The FCA has published its feedback and final rules to support the introduction of the senior manager and certification regime (SM&CR).

    The regulator published its SM&CR policy statement at the end of July. It is aimed at clarifying queries from financial services firms, and in particular, if staff such as administrators and paraplanners are caught by the regime. 

    The main feedback the FCA gave was 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 or decide on behalf of a client, that is, administration staff, do not need to be registered under SM&CR.

    Here are some of our thoughts on the questions this may raise, and the potential implications for your firm.

    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 legal functions be brought into scope for SM&CR, this would then put such individuals at risk of disclosing information usually protected under legal privilege.

    It is not a get out of jail free card though – heads of legal 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, such as compliance oversight, then this would bring this individual into the scope of SM&CR anyway.

    I manage staff who are covered by the certification regime, but my role isn't a senior manager role. SM&CR doesn't apply to me, does it?

    It wouldn't 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 and paraplanners. 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 now 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.

    The regulator has gone on to say it is down to the firm itself to decide if the role meets these criteria, based on the firm’s structure. Confused? Let’s look at two roles and if SM&CR would apply:

    Admin staff

    Admin staff might answer the phone and greet clients when they arrive at your offices. They might also sit in on meetings and type up what is discussed and agreed.

    However, they usually don't make a decision which could impact a client, 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, the issue of whether or not SM&CR would apply to paraplanners was debated a lot.

    In our opinion, (which you can read more about here) it is down to the level of involvement a paraplanner has in the client relationship.

    While 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.

    Yet if your paraplanner is involved in client meetings and discusses the recommendations with your client, then you might want to consider applying the certification regime to them.

    So 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 9 December deadline.

    As such, this policy statement should hopefully clarify for you those few staff roles which you were unsure about.

    You can find a host of useful resources on getting ready for the SM&CR here. You can also sign up to one of our masterclasses - hosted by Apricity Compliance - and register your interest for our upcoming SM&CR white paper 

    Start the discussion

    Add a comment