Why firms need to stay in shape for SM&CR
The end of 2019 was marked for many consumer credit firms by a sprint to the line on 9th Dec. This was when the first stage of the SM&CR implementation was required. With only a short period of recovery firms are starting to think about getting in shape for the second stage at the end of 2020. On Dec 9th the new legislation becomes fully effective. Firms who are non-compliant after this date could find themselves facing action from the FCA.
For all firms SM&CR marks a big cultural shift. Legislation is now not just about successfully completing a series of sprint stages; it demands more stamina. Firms need to work on compliance day-to-day and strengthen their weaknesses. Firms who don’t stay in shape will quickly fall behind and risk being picked up by the regulator, resulting in uncomfortable investigations and the possibility of prosecution.
So, what are the implications for firms going forward? Well, these fall into 2 categories – further actions that firms must take before 9th December 2020 (when SM&CR comes fully into effect) and actions firms must take to keep fit for the future.
Before 9th December 2020 all firms must have trained all staff, except for ancillary staff, on the new conduct rules. This applies to regulated and non-regulated activities and firms will need to be able to demonstrate that staff have been appropriately trained. Core and Enhanced firms will also need to have a Senior Manager with a prescribed responsibility for the delivery of training. Fit and proper assessments must also be carried out for firms with certification staff.
To stay in shape firms will need to develop appropriate procedures and apportion responsibility for them. These tasks include:
- Conducting on-going fit and proper assessments for Senior Managers, Certification staff and Non-Executive Directors.
- Reviewing and updating Statements of Responsibilities, including notifying FCA of significant changes.
- Establishing and implementing procedures for the appointment of Senior Managers, Non-Executive Directors and Certification staff including, where appropriate, conducting Disclosure & Barring Service checks.
- Recording and reporting to FCA breaches of the Conduct Rules
- Providing regulatory references in the prescribed format where requests for references are received from other firms. These references will need to cover at least the last 6 years.
- Providing updated references where new information comes to light after a reference has been given.
- Delivering on-going training on the Conduct Rules.
- Updating and implementing revised compliance monitoring plans in order to include SMCR related activities.
This second stage of the SM&CR implementation is going to be a lot tougher for firms. Under SM&CR the FCA will be able to ‘pull’ individuals where their firms don’t keep pace with the field. With such personal liability at stake the motivation level to stay in shape should be high.