Certification Regime: are you on track?
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SMCR came into force for all solo-regulated firms in December 2019, and much of the activity in the past year has been focused on the Senior Managers Regime. Hardly surprising, given the FCA’s increased focus on senior manager accountability and the requirement to define and formally record these.
But if we can learn anything from the implementation of SMCR in the banking sector back in 2016, it’s that the Certification Regime can often pose more challenges for firms than they might expect.
Unlike Senior Managers, those performing a certification function aren’t required to be FCA-approved, with the certification process being managed in-house. But, that doesn’t mean the risk of getting it wrong won’t land you in hot water. You’re responsible for evidencing that every Certified Function holder is ‘fit and proper’ and clearly demonstrating your assessment criteria. You have until 9th December 2020 to issue your certificates and make sure your approach is robust.
On top of that, your certified population is likely to be larger, more diverse in terms of job roles, and arguably have a more immediate impact on the day-to-day running of your business. So, if the Certification Regime has been playing second fiddle up until now, it’s time to start giving it more attention.
The risks of getting it wrong
While under the old system the FCA was responsible for deciding whether all Controlled Function holders were fit and proper, under the Certified Regime it’s all on you.
Make the wrong call and you could end up facing some costly repercussions and a damaged reputation if your customers are adversely affected.
Often acting as middle managers, or heading up key business units, your certified staff are uniquely placed to influence your wider culture and the rollout of the new conduct rules – for better or for worse. After all, if they can’t demonstrate good conduct, it’s unlikely that their teams will either.
And as we’ve talked about before, fostering a healthy culture aligned to the principles of SMCR is the easiest way to deliver the right outcomes for your customers – and see the commercial benefits too.
So, what are your next steps?
- Get your evidence up to scratch
Although you should have already identified which of your staff fall under the Certified Regime, by December 2020 you also need to have gathered all the evidence required to show that they are fit and proper for their job roles. You’re required to submit your data to the FCA’s new public Directory before the 2020 deadline.
Likewise, you’ll need to properly document your certification assessment criteria and the procedures that support it. This includes your recruitment, vetting and disciplinary processes along with your job descriptions and employment contracts.
- Make sure your processes help, not hinder, your efforts
It’s also your responsibility to assess their skills, competence and integrity against this criteria on an annual basis, or whenever there’s been an in-year trigger, such as a material change to someone’s role.
The best way to do this? Align the annual assessment with your existing promotion and appraisal process to minimise disruption. Getting your house in order now can help futureproof your approach, so think about how well your HR processes and procedures support your ongoing SMCR obligations.
- Assure your approach with independent expertise
While that might sound simple enough, it’s all too easy for an internal HR and compliance teams to miss important documentation when juggling all the other facets of people management. Get it right first time by partnering with an independent expert like TCC. Our broad market experience and sector insight means we know exactly what the FCA is looking for, can spot the gaps and help you resolve any issues before it’s too late.
Make the wrong call and you could end up facing some costly repercussions”
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