20 years: Compliance & asset management
In this video, Stephen briefs us on UK's Senior Managers and Certification Regime, or “SMCR”, He runs through the background and genesis of the new rules, as well as key aspects of the new regimes and the Conduct Rules which now impact most of those working at investment firms. He finishes by speaking briefly about regulatory enforcement actions that the FCA has taken.
In this video, Stephen briefs us on UK's Senior Managers and Certification Regime, or “SMCR”, He runs through the background and genesis of the new rules, as well as key aspects of the new regimes and the Conduct Rules which now impact most of those working at investment firms. He finishes by speaking briefly about regulatory enforcement actions that the FCA has taken.
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11 mins 51 secs
Senior Managers and the Certification Regime or SMCR aims to reduce harm to consumers and strengthen market integrity by creating a system that enables firms and regulators to hold individuals to account.
Key learning objectives:
Understand the background of the UK\'s Senior Managers and Certification Regime (SMCR).
Outline the five core objectives of the SMCR
Understand how SMCR applies to Senior Managers
Understand how SMCR applies to Certified Staff
Understand how SMCR applies to Conduct Staff
Outline the regulatory enforcement actions taken by the FCA
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The SMCR regime has its roots in the flurry of post-Global Financial Crisis rulemaking activity. The UK Parliament discussed the new rules for a long time before it passed legislation in December 2013. This was only implemented for banks in March 2016, for insurers in December 2018 and eventually for much of the rest of the industry in December 2019.
The new regime replaces the previous Approved Person regime under which the FCA pre-approved all individuals carrying out certain activities in firms. It aims to act as a “lever” to drive cultural change within organisations in the industry.
Senior managers are the most senior decision-makers in a firm; that is, those individuals with the greatest ability to inflict damage or effect on market integrity. Firms must now recognise these individuals; and apply to the FCA for pre-approval under one or more "Senior Management Functions."
The other key criteria are that every such Senior Manager needs a "Statement of Responsibility," a stand-alone document detailing what they are responsible for. The aim here is to avoid responsibilities falling through the gaps and ensuring that a regulator can identify the particular person in any given firm responsible for any activity in that firm.
Every Senior Manager is often subject to a legal duty of responsibility for which the Senior Manager responsible for a specific area of business may be held liable if he or she has not taken appropriate action to avoid or stop a breach.
Certification staff have the potential to do serious damage to either the company, its clients or the reputation of the industry. In the past, these individuals would likely have been approved by the FCA, but they will now be "certified" initially and periodically by the firm itself to ensure that they are, and remain, "fit and proper."
The CEO of Barclays was fined a total of 642 thousand pounds and forced to repay 500 thousand pounds in bonuses for failing to behave with proper ability, care and diligence. He breached Conduct Rule 2 in the way he acted in response to an anonymous letter received by Barclays in June 2016, which claimed to be from a Barclays shareholder.
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