SM&CR Indicators

The FCA has recently released positive and negative indicators in relation to the implementation of SM&CR. These indicators highlight what they expect Senior Managers and Certification staff to be doing in relation to fitness & propriety and training staff on the conduct rules.

We have broken the positive indicators down into easy, simple statements so you are clear on what the regulator expects you to be doing.

Fitness and Propriety Indicator

The FCA expects firms to demonstrate that they are making regular, thorough and consistent assessments of the fitness and propriety of Senior Managers and Certification staff. Their examples of what they expect are:

  • F&P checks identify new issues with staff (some staff will fail the checks).
  • The relevant SMFs actively oversee the process and demonstrate appropriate reporting.
  • Competence assessment shows thought has been given to each specific role.
  • Development plans are put in place as a result of F&P assessments.
  • Adequate training on firms F&P approach for managers.
  • A detailed process that’s integrated with existing performance management processes.
  • Panels (including Senior Managers) convened to consider marginal cases.
  • Appropriate criteria and a robust process in place for identifying certification staff on an ongoing basis.
  • Regulatory references disclose misconduct/ concerns promptly.

What does this mean for your firm?

We recommend implementing the following process into your firm:

Step 1 – Approach the adviser and let them know that you plan to complete their fit and proper assessment, and let them know the timescale. The adviser then has time to gather evidence of their honesty, integrity and reputation, competency and capability, and financial soundness.

Step 2 – Undertake the fit and proper review and sign them off. If there are no further development areas highlighted this will be an annual review of the advisers fit and proper.

Step 3 – If certified staff are not signed off initially, they will need additional time to prepare further evidence needed in order to be signed off. If they are still unable to be signed off then disciplinary action may need to be taken.

Conduct Rules Indicators

When training staff on the conduct rules the FCA expect:

  • Relevant SMF can demonstrate oversight of training.
  • Interactive training with realistic scenarios.
  • Examples/scenarios to show the variation of how the rules apply to each type of role.
  • Line managers are involved in the delivery of training.
  • Training is regularly reinforced and built into on-boarding.
  • Effectiveness of training is assessed.
  • Training is put in the context of the overall regime.
  • Regime/Conduct Rules are presented as a step-change in regulatory expectations.
  • Conduct is linked to F&P and performance assessments.

What does this mean for your firm?

Line managers need to be actively involved with the training of staff and this needs to be evidenced. Training will need to be thought out and evidenced to show what the advisers learning outcomes were as opposed to all training being computer-based. Firms will need to think through some scenario-based training that is specific to employees job roles, and ensure this training is provided to staff on an annual basis.

Senior Managers will need to complete individual conduct rules training as well as Senior Manager Conduct Rules Training.

Alanis Daniel – Junior Adviser Support

 

SM&CR Indicators