Preparing for SM&CR: the road ahead for consumer credit firms and insurance brokers

15 March 2018

Following the FCA’s December technical paper on extending the Senior Managers & Certification Regime (SM&CR), firms may have hit the pause button on their implementation plans. In the paper, the Financial Conduct Authority (FCA) announced plans to delay implementation of the extended regime from late 2018 to mid to late 2019.

With such a busy regulatory agenda this year, this extension will provide firms with some welcome breathing space. But our experience in helping banks to implement the regime suggests that firms would be well advised to use this extra time to start their preparations early. The personal nature of the SM&CR means that early engagement with staff is critical to getting things right. The SM&CR is a very personal regime for senior managers, so it’s important for firms to provide adequate time for senior managers to understand their role, remit and how they need to interact with others. Additionally, it’s important for firms to have good initial and ongoing communications with staff, particularly with HR and compliance teams as well as the impacted individuals.

The SM&CR is a complex regime, which can be difficult to navigate. Governance structures will be a major area of focus in firms’ preparations. It’s important to consider early on how a firm’s existing governance arrangements support individuals to comply with the requirements, be that documenting reasonable steps under the Senior Manager Conduct Rules or developing Statements of Responsibilities and Management Responsibility Maps for enhanced firms. In addition, the regime has knock on implications for other areas such as contracts, tax, remuneration and job descriptions, all of which will take time for firms to work through.

The regime will create different challenges for different types of firms. In the consumer credit space, firms should review governance arrangements early to allow enough time to make and embed the changes needed before the regime goes live. Ensuring the right level of quality and consistency across these documents could be a particular challenge for those in the consumer credit market. This is because their management and governance arrangements overall may not yet be as developed as firms in other industries, as they’re still relatively new to FCA regulation.

For insurance brokers, the SM&CR represents a significant step in the increasing regulatory focus on brokers, which has been developing for a number of years. Large broking groups are likely to face challenges in how they maintain robust governance over a number of different business segments. In many cases, groups may need to focus on any conflicts of interest that exist in their business and how they manage these conflicts. For many small and medium sized brokers and intermediaries, formalising governance and responsibilities will generate challenges in assigning and carrying out key accountabilities.

Whichever sector you’re in, the message is clear - starting to work through the implications of the SM&CR now will pay off as the implementation date approaches.

John Coley | Director
Profile | Email | +44 (0)7720 897942

Sarah Nield | Director
Profile | sarah.nield@pwc.com | +44 (0)7739 874039
Follow @SarahNield_PwC

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