The role of HR in SM&CR in the Finance Sector

Are you aware of the important role that HR will play in the Senior Managers and Certification Regime in the finance sector in 2018?

As you’ll already know, the Senior Managers and Certification Regime (SM&CR), has been in place since March 2016 and applies to banks, building societies, PRA investment firms and credit unions. It will be extended to almost all regulated firms in 2018. But what many firms are unaware of is the important role of HR in the effective application of the regulations and ensuring legal compliance.

How should HR prepare for the upcoming changes?

Although it is not expected to be implemented until Q3 2018, you should still be taking steps, from an HR perspective, to:

  • Identify those individuals undertaking ‘senior management functions’ or ‘certification functions’ and find out what regime proposed applies to your firm.
  • Draft Statements of Responsibilities for each and every senior manager, which lays down what they are personally liable for. This must be in line with the firm’s comprehensive and up to date Management Responsibilities Map that sets out the firm’s management and governance arrangements.
  • Re-assess your pre-employment checks. Remember those individuals undertaking ‘senior management functions’ require pre-approval (by the FCA or PRA) in order to perform their role and those who are not senior managers, but who fulfil ‘certification functions’ must be certified as fit and proper to undertake their function.
  • Re-evaluate your appraisals processes to include an annual certification requirement. Remember that those individuals who perform certification functions must be certified as fit and proper every year.
  • Update relevant employment contracts, for example, you may wish to make compliance with conduct rules a contractual obligation or state that appointments are subject to the regulator’s approval in the case of senior managers.
  • Consider the impact these changes will have on your HR policies and procedures, for example, disciplinary procedures.
  • Identify all those subject to the conduct rules and provide training so that all affected individuals understand the rules and how they apply to them. These rules apply to all employees whose role concerns financial services activities. Therefore, receptionists, security guards, catering staff and cleaners working in financial services firms are excluded from the rules’ application.

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James Tamm

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