What is the SM&CR? And why was it introduced?

In the aftermath of the 2008 financial crisis, The Parliamentary Commission for Banking Standards (PCBS) was established in the UK to investigate the causes of the crisis and propose reforms. The PCBS ultimately recommended that senior management must be held more accountable and personally liable for their decisions and actions.

The SM&CR was introduced as a regulatory framework designed to enhance accountability within financial services firms.

The legislation was passed in December 2013 which led to its application to the banking sector from March 2016.

What is the scope of the SM&CR?

The SM&CR applies to, but not limited to, firms such as banks, building societies, credit unions and insurance companies.

Initially it applied to a select few types of financial services firms but has since been extended to cover all solo-regulated firms except benchmark administrators. Insurers were also brought fully into the regime in December 2018.

Around 47,000 firms fall under the scope of the SM&CR.

Within these firms, the SM&CR emphasises individual accountability and therefore applies to individuals within these firms based on seniority and their roles and responsibilities.

In terms of how the scope could be improved in the future, there is ongoing discussion about whether non-financial misconduct (such as sexual harassment, racism, and discrimination) should also be considered a breach of the Conduct Rules.

What is the purpose of the SM&CR?

Key objectives of the SM&CR include:

• improving accountability of senior individuals for their actions and decisions, thus strengthening market integrity and protecting consumers.
• further strengthening cultures of ethical behaviour, integrity and professionalism within financial services.

• ensure robust risk management and effective governance.

There’s also the importance of clarity around how firms and individuals understand their roles and responsibilities which the SM&CR aims to address.

By clearly defining who does what, it helps prevent confusion and ensures effective governance within organisations.

How many components are there in the Senior Managers and Certification Regime?

There are three key components in the Senior Managers and Certification Regime. These include:

1. Senior Managers Regime

   This area focuses on senior management accountability and the importance of senior managers having specific responsibilities outlined in the Statements of Responsibilities (SoRs). It also outlines “Prescribed Responsibilities” including specific focus areas including risk management and compliance, for which senior managers are accountable for.
   
   

2. Certification Regime

   This regime covers individuals performing specific roles that could significantly impact the firm, and the importance of these individuals to be certified as fit and proper. Individuals must be certified annually.
   
   

3. SMCR Conduct Rules

   These rules apply to almost all staff, not just senior mangers. They set the expected standards of behaviour including integrity, honesty and treating customers fairly.

The role of online learning in navigating SM&CR

Navigating this crucial regulation within the financial services industry requires businesses to provide high quality, regularly updated, engaging and accessible training for all employees to ensure ongoing compliance.

The right training can:

• Create a culture of compliance
  

High quality training should help create a culture of ethical behaviour, professionalism and integrity required by the SM&CR regulation of financial services firms.

• Stay on top of new regulations
  

Your SM&CR training should be regularly reviewed and updated by industry experts to ensure continued compliance in the face of ever-changing regulations.

• Enhance leadership skills
  

With the right training, learners will develop essential leadership skills and a deeper understanding of strategic planning to drive organisational success.

• Improve risk management
  

A key driver of the introduction of the SM&CR was poor risk management. Introducing the right training helps set the standard for the business in managing risk.

• Always remain compliant
  

Continual, high-quality training ensures as your business grows, new hires and existing employees continue to uphold the required standards to comply with regulations such as the SM&CR.

Ultimately, the Senior Managers & Compliance Regime is a complex regulation that must be understood by all employees within financial services firms.

Providing the right training ensures employees are efficient in their learning and understanding of this crucial regulation.

Choosing the right vendor for SM&CR training

With the above in mind, what should you consider when choosing the right compliance learning provider? 

Subject matter experts

Is the learning content developed by or with subject matter experts, ensuring quality?

Engaging learning

Is the material delivered in an engaging format for learners?

Comprehensive training material

Is the course content comprehensive enough to meet the needs of your firm?

Regular assessments

Does the training include regular assessments designed to test and ensure learners have retained vital knowledge?

Reputation and track record

Does the vendor have a good reputation and track record with financial services training?

 

Our Governance, Risk and Compliance training is CPD assured and is written in partnership with industry experts to ensure you always get the highest quality, engaging eLearning. 

Senior Managers and Certification Regime Summary 

A key theme of the SM&CR is that it focusses on accountability, particularly with senior management within financial services, while ensuring the highest standards are upheld by financial services firms to protect the consumer and uphold market integrity.

Its components address senior managers specifically, but also individuals who play key roles within financial services firms along with the rest of the organisation who all have a key part to play in ensuring compliance and upholding the required standards of the SM&CR.

How you deliver SM&CR training to your employees is crucial in adhering to this important regulation.

Find out more about our SM&CR training and how, as the #1 provider of financial services training in the UK, we’re supporting financial services firms across the UK in remaining compliant with financial services regulations.