SM&CR Feedback Policy Statement 19-20

The intended proposals

The purpose of this Policy Statement is for the FCA to clarify several industry queries about the Senior Managers and Certification Regime (SM&CR) – in particular, if admin staff, paraplanners (etc), are caught by the regime.

Main findings

The main findings were that:

  • Firms with a Head of Legal position do not need to register them under SM&CR.
  • Managers who are not Senior Managers still need to comply with the certification regime.
  • Roles which do not have the scope to choose, decide on behalf of a client i.e. administration staff do not need to be registered under SM&CR.

Our thoughts?

How come Heads of Legal get out of SM&CR and I don’t?

Legal functions are already heavily regulated by other bodies, including the Law Society. The FCA’s main concern is that should they be brought into scope for SM&CR, then this would put such positions at risk of disclosing information which would usually be protected under legal privilege.

It is not a get out of jail free card though – they still need to comply with the Conduct Rules and the Certification Regime. Also, if your Head of Legal also holds another position within the firm, compliance oversight for example, then this would bring this individual into the scope of SM&CR.

I manage staff who are covered by the Certification Regime, however, my role is not a Senior Manager role. SM&CR does not apply to me, does it?

It would not be a very fair system if a manager is not caught by a set of rules but their staff are. Under the Certification Regime, firms must classify as Certified Staff anyone who supervises or manages a Certified Function but is not a Senior Manager.

My staff includes administrators, paraplanners etc. Are they classified as client dealing functions? Does SM&CR apply to them?

Over the last few months this question has been asked at all of our SM&CR events, and until today we were only able to provide our “gut thoughts” on it…

The FCA has finally clarified that SM&CR does not apply to individuals where their role has no scope to choose, decide or reach a judgement on something. They have gone on to say that it is down to the firm itself to decide if the role meets these criteria, based upon the firm’s structure. Confused yet? Let’s look at two roles and if SM&CR would apply:

Admin staff

Admin staff might answer the phone, greet clients when they arrive at your offices – they might even sit in on meetings and type up what is discussed and agreed. However, usually they do not make a decision which could impact a customer, nor does their role require them to exercise judgement on the suitability of the advice being given. As such, SM&CR would not usually apply to your admin staff.

Paraplanners

With our sister company Para-Sols being a specialist outsourced paraplanning firm – SM&CR and if it would apply to them was debated a lot. In our opinion, it is down to the level of involvement which a Paraplanner has in the client relationship. Whilst their reports are an important part of advice, in scenarios where it is the adviser who is responsible for discussing the report and advice itself, then the paraplanner is not likely to be caught.

However, if your paraplanner is involved in your client meetings and discusses the recommendations with your client, then you might want to consider applying the Certification Regime to them.

What you should do now

You should already be well on your way to getting everything in place for SM&CR and to identify any gaps ahead of the 9th December deadline. As such, this policy statement should hopefully clarify for you those few staff roles which you were unsure about.

If you have not started thinking about SM&CR or want more guidance on it, check out our dedicated SM&CR resource page which can be found here.

In the run-up to the 9th December, we will also be running SM&CR Implementation Days, this is a bespoke service aimed at firms who want a hands on support to implement the requirements of SM&CR. For more information on this, drop us a line!

SM&CR Feedback Policy Statement 19-20
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