Changing The Culture in Compliance
In past times, the very word ‘compliance’ meant turning to an obscure part of the company in question to speak to people who, whilst responsible for one of the most important components to the company’s running, were dreaded by most.
This resulted in the emergence of a blame culture within the financial industry in the UK. Since the 2008 Financial Crisis, where many regulations and frameworks were manipulated and flaws in the system exploited, there have been growing calls for the FCA to shake up UK financial services.
SMCR is designed to ensure that there is increased emphasis on personal accountability and the very concept of professional responsibility. Focusing on senior managers, including directors, non-executive directors and other management positions within firms, SMCR ensures everyone is accountable to at least some extent, unlike ever before.
Who Needs to Comply With SMCR?
The SMCR applies to all solo-regulated, FCA-authorised firms in the UK. this covers a huge range of different companies across many different sectors. However, the FCA classifies firms into three clear categories, whereby every qualifying firm under SMCR will be classed as one of the following:
Core Firms – This is the classification which will cover most solo-regulated companies. The standards set out for core firms are also the FCA’s baseline expectations and standards which will apply to most firms.
Enhanced Firms – This pertains to firms which are of a more complex nature and who require more complex governance. Thus, these more complex companies will need more detailed oversight covered under these rules. They will however, also need to comply with core firm requirements.
Limited Scope Firms – These are those which already benefit from exemptions and conditions under the Approved Persons Regime (APR), which SMCR replaces. These firms will not have the same degree of responsibilities as those of core or enhanced classifications.
Because this regulatory framework is so all-encompassing, covering swathes of firms, more companies than most are aware of are actually required to comply with the SMCR. Firms that will need to comply fully with SMCR include:
- Mortgage brokers
- Insurance brokers
- Financial advisors
- Lenders of both secured and unsecured loans (more information)
- Pension fund managers
- Asset managers
- Companies offering any form of consumer credit
Who is Exempt from SMCR?
Although the regime covers all employees and advisors in qualifying firms, there are a number of people who will not be required to comply even though they may well be employed by a qualifying company. These employees are known as ‘ancillary staff,’ who will be those that do not have roles covered by the SMCR. However, firms are encouraged to train ancillary staff as per the requirements of SMCR as good practice. Ancillary staff routinely include:
- Catering staff
- Security guards
- Cleaners and maintenance staff