Defined by the FCA as “a catalyst for change”, the SM&CR represents an opportunity to enhance healthy cultures and effective governance in financial institutions, requiring greater accountability both individually and within a firm, as well as setting a new standard of personal conduct and competence.

The regime aims to reduce harm to consumers, strengthen market integrity and restore confidence in the industry.

The First Anniversary

The date of the 9 December 2020 was the first anniversary of the SM&CR implementation and the requirement to complete Fit & Proper (F&P) certification. The aim was that by this date this would all be completed and signed off.

Nevertheless, due to coronavirus pandemic, the deadline for solo-regulated firms to have undertaken the first assessment of the fitness and propriety of their Certified Persons has been delayed from 9 December 2020 until 31 March 2021. In any case, the firms able to provide this information before this date, were encouraged to do so.

The F&P should detail the requirements for the individual to obtain their own evidence, based on their relevant role, and how they can demonstrate they have met the requirements of honesty, integrity, reputation, competence and capability, financial soundness.

With the Fit & Proper review done, the next step is to update the relevant details in The Directory.

Potential Challenges

Managing SM&CR manually through spreadsheets and word processors means a single person access at a time and potential for errors for a costly activity. Without considering the need of keeping information up to date, maintaining audit trails, documentary evidence, ensuring data remains consistent across numerous documents and so on.

Moreover, Senior Managers, by their very nature, are busy people, so will they need to step back from some of their roles to allocate enough time to it?

One of the big challenges is also the statement of responsibilities: the requirement for people to sign exactly what they are liable and responsible for.

The SM&CR is likely to increase the overall operating costs of the advice industry. This is because companies will need to pay for consultants, lawyers and third-party training providers to see that the certification process is done right.

Simplifying Certification Regime

In order to significantly reduce the administrative burden the key is leveraging a simple process of data selection which is automatically stored and evidenced, meanwhile the responsibility maps and statement of responsibilities are automatically generated.

Also the Directory should be simplified, by merging its members’ existing SM&CR data, collating the new

information required, presenting it in a comprehensive layout and exporting it into the format required by the FCA.

The SM&CR solution should be cloud-enabled, accessible from anywhere. Furthermore, access to data should be granted any time for continuous data management, monitoring and reviewing.

Scalability is another characteristic to look at, to accompany the growth in dimensions and in organisation complexity. A paperless process would complement the fitting solution for complying with the Regime, where relevant documentation is stored within its document management system as evidence.

In the search for solutions, RegTech can certainly help. But there is a risk that RegTech could be deployed as standalone point applications when, in reality, such solutions need to be part of a broader support, to simplify and speed up compliance and release of regulatory requirements.

The right answer is a holistic approach, integrating this competence with ad-hoc support through specific tools.

Automating the process and removing complexities you could significantly reduce the massive administration burden of annual submission and reporting changes to the FCA and definitively focus on the duties of responsibility in a timely, efficient and cost-effective manner.