Beyond the Buzz: What the SM&CR Reforms Really Mean for Your Firm

The Financial Conduct Authority (FCA) recently signalled a significant shift in its approach to the Senior Managers and Certification Regime (SM&CR).

While the initial announcement to streamline SMCR and reduce the burden on firms might have been met with a collective sigh of relief across the financial services industry, these reforms are about more than just deregulation. They are an invitation to refine and refocus our approach to accountability.

At Adempi, we've always believed that SM&CR, when implemented thoughtfully, is a valuable tool for fostering a culture of responsibility and improving conduct. We welcome the FCA's move towards simplification where it can be achieved without compromising the regime's core aims. This isn't about dismantling accountability; it's about making it more effective and proportionate. Two things that we can absolutely get behind.

So, what does this really mean for your firm?

A Welcome Mat for Simplification (But Mind the Step)

The headline from the FCA is clear: they are easing the regulatory burden.

For many firms, especially smaller and medium-sized ones, SM&CR can feel like a significant administrative undertaking.

The proposed changes aim to streamline processes and reduce unnecessary complexity.

Proposals include:

• Simplified SMCR forms: Form A, the most widely used firm has been revised to enhance usability, reduce duplication of information and improve data validation.

  
  

• Reduced Statement of Responsibility submissions: Firms would no longer need to submit a new Statement of Responsibility with every change. Instead the FCA would permit periodic updates.

  
  

• Extended Directory update window: Firms would have up to 20 business days to make most updates to the Directory, providing greater flexibility and reducing the compliance burden associated with

  maintaining accurate records.

  
  

• Streamlined Certification: A proposed move to eliminate overlap in certification roles—for example, individuals would no longer need to hold the “manager of certified employee” function if they already hold another relevant certified role. This will be welcome news for firms, especially when team structures or reporting lines shift.

  
  

However, simplification doesn't mean abdication. The FCA is keen to ensure that any easing of the regulatory load doesn't dilute the core purpose of SM&CR: holding individuals to account for their responsibilities and improving conduct across the organisation. Firms will still need to demonstrate that they have robust governance in place and that senior individuals understand their obligations.

The Enduring Importance of Accountability

While the regulatory scaffolding might be adjusted, the fundamental principle of accountability remains.

The "reasonable steps" defence, the clarity around Statements of Responsibilities (SoRs), and the overall expectation that Senior Managers will act with integrity and competence are not going anywhere.

This reform provides a timely opportunity to:

• Review and Refine SoRs: Are your current Statements of Responsibilities accurate, clear, and reflective of actual duties? Are they tailored to the firm's specific business model and permissions (whether that's Payment Services, Consumer Credit, or another regulated area)? This is a prime area where Adempi supports firms, helping to ensure these documents are robust and meet regulatory standards.

• Embed Conduct Culture: True accountability stems from culture, not just compliance. How are you fostering an environment where ethical behaviour is expected, modelled by senior leaders, and challenged when it falls short? The SM&CR reforms can be a catalyst for strengthening this internal culture.

• Focus on Senior Manager Functions (SMFs): Identifying who holds SMF appointments and ensuring they understand their specific duties and the FCA's expectations is crucial. The reforms may simplify how this is managed, but the what – the clarity of role and responsibility – is more important than ever. Further, the FCA’s observations on the proper use of the 12-week rule underscores the importance of having strong succession planning in place.

  
  

Navigating the Practicalities: Where Adempi Can Help

Implementing significant regulatory changes, even those aiming for simplification, can present challenges.

When it comes to SM&CR, firms often grapple with:

• Resource Constraints: Ensuring the compliance team has the capacity to thoroughly review and adapt existing frameworks.

  
  

• Lack of Clarity: Interpreting the nuances of updated guidance and how it applies to their specific business.

  
  

• Appointment Processes: The ongoing need for rigorous due diligence when appointing individuals to senior roles. This includes providing and securing accurate regulatory references – a process we frequently assist firms with.

At Adempi, we thrive on demystifying complex regulations and translating them into actionable strategies. Our work with firms includes:

• Assisting with Form A applications

  Ensuring that applications for senior managers to be approaved by the FCA present a strong case to the regulator.

  
  

• Navigating Regulatory References

  Providing expert guidance and support to compliance and HR teams in the often-complex process of obtaining and providing regulatory references for senior appointments.

  
  

• Advising and Training Senior Managers

  Equipping your senior team with a clear understanding of their responsibilities, the implications of SM&CR, and how to embed a strong conduct culture. We also prepare seior managers ahead of interviews with the FCA.

  
  

The proposed SM&CR reforms represent a thoughtful evolution of one of the FCA’s flagship regimes. They offer an opportunity to refine our approach to accountability, making it more effective and proportionate. By focusing on the core principles and leveraging expert guidance where needed, firms can adapt successfully and reinforce their commitment to sound governance and good conduct.

---

If your firm needs support in navigating these SM&CR reforms, or any other aspect of FCA regulation, please get in touch. Adempi's senior consultants are here to provide direct, expert advice tailored to your business.

You can reach us at contact@adempi.co.uk or on 0203 925 4761 to prepare your business for whats next or find out more about our services from the website: Adempi - FCA Compliance Consultants.