SMCR and The Changing Face of UK Financial Regulations


The Financial Conduct Authority (FCA) have, in the last decade been overhauling the UK financial sector’s regulatory framework and governance, with the introduction of the Senior Managers and Compliance Regime, or “SMCR” (read more). Since the 2008 Financial Crisis, there were have been a number of issues raised by the FCA with regards to personal accountability and responsibility within one of the UK’s largest and most profitable sectors.

One of the key issues identified has been the ‘blame culture’ which has persisted within finance. This new set of rules and regulations replace the previous Approved Persons Regime (APR) and is set to change the way in which financial compliance and overall governance run in the UK, for the better.

Changing the Compliance Culture

In previous years, the way in which financial compliance operated was such that there would be a compliance manager or an individual within a financial firm who was responsible for all compliance-related matters and breaches. This meant that they had all but sole responsibility placed upon their shoulders to manage the entire scope of the firm’s compliance obligations.

The UK government and subsequently the FCA have been seeking to overhaul this for the better and this has led to the ushering in of the SMCR programme which is in the process of being fully implemented. As of December 2019, firms must begin the process of training the necessary staff within their company on their obligations and responsibilities.

Changing Compliance with SMCR

The SMCR regime applies to all solo-regulated firms, who are FCA-authorised and unbeknownst to many, this includes a great deal of firms in the UK and all their staff, excluding ancillary staff (for example cleaners, security guards and porters.)

One of the key messages and aims of this new set of regulations is that the senior management within financial firms, should have a level of responsibility in terms of compliance, comparable with their other responsibilities.

Therefore, this regulation reaches and applies to the likes of chief executives and directors, who are responsible for high-level management within their respective companies, but who until now were not really responsible or liable for much of the financial governance within their companies.

One of the big differences with this regime, compared to others that have been implemented in the past by the FCA is that individual companies have a large degree of the responsibility when it comes to certifying staff. This means that rather than all necessary staff having to be regulated directly by the FCA, their firm will need to certify them, as per the regulations on a regular (at least annual) basis to stay on the right side of these regulations.

Classifying Firms Under SMCR

A key element of this new regulatory framework is that firms are classed as one of three types. Each of the three types of firm classification comes with its own sets of responsibilities and requirements which must be accounted for and satisfied by the respective firms:

Core Firms – Comprising the vast majority of firms, core firms and their requirements under SMCR set the baseline and the FCA’s benchmark when it comes to the rules of the regime. This includes most solo-regulated financial firms in the UK.

Enhanced Firms – This applies to a number of firms who are more complex in their makeup and nature. As a result, the regulations in place are designed to reflect the needs, requirements and more complex oversight such companies require, in addition to their obligations under core firm rules.

Limited Scope Firms – A small number of financial firms in the UK will be subject to more limited rules as limited scope firms. These will be firms who already benefit from exceptions under the Approved Persons Regime (APR).

Who Does the SMCR Regime Affect?

This new SMCR regime affects all solo-regulated firms in the UK. The list of firms and firm types it applies to is not exhaustive and many companies may still not be fully aware of their need to comply with the regulation.

This is something the FCA and financial firms in the UK who are aware are looking to fix. A key part of the companies it applies to is that of companies who offer consumer credit. Hence, this regime will apply to everyone from dentists offering finance packages (more information) to car dealerships and various financial intermediaries.

This regime will apply to the following (although it is in no way limited to these types of financial firms):

  • Mortgage brokers
  • Insurance brokers
  • Companies offering consumer credit
  • Financial intermediaries

Important to note with these new regulations is that the current Appointed Representative (AR) regime in the UK remains unaffected and the rules of that regulatory framework still apply as always.

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