What is the Senior Management and Certification Regime and why does it matter to insurance brokers?

What does the SMCR do?

Senior Management and Certification Regime (SMCR) is a programme designed by the Financial Conduct Authority (FCA). It first applied to banks and building societies but is now being extended to include all firms regulated by the FCA.

The programme is designed to make the right people accountable for their decisions. It aims to improve trust within the financial services industry. By encouraging ethical behaviour and senior management to take responsibility, the FCA hopes to foster a sense of trust between firms and its customers.

The core regime is split into three elements. Under the Senior Managers Regime, Senior Managers must be approved by the FCA, and must be assigned written responsibilities set out by the FCA. This means, if there’s a breach of any FCA requirement, the senior manager responsible can be held personally accountable.

The Certification Regime applies to “people who are not Senior Managers but whose job can cause significant harm to the firm or its customers”. They must complete an annual certification.

Finally, all staff members need to comply with the FCA’s Conduct Rules, receiving training where appropriate.

What are the SMCR conduct rules?

All employees must:

  • Act with integrity
  • Act with due skill, care and diligence
  • Be open and co-operative with the FCA, the PRA and other regulators
  • Pay due regard to the interests of customers and treat them fairly
  • Observe proper standards of market conduct

A Senior Manager will be personally responsible for making sure all staff members are trained to understand how the above impacts their individual roles. Senior Managers must follow four Additional Conduct Rules which do not apply to all staff. They must:

  • Take reasonable steps to ensure that the business of the firm for which they are responsible is controlled effectively
  • Take reasonable steps to ensure that the business of the firm for which they are responsible complies with the requirements and standards of the regulatory system
  • Take reasonable steps to ensure any delegation of responsibilities is to an appropriate person and oversee the discharge of the delegated responsibility effectively
  • Disclose appropriately any information of which the FCA or PRA would reasonably expect notice

In essence, the FCA is encouraging firms to improve their workplace culture. Are members of senior management comfortable taking responsibility for the actions of their team? Is everyone in the business doing the right thing?

The extension of the SMCR

The programme will apply to insurance brokers from 9th December 2019. SMCR will “improve culture and governance in the sector”.

Just 56% of brokers are aware of SMCR, according to Ecclesiastical. This is a worrying stat, given that the programme encourages those at the top to be held personally responsible for wrongdoings. We’re already prepared for the commencement, with all staff required to certify that they are a ‘fit and proper person’.

What are the consequences of SMCR?

Individuals rather than firms are being fined and punished for serious breaches. This is in-line with the theme of individual accountability.

Is it time for a cultural change?

One of the strongest drivers of the programme is bringing about a cultural change in which governance and accountability is the big focus. There is still an industry stigma and any steps towards improving customer trust can only be a positive thing.

Here at Romero, our visions and values aren’t just written in a brand book gathering dust in our drawers. We live and breathe our motto to treat customers exceptionally. Our team knows to put our customers first and do right by them, other colleagues and the business. Everyone here is part of the Romero family and we strongly believe that’s what makes us so different. Get in touch if you’d like to chat to our expert team.