7 March 2017 will mark a year since the commencement of the
Senior Managers Regime (SMR) for banks, building societies, credit
unions and PRA-designated investment firms. This date is also
significant since it will be the go-live date for the following
requirements which form part of the SMR:
The Conduct Rules which apply to the wider body of
staff working in the firms concerned; and
Deloitte continues to work closely with individuals holding
Senior Management Functions (SMFs) and those in SMR Offices within
the relevant firms. We have set out below the key questions which
firms and their SMR teams should be looking to answer to ensure
readiness for these new requirements. We examine the steps that
they should be taking to prepare and what they will need to do
going forward to ensure compliance and good practice in these
Have you issued certificates to all Certified employees?
In line with the upcoming deadline, firms should have now issued
certificates to all employees who are captured under the
Certification Regime. Firms should also be reviewing their
processes which will support the ongoing requirements of the
Certification Regime; in particular to ensure that new joiners into
Certified roles are identified, trained and that ongoing fitness
and propriety can be assessed.
Does your approach to assessing fitness and propriety align
with industry guidance and good practice?
The Certification Regime puts the onus on firms to identify and
annually certify individuals as being fit and proper to carry out
certain roles. We have seen that the SMF with this responsibility
differs from firm to firm, however a single SMF must be allocated
the responsibility for this process. The Banking Standards Board
(BSB) has this week published guidance and good practice for assessing
fitness and propriety with further information on what each element
of fitness and propriety means and how it might be assessed. In
light of this firms should be considering their approach to
assessing fitness and propriety to ensure that it aligns with the
BSB's guidance and good practice.
Are your current staff adequately trained in the Conduct
From 7 March 2017 the individual Conduct Rules will apply to
Certified Employees and to almost all other staff within the
relevant firms. The regulatory guidance in COCON 2.3 states that firms should take
reasonable steps to notify individuals of the rules which apply to
them and ensure that they understand how these rules apply to their
role through the provision of suitable training. A reminder
of the Conduct Rules is below:
Is an effective Conduct Rule breaches reporting framework in
The initial implementation date of the SMR marked a shake-up in
terms of the procedure for notifying the FCA of breaches of the
Conduct Rules by SMFs and Certified Employees. In line with the
application of the Conduct Rules to the wider staffing body, from 7
March 2017 firms will also be required to record Conduct Rule
breaches by any employee to whom any of the Conduct Rules
In line with this new requirement, firms' SMR Offices should
be in the process of reviewing the Conduct Rule framework in place
to ensure it is fit for purpose. Going forward they should also
ensure that the process in place to assess and report breaches of
the Conduct Rules is fit for purpose and remains effective.
Is there a process for training new joiners in the Conduct
Going forward, Conduct Rules training will also be required for
new joiners (both Certified Employees and other relevant staff).
Many firms are requiring existing staff to complete their annual
training at the same time as the firm carries out its annual fit
and proper assessments. In response to our clients' feedback on
a lack of availability of tailored online compliance training,
Deloitte has partnered with Thomson Reuters to produce a suite of
training on the Senior Managers and Certification Regime and the
new Conduct Rules. Firms can subscribe to this training by
contacting Thomson Reuters and more information about it can be
found at: https://risk.thomsonreuters.com/en/compliance-training-courses/senior-managers-and-certification-regime-training.html
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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