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7 March 2017 will mark a year since the commencement of the Senior Managers Regime (SMR) for banks, building societies, credit unions and PRA-designated investment firms. This date is also significant since it will be the go-live date for the following requirements which form part of the SMR:

  • The Conduct Rules which apply to the wider body of staff working in the firms concerned; and
  • The requirement for firms to have issued certificates to all Certified Employees.

Deloitte continues to work closely with individuals holding Senior Management Functions (SMFs) and those in SMR Offices within the relevant firms. We have set out below the key questions which firms and their SMR teams should be looking to answer to ensure readiness for these new requirements. We examine the steps that they should be taking to prepare and what they will need to do going forward to ensure compliance and good practice in these areas.

Have you issued certificates to all Certified employees?

In line with the upcoming deadline, firms should have now issued certificates to all employees who are captured under the Certification Regime. Firms should also be reviewing their processes which will support the ongoing requirements of the Certification Regime; in particular to ensure that new joiners into Certified roles are identified, trained and that ongoing fitness and propriety can be assessed.

Does your approach to assessing fitness and propriety align with industry guidance and good practice?

The Certification Regime puts the onus on firms to identify and annually certify individuals as being fit and proper to carry out certain roles. We have seen that the SMF with this responsibility differs from firm to firm, however a single SMF must be allocated the responsibility for this process. The Banking Standards Board (BSB) has this week published guidance and good practice for assessing fitness and propriety with further information on what each element of fitness and propriety means and how it might be assessed. In light of this firms should be considering their approach to assessing fitness and propriety to ensure that it aligns with the BSB’s guidance and good practice.

Are your current staff adequately trained in the Conduct Rules?

From 7 March 2017 the individual Conduct Rules will apply to Certified Employees and to almost all other staff within the relevant firms. The regulatory guidance in COCON 2.3 states that firms should take reasonable steps to notify individuals of the rules which apply to them and ensure that they understand how these rules apply to their role through the provision of suitable training.  A reminder of the Conduct Rules is below:

 

Tier 1 – Individual Conduct Rules

Regulator

Rule 1

You must act with integrity.

FCA / PRA

Rule 2

You must act with due skill, care and diligence.

FCA / PRA

Rule 3

You must be open and cooperative with the FCA, the PRA and other regulators.

FCA / PRA

Rule 4

You must pay due regard to the interests of customers and treat them fairly.

FCA Only

Rule 5

You must observe proper standards of market conduct.

FCA Only

 

Is an effective Conduct Rule breaches reporting framework in place?

The initial implementation date of the SMR marked a shake-up in terms of the procedure for notifying the FCA of breaches of the Conduct Rules by SMFs and Certified Employees. In line with the application of the Conduct Rules to the wider staffing body, from 7 March 2017 firms will also be required to record Conduct Rule breaches by any employee to whom any of the Conduct Rules apply.

In line with this new requirement, firms’ SMR Offices should be in the process of reviewing the Conduct Rule framework in place to ensure it is fit for purpose. Going forward they should also ensure that the process in place to assess and report breaches of the Conduct Rules is fit for purpose and remains effective.

Is there a process for training new joiners in the Conduct Rules?

Going forward, Conduct Rules training will also be required for new joiners (both Certified Employees and other relevant staff). Many firms are requiring existing staff to complete their annual training at the same time as the firm carries out its annual fit and proper assessments. In response to our clients’ feedback on a lack of availability of tailored online compliance training, Deloitte has partnered with Thomson Reuters to produce a suite of training on the Senior Managers and Certification Regime and the new Conduct Rules. Firms can subscribe to this training by contacting Thomson Reuters and more information about it can be found at: https://risk.thomsonreuters.com/en/compliance-training-courses/senior-managers-and-certification-regime-training.html

David Strachan - EMEA Lead, Centre for Regulatory Strategy, Deloitte

David focuses on the impact of regulatory changes - both individual and in aggregate - on the strategies and business/operating models of financial services firms. David joined Deloitte after 12 years at the FSA, where in his last role, Director of Financial Stability, he worked on the division of the FSA into the PRA and the FCA.

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 Dominik Graham

Dominic Graham - Director, Risk Advisory, Deloitte

Dominic has over 20 years’ experience in delivering regulatory change projects. He is a highly experienced programme manager with a technical focus on the UK regulators’ expectations on banking firms’ governance arrangements. He is Deloitte’s lead Director for both the Senior Manager Regime and Skilled Persons engagements.

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Rebecca Walsh



Rebecca Walsh - Manager, Risk Advisory

Rebecca has advised to a variety of financial services firms on corporate governance, regulatory compliance and conduct risk management. She is currently assisting a number of firms to implement the requirements of the Senior Managers and Certification Regimes.

Email | LinkedIn

Comments

  • Well, your article is pretty much useful and attractive and i have note down many key points which will help me in future.
    Thank you!

    Posted by: Rachel Willy on 29/03/2017

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