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2 October 2019

SM&CR: FAQs for CMCs

The Senior Managers and Certification Regime (‘SM&CR’) will apply to all regulated FCA Firms from 9th December 2019. It replaces the existing ‘Approved Persons’ regime and seeks to bring greater accountability across the regulated sector.

All of our Claims Management Clients are Limited Scope Firms and these FAQs are to assist Limited Scope CMCs that hold Temporary Permission or are recently authorised prepare for the SM&CR.

What should my Firm apply for?

There are two Senior Management Functions that apply to Limited Scope Firms, namely the SMF29 – Limited Scope Function and the SMF16 – Compliance Oversight. You need only apply for SMF16 if your turnover is 1 million or more (i.e. you are a Class 1 CMC), but most CMCs must have a SMF29 holder (unless you are a sole trader with no employees).

Do all Directors/Senior Managers in my Firm need to apply for SMF29?

No. There should be one person applying for SMF29 in a Firm. You should make a decision on who that person should be based on their role and responsibilities. If you are required to have a SMF16 holder (i.e. because you are a Class 1 CMC), you may want to give that responsibility to another Director to ensure appropriate apportionment of responsibilities. However, it is to be noted that the SMF29 holder can hold the SMF16 too.

What if I am a Sole Trader?

Sole Traders with no employees need not apply for SMF29. In the unlikely event that a Sole Trader has employees and an employee performs a Senior Management Function, the Sole Trader will need to apply for SMF29. We believe that for most of our Sole Traders, SMF29 will not apply. If you are a Sole Trader whose turnover is £1 million or more, you will need to apply for SMF16.

I don’t have my Full Permission yet, why do I need to apply now?

The FCA has been proactive with CMCs that are currently in the middle of the application process. Many have received emails from their application Case Officer with an October deadline for completing their SM&CR Application. If you have received an email like this, you will have been sent links to the relevant forms to complete. If you need our assistance completing the Forms, please get in touch.

Do I need to draft a Statement of Responsibilities?

Not exactly, no. The prescribed responsibilities under the new regime do not apply to Limited Scope Firms such as CMCs. You will need to complete the Statement of Responsibilities (‘SoR’) Form but not all of it will apply to your Firm. Section 3.4 of the SOR will be most relevant. Sections 3.2 and 3.3 can be left blank as they do not apply to CMCs.

Do I need a Criminal Records Check?

Yes. If you are applying for a Senior Managers Function you will need to ensure that you register with the Disclosure and Barring Service (DBS), or the equivalent agencies in Scotland who run the checks. At SM&CR application you will need to provide a criminal records check, but this is not an annual requirement.

Do I need to supply a Regulatory Reference?

No. For Limited Scope Firms, only individuals newly appointed to an SMF role from 9th December 2019 will need a Regulatory Reference.

I haven’t received an email from the FCA about the SM&CR.

You most likely will. If by end of October you haven’t, please contact your application Case Officer or contact us for assistance.

I’m newly authorised, what should I do?

If you have recently been granted your full permission, congratulations! You can apply for the SM&CR via your online Connect page. If you are having difficulty finding the Forms, please contact us.

I’ve heard I need to complete Responsibilities Maps and a skills gap analysis!

Again, a lot of this won’t apply to CMCs. Limited Scope Firms are not subject to the same level of scrutiny as Core and Enhanced Firms. There are no prescribed responsibilities for CMCs. The requirement to produce a Responsibilities Map only applies to Enhanced Firms. The conduct of a skills gap analysis is only relevant if the SMF29 candidate is being newly appointed to the role.

Do my staff need to apply for the Certification Regime?

In the main, it is unlikely that staff working in the majority of CMCs are going to need Certification. The exception to this is if the CMC holds client money and has a CASS oversight function holder and where the CMC has an individual who is responsible for a significant business unit such as complaints handling. If you are unsure, please contact us for advice.

What training do I need to undertake?

As a Senior Manager applying for the SMF in your Firm, you must understand and comply with the Senior Managers Conduct Rules as well as the Individual Conduct Rules (i.e. general Conduct Rules). The Senior Manager Conduct Rules are as follows:

  1. You must take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively
  2. You must take reasonable steps to ensure that the business of the firm for which you are responsible complies with the relevant requirements and standards of the regulatory system
  3. You must take reasonable steps to ensure that any delegation of your responsibilities is to an appropriate person and that you oversee the discharge of the delegated responsibility effectively
  4. You must disclose appropriately any information of which the FCA would reasonably expect notice.

You must also ensure that within 12 months of 9th December 2019 (or the date from which you are granted your full permission) all staff (excluding ancillary staff such as cleaners and other staff not involved in the delivery of the financial service) are trained on the Individual Conduct Rules. These are as follows:

  1. You must act with integrity.
  2. You must act with due care, skill and diligence.
  3. You must be open and cooperative with the FCA and other regulators.
  4. You must pay due regard to the interests of customers and treat them fairly
  5. You must observe proper standards of market conduct

How you train this out to staff will be up to individual Firms.

If you have any questions regarding SM&CR please contact us at, CMC@thecompliancecomany.co.uk

By David Petty

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