Financial compliance in the UK is an area in which the Financial Conduct Authority (FCA), the UK’s regulator has the final say and an area which is seeing a huge amount of changes.
Over the last decade or so and since the 2008 Financial Crisis in which there were significant conduct failings, leading to the creation of the Senior Managers and Certification Regime, known as ‘SMCR’ (find out more). Such manipulations included those of the London inter-Bank Offered Rate (LIBOR), the FCA have sought to majorly change how the industry operates.
The 2008 Financial Crisis highlighted to the UK public, the government and the FCA that the ‘way’ in which compliance was practiced as well as how it was perceived needed an overhaul. One of the biggest issues which has continuously been identified by the regulator is the lack of personal responsibility that has existed within UK finance.
Compliance in most companies and financial firms has, until now been seen as ‘something for the compliance department.’ This has meant that a single person or a small number of people in a compliance team within a company have been ultimately responsible for everything compliance-related. However, this has in practice meant that should a financial advisor for example fall foul of compliance-related issues, they can pass the buck to the compliance department, who will need to sort out the issues at hand.
What is SMCR?
The SMCR is a new regime, which has been introduced by the FCA from December 2019 and which must be fully complied with by 9th December 2020, implements a new set of standards for financial compliance. Senior managers, and those of senior levels within all solo-regulated FCA-authorised companies will need to take on more personal accountability and responsibility.
This is in direct reflection of the business responsibilities their roles require. As the FCA see it, just as the senior management within companies have increased responsibilities for the running and success of a company, so too should they with regards to the compliance of their company. In a major change to the previous blame culture which has existed in the industry, there will be clearly determined rules and regulations for who is responsible for what, at all levels.
Furthermore, there will be increased emphasis of firms certifying and overseeing the actions and responsibilities of their own staff. Although senior management will need to be directly authorised by the FCA, staff who are lower down the pecking order will need to be certified by their firm.
Importantly, SMCR replaces the previous Approved Person’s Regime (APR) as of 9th December 2019 and all solo-regulated firms will need to comply with the new processes and requirements.
Who Is Subject to SMCR?
Al solo-regulated FCA-authorised firms in the UK will need to comply with the SMCR and its requirements. The only people working in these companies who are exempt from the regime are the ancillary staff (such as receptionists, security guards and similar.) Those who need to comply include all companies offering FCA-authorised financial advice, including mortgage and pension advisors, brokers and even all companies offering any form of consumer credit.
This means that everyone from a company offering dentures in Manchester to a large financial advisory in the centre of London will need to comply with the SMCR. Importantly, there are also very clear potential punishments and penalties for those who break the determined conduct rules of the regime ranging from potentially hefty fines to being struck off altogether by the FCA. this is all designed to push the industry and those involved away from blame and into the future, where personal responsibility and accountability is everything.