Those in Senior Management Functions should now be fully trained, but how well do they understand the conduct-related expectations of their role?
The importance of the SoR
Statements of Responsibility apply to all SMFs, outlining exactly what their responsibilities and accountabilities are. While these should’ve been completed already, you need to ensure that if asked, your SMFs can properly explain to the regulator their responsibilities and how these relate to their day job.
Understanding reasonable steps
Your SMFs are responsible for taking reasonable steps to prevent misconduct, but we hear time and again that firms are struggling to understand what exactly the FCA means by ‘reasonable steps’ and how best to evidence them. Make sure you’re on the right track by independently assuring your approach, using practical scenarios that will both unearth any gaps and assess the knowledge of your SMFs. What’s more, external validation of your procedures can make it clear to the regulator that you’re serious about your SMCR responsibilities – a reasonable step in and of itself.
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. Get your approach to the certification regime wrong and you could end up facing some costly repercussions and a damaged reputation if your customers are adversely affected.
So, what do you need to do?
Get your evidence lined up
You’re now responsible for evidencing that every Certified Function holder is fit and proper and you should be able to clearly demonstrate your assessment criteria. You have until 31st March 2021 to issue your certificates and submit your data to the FCA’s new public Directory.
Make sure your processes and procedures are aligned
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. Align the annual assessment with your existing recruitment and selection, promotion and appraisal, and disciplinary processes to ensure a consistent approach.
Call in reinforcements
While all this might sound simple enough, it’s all too easy for internal HR and compliance teams to miss important documentation when juggling all the other facets of their roles. Partnering with an expert like TCC means you can be sure you're covering all bases and getting it right first time, without draining your resources.
You have less than a year to train all employees across your organisation on the new conduct rules and the impact on their job roles and responsibilities. Leave it too long and you risk either missing the deadline or putting undue pressure on your internal teams to get it done. Now is the time to review your progress and create an action plan for the year ahead.
The FCA’s continued work on cultural transformation suggests conduct rules will be front and centre of the regulator’s supervisory approach, so getting this wrong can leave your business exposed. Not only will you run the risk of non-compliance, but if good conduct isn’t ingrained in your culture then your customers – and ultimately your bottom line - could suffer.
As with the certification regime, incorporating the conduct rules into your existing HR process can be a helpful starting point to embedding the conduct rules.