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SM&CR: The Countdown Begins

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This weekend marks just one month to go until SM&CR goes live for all solo-regulated firms, replacing the FCA’s previous Approved Persons Regime (APR) and bringing with it a host of new data management requirements and challenges. A survey published by ACA Compliance in August this year warned that less 2% of firms had completed sufficient preparation for the oncoming regulation, which requires conversion from the APR by November 24 and the first data upload by December 9. Fast forward two months and, it seems, not much progress has been made.

“With one month to go, many solo-regulated firms are only just now awakening to the realities of SM&CR – and unfortunately they’ve woken up to find themselves on the back foot. This is largely because the work required ahead of the deadline has been significantly underestimated or been left to the last minute due to other priorities,” says Adam Palmer, Partner at ACA Compliance.

“The implementation of SM&CR within the banking sector has so far revealed some positive effects on business culture and day-to-day operations, demonstrating the potential for this particular regulation to give UK businesses a facelift more broadly when the remainder of firms are brought in scope.

“Yet while the outlook is positive, for many, the coming of this new regime will necessitate substantial self-assessment and potential changes to both governance and culture. There are new policies, processes, and documentation that solo-regulated firms must implement. The engagement that must take place with certain individual employees will take time if necessary changes to their overall business culture are to become effective. In addition, employees across the firm need to be trained on SM&CR individually, as it will in many cases touch on their day-to-day roles.”

As the year-end approaches, the next few months are sure to be busy for the majority of financial services firms – and creating new codes of conduct or formalising statements of responsibility may not be at the top of their priority lists. But with 47,000 firms estimated to be affected by the upcoming deadline, a little effort now could divert a world of pain later. Key steps include confirming senior managers in their new SMF roles, assigning each of the regulation’s four Prescribed Responsibilities to a senior manager, identifying all certification staff and which function they will be holding, training all senior managers and certification staff in the new conduct rules, and establishing processes to implement requirements on new hires – including new documentation references, background checks and assessments.

“The amount of work required ahead of the deadline cannot be underestimated,” warns Palmer. “It’s important for all solo-regulated companies to make SM&CR a top priority today.”

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