The Analysis CSA


SM&CR: decide on a strategy


With the new regime a subject of intense industry debate, it is important to work out your plan for some sensitive decisions and conversations


Sara de Tute Board director, Credit Services Association info@csa-uk.com


The Senior Managers and Certification Regime (SM&CR) is a subject of much debate, not least at our recent Compliance Meeting that highlighted the complexity of an initiative that is actually intended to simplify and give greater clarity to senior managers’ roles and responsibilities. The CSA has responded to the FCA consultation on the extension of the SM&CR to consumer credit firms, and has noted some key areas needing clarification. So, what steps can members be taking to ensure a suitably ‘soft’ landing? One of the biggest challenges appears to


be around definitions. The definition of ‘income’ when assessing whether a debt-purchase firm should fall under the enhanced regime, is a good example. Some firms have already indicated, to the FCA, they would like to adopt key parts of the enhanced regime, believing them to be good practice. The FCA had urged those firms to engage with the consultation if they felt that the proposed criteria were inadequate or did not go far enough. In a similar vein, many have suggested that, when it comes to ancillary staff, the approach taken by the FCA may simply not have gone far enough, failing to include staff that should, in fact, be within scope of the Conduct Rules, particularly employees with access to information and systems. It has also been noted that certification may be missing some key areas of responsibility, especially ‘risk’. Under current proposals, firms will no longer be contributing to a


register of ‘approved persons’, as is the case under current rules. They may choose to publish details of senior managers themselves, to ensure transparency and as an indication of good governance.


Action now or wait? One of the debates at the Compliance Meeting was whether members should be preparing now, or waiting for the clarity of the final rules from the FCA. The weight of advice is to act early, with the day’s speakers noting that there are steps firms can take now. For example, they may want to take real-world breaches (even


their own) and consider how these might be dealt with. Would they be able to evidence the approach they took, to the FCA’s satisfaction? Another simple recommendation is to begin mapping out the roles


and responsibilities of senior managers, reviewing the accuracy of job profiles and establishing whether the individuals are appropriately qualified to occupy the roles under the new regime. This will create cultural and motivational issues, and shows why it will be imperative


December 2017


that the introduction of the new regime will be accompanied by advice and engagement from both compliance and HR professionals. Failure to involve and engage with senior managers early on, is likely to result in HR- related issues further down the line. Asking senior managers to assess and


understand their role and responsibilities, and demanding that they demonstrate their fitness and competence to carry out that role, is a delicate balancing act, and will require sensitivity. A senior manager who is moved out of a role or effectively ‘demoted’ because they are seen as not having the requisite skills


under the new regime, is unlikely to be happy and is likely to think that they have been treated unfairly. When it comes to certifying employees, firms would be wise to


create a dedicated certification committee and agree a structure for determining appropriate certification standards. This same committee could also enable the organisation to be consistent in its identification of, and response to, breaches of the conduct rules, by assessing and determining what constitutes a breach, and documenting those decisions for future reference.


Questions for firms In preparing for the new regime, firms will need to ask themselves questions. For example, how work is delegated, and whether there are sufficient controls and measures in place to monitor work passed down the line. Definitions are key too: are job descriptions accurate, or do they allocate too much or too little responsibility for certain tasks? Certification will need to be applied consistently throughout the


firm. This means getting it right at the front end to avoid problems later. Another question is which employees should be subject to the certification process: firms should beware an overzealous approach, which could introduce SM&CR obligations where they are not required, such as requirements to obtain regulatory references. There are also practical issues to consider. Have firms factored in


the time for DBS checks to be completed, or the volume of checks that may be required? Other issues include what to do if a manager decides they do not wish to be subject to certification, or sees a move from being ‘approved’ to ‘certified’ as a loss of status. Clearly, planning is essential. Even though nobody yet knows the


specifics of the regime, firms do know enough to get started, and that is precisely what they should be doing. CCR


www.CCRMagazine.co.uk 11


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