can help you implement and embed SMCR efficiently, please contact us.

Note: This opinion piece was first published by Catalyst prior to the Sionic merger

About the author

My consulting experience includes outsourcing, process improvement, M&A, finance, fund development and product development. Today my main focus is the funds arena and associated regulatory change.