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SM&CR & Your Wider Governance Arrangements | Worksmart

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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.

When applying the new  Senior Manager & Certification Regime (SM&CR) to your organisation, the regulator will expect more than just a Management Responsibilities Map (MRM) summarising the allocation of Senior Manager Functions (SMFs) and Prescribed Responsibilities (PR). The regulator will expect these things set within the context of a firm’s wider governance arrangements.

This short blog uses our experience to suggest the components of a good submission from a governance perspective;

Board Structure

At its most basic, the submission must provide a clear summary of the board, it’s members, their responsibilities and how these come together into reporting relationships. 

Governance Structure – Committees

Like the board structure, the firm’s committee structure needs to be defined along with memberships (and attendees) and their chairs. Each committees’ terms of reference need to be referenced as well as any inter-relationships. And last, but not least “Matters reserved for the Board” should also be included. 

Approved Persons

This is a complex area as what SMFs and Prescribed Responsibilities are relevant will depend on each firm’s sector, categorisation and size.

For example, the wider financial services sector, firms are categorised as Enhanced, Core or Limited, with the largest categorised as Enhanced and the smallest Limited;

Click the document image below to read about the Banking SM&CR regime further, reference chapter 2: 

For insurance firms, the categorisations are; Solvency II and large NDFs, Small NDF and small run-off firms, EEA branches, non-EEA branches and other;

Click the document image below to read about the Insurance SM&CR regime further, reference chapter 2: 

The regulator has provided mappings between the current Approved Persons Regime (APR) and the new SM&CR regime. If an executive is currently approved by the regulator for their role and is moving to an equivalent Senior Manager Function (SMF), they would not need to apply for reapproval. However, they would need to apply for conversion. Where there are no direct Control Function (CF) to SMF mappings. In this instance, firms and individuals will need to submit an application for the new SMF function they wish to fulfil, and will need to do so in good time.

So, in summary new applications for executives moving across into different SMF functions  would need to be treated as a new application, and so will be time sensitive.

 Download the Free Worksmart Information Sheet:

5 Great Strategies for Successfully Implementing SM&CR in your Organisation

Best Practice Governance – Three Lines Of Defence

Good governance within firms is a given, firms must not only ensure that they are effectively structured and managed, they must be able to demonstrate to the regulator that their governance arrangements are fit for purpose. Typically, firms will operate a’ three lines of defence’ model with independent oversight from Internal Audit. Governance arrangements should clearly demonstrate clear lines of responsibility, accountability and oversight. Remember, one of the FCA’s threshold conditions for authorisation is that a firm must be structured in such a way that it can be effectively supervised.

Management Information

A small, but important part of a governance submission is to describe the management information used by the directors to manage the business.

Robust MI is key to providing accurate and up to date information on performance for monitoring and, if necessary, pinpoint areas where remedial action is required.

In summary, good governance is a must.  However, it is far easier said than done in practice. Whilst this may seem daunting, there are many options open to firms such as SM&CR systems that will take the strain out of these complex governance arrangements by providing accurate, real time and ‘time boxed’ MI as well as managing the annual and ongoing activities required by the new regulation.

 Download the Free Worksmart Information Sheet:

5 Great Strategies for Successfully Implementing SM&CR in your Organisation

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