SM&CR indicators

We wrote recently about the extension of SM&CR implementation periods for solo-regulated firms: The deadline for firms to assess the fitness and propriety of their Certified Persons is delayed until 31 March 2021. The FCA also proposes to extend the deadline for the following requirements from 9 December 2020 to 31 March 2021: 

  • the date the Conduct Rules come into force, for staff who aren’t Senior Managers or Certified Persons;
  • the date by which relevant employees must have received training on the Conduct Rules;
  • the deadline for submission of information about Directory Persons to the FS Register.

Further information on SM&CR implementation can be found here.


Indicators

Meantime, it is of interest to note the indicators (positive and negative) that the FCA has published. These give a clue as to the regulator’s thought process around any review of SM&CR implementation that will take place. It is a pretty sure bet that there will be a review!

 

Fitness and propriety

 

Positive indicators

Negative indicators

F&P checks identify new issues with staff – some fail.

F&P checks identify nothing new; a ‘rubber stamp’ exercise.

Relevant SMFs actively oversee the F&P process and ensure appropriate reporting.

Relevant SMFs have delegated the F&P process and cannot demonstrate adequate oversight and reporting.

Competence assessment demonstrates that thought has been given to each specific role  (including managers).

Competence assessment is perfunctory and/or cannot be evidenced as being objective.

Development plans are put in place as a result of F&P assessments.

No development needs are identified.

Managers are adequately trained in the firm’s approach to F&P and understand what is expected of them.

Managers are poorly trained and/or have inadequate guidance as to what is expected of them in terms of F&P.

A detailed F&P process has been introduced and integrated into existing HR/performance management processes (it covers what happens if someone fails F&P).

F&P is considered (without review) to already be covered by pre-existing HR/performance management processes and/or there is no process for dealing with someone who fails F&P.

F&P panels – which include senior managers – are convened to consider marginal cases.

Process for considering marginal F&P cases either does not exist or is rarely convened.

Firm has appropriate criteria and a robust process for identifying certification staff on an ongoing basis.

Identification of certification population is ad hoc and/or a burdensome manual process.

Regulatory references disclose misconduct/relevant concerns and are produced in a timely manner.

Regulatory references fail to provide the necessary information and/or are not available promptly.

 

Conduct Rules

 

Positive indicators

Negative indicators

Relevant SMF can demonstrate appropriate involvement/oversight of training.

Relevant SMF has limited knowledge of training approach and/or has delegated with limited oversight.

Training is interactive and uses realistic scenarios.

Simple computer-based training only – with little attempt to tailor to role.

Examples/scenarios draw out nuances of how the rules apply to each type of role.

Training only gives obvious examples of breaches – for example, fraud or not attending mandatory training – which do not draw out nuances.

Line managers are involved in training delivery, not just HR or the project team.

Training is delivered by a HR, compliance or the project team with no line management involvement.

Training is reinforced regularly and built into on-boarding.

Training is a one-off exercise and/or not built into on-boarding.

Effectiveness of Conduct Rules training is assessed.

No measures of the effectiveness of conduct rules training.

Training is put in the context of the overall regime.

Not put in context of the overall regime.

Regime/Conduct Rules are presented as a step change in regulatory expectations.

Regime/Conduct Rules are presented as nothing new, simply ‘what we do already’.

Conduct is linked to F&P and performance assessments.

Conduct rule not linked to F&P or performance assessments.

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About the Author

Technical Manager - Often referred to as the Oracle or the Sage, Alistair has a wealth of financial services experience. He is our go-to Technical Manager and enjoys nothing more than a complicated conundrum. Feel free to test his renowned knowledge by getting in touch.

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