SM&CR – The Last Piece of the Puzzle (Part 1)

Eleven months ago, when the world was not so upside down, the SM&CR clock started to tick towards the first anniversary of the SM&CR implementation and, therefore, the requirement to complete Fit & Proper (F&P) certification.  The aim was that by the 9th December 2020 this would all be completed and signed off.  Unfortunately, the impact of the COVID-19 pandemic has caused issues with people working from home and furlough which will impact on the certification process for some firms.  Earlier in the summer, HM Treasury agreed to delay the deadline until 31 March 2021 for firms who have been ‘significantly affected’. However, the FCA commented that if firms are able to certify staff earlier, they should do so.

Speaking to our firms, the majority still believe that, despite this year’s disruption, the earliest opportunity to Certify their staff within Fit and Proper requirements is good business sense.  We agree and hope that most firms will still work towards the original deadline of the 9th December for this reason.

The Senior Manager who holds the prescribed responsibility for the Certification Regime will be responsible for ensuring this has been completed and should have active involvement in this process. F&P should also be part of the existing T&C manual and would include any disciplinary or performance processes.

The Fit & Proper process

The F&P process should be held within the staff handbook or on the firm’s intranet and be accessible to all members of staff to whom certification applies. It 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 required areas of:

SM&CR – The Last Piece of the Puzzle (Part 1)

The role of the F&P assessor should be agreed at the firm but we would expect this to be held by a senior member of the firm and /or supervisor who is adequately trained.

We have broken down the process of carrying out fit and proper reviews into 3 stages:

  1. Inform the certified member of staff that you will be carrying out their review and give a timescale for them to obtain evidence on how they meet the three areas.
  2. Review the evidence from the person requiring certification and conduct the Fit & Proper assessment. Validate and challenge the information provided. If sufficient and all areas can be supported, certification is given. Full evidence and reasons must be documented and held on file. Certification can be via a ‘certificate or declaration that is signed and dated by both parties.’
  3. If the evidence cannot be supported or does not meet the required standards, a remedial plan should be put in place prior to the expiry of the annual certification deadline. If F&P still cannot be provided/agreed, certification cannot proceed and disciplinary action may be required. The adviser would have a right to appeal.

It is important that you allow sufficient timeframes for the collating and documenting of any evidence prior to annual certification renewal. The key is to ensure you hold regular assessments throughout the year as this will allow you to support your certification process and manage any issues that may appear without the additional pressure of deadlines and insufficient evidence.

With the Fit & Proper review done, the next step is to update the relevant details in The Directory, and we will cover this in part two of this series.

SM&CR – The Last Piece of the Puzzle (Part 1)

P.S. We’re are running a TALK webinar tomorrow, looking at exactly how to be prepared, which you can sign up to here.