Retail Compass Summer edition 2019

Extension of Senior Managers and Certification Regime

Published on 04 July 2019

From 9 December 2019, retailers which offer or introduce finance or credit to their customers and are FCA authorised will need to comply with a new individual accountability and conduct regime known as the Senior Managers and Certification Regime (SMCR).

What is happening?

SMCR, which already applies to banks and insurers (amongst others), is set to be extended to all FCA authorised firms and will apply personal accountability and conduct obligations to almost all staff which work in regulated financial services, including the offer and provision of consumer credit.

Why does it matter?

For affected retailers, the impact of SMCR on its governance and staff can be broken down into three core parts:

  • Senior Managers Regime: This replaces the previous “approved persons” regime.
    • For most retailers which have the limited consumer credit permission, they will still only need one person to be approved by the FCA. This will now be known as a “senior manager function” – the current “approved person” will automatically convert in December 2019.
    • Senior managers will be under a new “duty of responsibility” and will need to have their roles and responsibilities set out in a “statement of responsibilities” which should be provided to the FCA.
    • The approval form and process for new senior managers will change considerably.

  • Certification Regime: This will require affected retailers to certify, at least on an annual basis, that all staff (including Senior Managers) who have an impact on how customers obtain or take out credit/finance, are fit and proper to perform their roles.

  • Conduct Rules: This will place conduct rules and obligations on staff carrying on consumer credit related activities at an affected retailer. Such retailers will need to train the relevant staff on the new rules and obligations.

What action should you take?

  1. Identify your current “approved persons” (soon to be “senior managers”) and other employees caught by the Certification Regime and Conduct Rules.

  2.  Draft a statement of responsibilities for new senior managers and ensure that they understand the new “duty of responsibility”.

  3. Assess whether employees caught by the Certification Regime are fit and proper and set up a process (including who is responsible for oversight) to ensure this certification is done at least on a yearly basis.

  4. Consider the training (and induction) needs of affected staff and your systems and controls to a) ensure that the new rules are complied with and b) notify the FCA of breaches of conduct.

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