The Senior Managers and Certification Regime (SMCR) consultation published last week, will place new responsibilities on senior staff, largely replacing the current Approved Persons Regime.
Additionally, firms themselves will have to certify many other staff for their integrity and competence. The Treasury will set the date for implementation separately – likely to be in 2018.
The shift has been given a warm welcome by the SimplyBiz Group chairman Ken Davy, who says it will drive reckless and criminal advisers out of the industry.
But what does it mean for portfolio advisers in practice?
Lorraine Mouat, senior regulatory consultant at TCC, says: “The FCA’s rules will define which roles are Senior Management Functions, which will depend on the type of firm involved. The focus will be on the most senior people in the firm and anyone who holds a Senior Management Function will need to be approved by the FCA before they start their role.
“Firms will therefore need to make sure that the senior managers are suitable for their roles. Every senior manager will have a duty of responsibility, and the FCA will need to give such managers ‘prescribed responsibilities’ – an exception will be sole traders or firms with limited permissions.”
Individuals in many other roles, including those deemed in a position to do “significant harm” may have to be certified by the firm itself on the basis of their fitness, skill and propriety at least once a year.
Mouat adds: “The Certification Regime is a new Financial Services and Markets Act requirement for all firms and covers people who are not senior managers but whose job means that they can have a big impact on consumers, the firm or the market as a whole.
“These individuals will not be approved by the FCA, but firms will be expected to certify and confirm at least annually that those individuals have the right level of care, skill and experience, and therefore suitable to carry out their role.
“It is likely that Certified Functions will be based on functions that would have been Significant Influence Functions under the current regime and will include anyone who supervises or manages a Certified Function, either directly or indirectly.”
A small number of larger firms may be subject to an “enhanced” regime – the FCA says this will be less than 1% – with smaller firms falling under the baseline “core” regime.
