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13 July 2020

Advisers have been warned not to put their requirements under the Senior Managers and Certification Regime “on the back-burner” despite an extension to the regulatory deadline.

Compliance experts have urged the industry to satisfy its regulatory responsibilities as soon as possible in light of the Financial Conduct Authority’s decision last week to delay certification requirements under the rules by four months.

Advice firms must now complete their first “fitness and propriety” assessment of certified persons by March 31 next year, rather than December 9, 2020, in an attempt by the regulator to alleviate pressure for those “significantly affected” by the coronavirus pandemic.

Richard Nuttall, director of compliance policy at The SimplyBiz Group, said the regulator’s “sympathetic approach” to those firms affected by the coronavirus was to be applauded. But he warned the extension was not a “concession for all firms to delay their fit and proper assessments”.

Mr Nuttall said: “We believe the FCA will expect the majority of firms to be still working towards the December deadline, and we would encourage firms, where possible, to aim to have these assessments completed and their certified persons uploaded to the directory by the original date of December 9.

“Whilst the regulator has not yet provided, and may not provide, a definition of how a firm might have been ‘significantly affected’ by Covid-19, we would suggest that you thoroughly consider whether the impact on your firm could be categorised as significant before extending this deadline.

“Above all else, keeping to the original deadline will give you some small peace of mind that your responsibilities in this area have been met.”

The FCA is also in the process of consulting to extend the deadlines of more requirements under the SMCR, to “ensure they remain consistent”.

These proposals would see the extension also applied to the date SMCR conduct rules come into force, the deadline for submitting information to the FCA register and the date by which relevant employees must have received training under the regime.

Maurice McDonald, managing consultant and head of conduct and controls at Bovill, said he knew of a number of firms which were behind schedule with implementing the certification aspects of the regime.

He said: “Whilst this gives firms a little wriggle room, they should not assume that this window will be extended again or that they can put this change on the back-burner.

“As we see things start to settle down into the ‘new normal’ in the next few months firms need to recognise that implementation timescales may need re-planning, but they will need to be delivered.”

Mr McDonald warned the FCA would not have any sympathy for firms which left their SMCR preparations too late and in the second half of next year still did not have adequate processes and policies in place.

In its update last week the regulator encouraged firms which were able to provide information before the December deadline to do so, stating it still intended to publish details of certified employees on its financial services register starting on that date.

Mark Turner, managing director of compliance and regulatory consulting at Duff & Phelps, warned the FCA’s extension was not an invitation for firms and their staff to act in a way that was not compliant with the conduct rules.

Mr Turner said: “Whilst many firms may welcome the opportunity to delay training and assessment of staff, they should be mindful of the risks associated with doing so.

“The FCA expects individuals working within regulated firms to conduct themselves appropriately at all times, regardless of this extension.

“By delaying training or fit and proper assessments firms are increasing the risk that staff don’t know what is expected of them, and ultimately that some individuals might not be fit and proper.”

Mr Turner warned there would “no doubt” be investigations into poor behaviour as the industry emerged from the coronavirus crisis and individuals’ actions become subject to “intense scrutiny”.

The SMCR was introduced to banks in 2016, but was rolled out to the wider financial services industry last December in the hope it would strengthen market integrity by making individuals more accountable.

Last year the FCA warned many firms in the banking sector were still often unable to explain what a conduct breach looked like in the context of their business.

As a result the watchdog announced it would be upping its supervision of how companies are embedding conduct rules and were meeting their responsibilities under the SMCR.

Souce: https://www.ftadviser.com/regulation/2020/07/10/advisers-warned-not-to-put-smcr-on-back-burner

By Ian Beardmore

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