SM&CR, The Investment Association & The FCA

Julie Pardy

Julie Pardy

With more than 30 years service in the Financial Services industry Julie has spent many years at the coal face undertaking a wide variety of roles in banking from Compliance to Sales, Operations to Training.

On a very hot and sunny Tuesday in June, I was delighted to be invited to talk to Investment Association members on the topic of SM&CR.  Joining a line-up that included David Blunt, Head of Conduct Specialists at the FCA, Angela Hayes from TLT, Natasha Cork from HSBC Asset Management and Sarah Thwaites, Senior Policy Adviser at The IA.  The afternoon was given over to discussing regulatory expectations around SM&CR and practical experience of the dual regulated regime in Banking.

David Blunt kicked off the discussion with an informative speech about regulatory expectations against a Covid-19 backdrop.  He started the discussion by noting that culture discussions within firms could be de-prioritised as a result of the current pandemic, however the regulatory view was that effective cultures and appropriate behaviours should remain “front of mind”.  And that now, more than ever the FCA needed leaders to foster inclusive environments. 

David blunt-1

Not an unexpected approach from a Conduct regulator who has spent a lot of time, money and resource in developing its thinking around culture I hear you say.  Interestingly though, David went on to remind firms that the FCA are placing great importance on both the effective implementation of the Certification Regime and the embedding of Conduct Rules to try and ensure that regulated firms permanently raise the bar for conduct and capability within the sector.  So for those firms that are still grappling with their approach to SM&CR (of which there appear to be many) it might be prudent to note David’s comments and think about how you can effectively kick start your implementation and embedding plans for SM&CR, and how here at Worksmart we can help you with that.

People conduct

He took a moment to remind Senior Managers that they will be held responsible for poor behaviour now and in the future.  Nothing which we don’t know already, however it was good to see that this was then linked directly back to employee competence and the need for firms to undertake regular, thorough, and consistent assessments of individual competence.  Well, we’ve known that all along and is one of the reasons we spent so much time and effort on working with the banking sector to refine our solutions approach to managing Certification within firms.  But the final comment from David was one that Senior Managers might do well to think long and hard about this and that he expected Senior Managers to demonstrate appropriate oversight of the regime both in terms of Certification and Conduct Rules.  He specifically called out the need for firms to be able to help individuals understand what a conduct rules breach looks like in the context of their role by using realistic scenarios and considering common issues and dilemmas.  He went on to close comments on this topic by stating that they felt that generic e-learning was unlikely to be sufficiently robust to deliver on regulatory expectations in this area.


So, what did we conclude from David’s speech to the Investment Management Sector?  Well, personally I viewed it as a helpful reminder to all around what the FCA were expecting from firms during this difficult time.  There was a timely and appropriate nod to the challenges of running complex businesses against a backdrop of Covid-19, backed up by the recent range of regulatory flexibilities announced, but there was also a firmer underlying message.  This was that whilst the FCA demonstrated that they know there are difficulties in progressing towards implementing and embedding SM&CR during this time, the message was clear.  SM&CR and effective implementations across the sector were needed now more than ever, and the industry and its leaders must not stop their progress towards the ultimate goal of stronger governance, more competent and capable staff and appropriate behaviour from all those they oversee.  Ignore the messages contained in David’s speech at your peril.

Since I originally penned this blog just a few days ago, we have since had the announcement that the FCA, in conjunction with the Treasury, have agreed to push back the initial deadlines with a Certification deadline extension period for solo-regulated firms.   Whilst this will be welcomed with open arms by many, my advice would be as follows.  Don’t fall into the trap of thinking that this topic has just dropped right down the regulatory agenda.  The FCA have shown a valid use of regulatory flexibility to help those that need it, but be in no doubt that those firms that choose to ignore the importance of Certification in the round may find themselves of much more interest to the regulator than they might have been!

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