Anyone who has had the dubious pleasure of taking a driving test in the UK will remember frequent reminders from their instructor to clearly emphasise checking your mirrors and making nice early signals so the examiner can see you do this in the test. While there is a lot of process around SMCR more importantly there are key changes to both attitudes, approach, and job roles that SMCR drives.
Make sure you can demonstrate and signal the step change that the FCA is expecting by following our top six steps to success.
1. Document your Fit and Proper (F&P) Assessment
Make sure your line managers are applying the assessment consistently across all your people and that you are covering all three tests:
Honesty, integrity, and reputation
Financial soundness
Competence and capability
This means training line managers on how to do the assessment, considering moderation exercises for the first wave, and give clear examples of sources of information they could be using to conduct their assessment.
Avoid storing up future employment law issues by making sure that your firm is treating its people consistently across teams. A good practice is to train HR (and particularly talent acquisition type roles) in the assessment so it can be built into the recruitment cycle.
The fit and proper assessment should not be a tick box exercise that everyone passes. It should result in a realistic learning and development plan. All your certification regime people must have an actionable learning and development plan no matter how many years they have been in their current job role. The FCA expects everyone to have a learning and development plan and some development points in there which are specific to the individual.
2. Check your F&P assessments are linked to your appraisal process.
Check the result of the F&P assessment is consistent with the appraisal. You don’t want to find you have an individual on a performance improvement program under the appraisal process and yet have deemed them fit and proper under the F&P assessment.
Feed in points from the appraisal to the F&P assessment and vice versa. If there were conduct issues during last year make sure that is properly reflected in the F&P assessment. This doesn’t necessarily mean an automatic failure against the F&P assessment but do establish internally agreed steps or guidance for what a pass looks like, what a failure looks like, and what the grey areas are. Use that to form the basis of your training and discussion.
3. Submit information about Directory Persons to the FCA
Many of you will have already figured out that sending some information about certified persons to the FCA register is not just a simple copy and paste exercise. If only data were all stored in the same system, in the same location, in a manner capable of being extracted.
Remember that you have a maximum of only seven business days to update any information that goes out of date for certification function holders. This clock does not start from the point that the individual remembers to tell the firm, it starts from the point the information is factually out of date. This means making sure you engrain this deadline into the minds of your certification function holders and that you have a swift means of getting updates through to the FCA. This is another key point for your training.
4. Train everyone on the conduct rules
FCA has been abundantly clear that training on the conduct rules must be meaningful. Your training must ensure that delegates properly understand what the conduct rules mean for them in their job at your business. This makes it difficult to take an off the shelf course unless you can adapt it to your business.
Consider getting your SMFs to deliver the training, or at the very least to take an active part in the training. Use case studies and examples. Consider providing line managers with packs to use at team meetings.
Don’t forget to keep a record of who attended and make sure individuals log the training need in their learning and development plans.
5. Establish a way of identifying and managing potential conduct breaches
Implementing the conduct rules will have a delta for every firm. FCA will consider your business to have missed the point of the conduct rules if you deliver messages about doing more of the same. Make sure that you are clear internally about what has to change.
As you will have guessed, we have a saying at Leaman Crellin: mirror, signal, manoeuvre. As with the examiner of your driving test you need to be obvious to the FCA about what you are doing.
As with conduct rules implementation, be really obvious about how you identify breaches, be clear that you are proactively looking, you are not just sitting back waiting for a whistleblower.
Make sure that you have a clear and consistent way of reviewing potential breaches that is fair to your people but also for the FCA’s benefit that you are very clearly taking the whole thing very seriously.
6. Make sure your SMFs understand their respective responsibilities
The responsibility of an SMF is so much more than just what is written in their statement of responsibilities (SoR). The SoR should be clear and succinct, and only cover what you have to cover from a regulatory perspective (why accept regulatory liability when you don’t need to?). the job description, as with all good JD’s, should be clear about the totality of the role.
The point here is that every good senior manager will be relying on other very good senior managers to do their jobs. That might be to provide computer systems, screen or onboard staff, operate processes, onboard and manage clients, etc. Each senior manager needs to have a conversation with all their peers to understand where one responsibility stops, and another starts.
This is an iterative process. You cannot start this soon enough. Never wait to have those discussions under the spotlight of the regulator when something has gone wrong. Always make sure you have those discussions internally, privately, away from third parties.
We have operated and implemented SMCR in large banking firms and have learned good and poor practices for success, including how to pass the regulatory interviews.
We have templates and guides that build on these experiences so that you can benefit from our expertise at reasonable costs (compared to hiring a team of consultants) and we make them available for sale in our online shop.
Get in touch if you would like advisory support, a sounding board for your programme, or indeed if you would like our increasingly popular specialist one on one training for senior managers and how to protect themselves.
