Delays to SM&CR implementation deadline gives firms time to ‘level-up’ with technology. Many firms will have breathed a sigh of relief when they heard that the FCA’s deadline for the implementation of the Senior Managers and Certification Regime (SM&CR) had been extended – from 9th December 2020 to 31st March 2021. But with that original deadline long gone, many firms may feel panic rising once more as the pressures of meeting the Regulators’ expectations are putting a strain on operations. For some, internal preparedness may still feel a long way off, particularly around the firm’s ability to assess and maintain the fitness and propriety (F&P) of those members of staff subject to the SM&CR.
As part of the SM&CR implementation, regulated firms are responsible for annual assessments and certification of not only their senior managers, but also members of staff who perform ‘Certification Functions’ that could potentially harm the firm or customer. These firms must be able to demonstrate to the FCA that these staff members are fit and proper to perform their roles effectively, as well as be able to continuously assess F&P on an ongoing basis. In order to ensure that this is happening, the FCA have published some key indicators that give a more practical view of good and bad practice when firms carry out these assessments.
These changes demonstrate that the FCA intends to be a lot stricter on firms that cannot deliver on their requirements
These changes demonstrate that the FCA intends to be a lot stricter on firms that cannot deliver on their requirements. Robust processes must be in place to guarantee that these regular assessments are conducted appropriately and in a consistent, efficient, and effective manner. The level of commitment that the FCA are now looking for from firms shows that by not having a software solution in place to demonstrate clear adherence to the rules is no longer an option. Only technology can provide the assurances firms need to avoid the harsh penalties of non-compliance.
F&P assessments and the benefits of technology
Given that the FCA have stressed that it is up to firms to assess whether individuals performing these ‘Certification’ roles are fully fit, proper, capable and competent to do so, it makes sense that many will want to bring in a piece of software to perform these tasks. Even more so given the additional pressures many firms are under due to the COVID-19 pandemic. Software solutions such as Ideagen’s Pentana Compliance are designed to remove the stresses of complying with FCA regulations to allow SMCR implementation, T&C and Compliance managers to focus on promoting excellence and professionalism throughout their firm. Some of the benefits include:
Risk reduction and assurance
Not implementing a software solution increases firms’ risk of failing to meet the FCA’s standards and incurring costly fines. Technology can give firms an immediate boost by reducing these risks and providing assurances to senior executives, Board members and the Regulators that all Senior Managers and Certified Persons are fit and proper to carry out their role. Technology-driven systems and processes provide clear evidence and visibility that the FCA needs to determine that F&P assessments are robust.
Accuracy and record keeping
Without technology, records of F&P assessments are at risk of becoming fragmentary and inaccurate. Software products such as Pentana Compliance have in-built central repositories for records and ensure accuracy with version control and live change monitoring. With systems such as these, F&P assessments become more reliable, because the software acts as a control against the risk of lost or inaccurate records. Firms can produce full audit trails of their F&P activities, leaving no doubt in the Regulators’ mind that their obligations have been met.
Time and cost savings
Preparing for and maintaining F&P assessments will take a lot of time and effort. Being able to properly identify the staff that need to be certified, proving the reasonable steps you are taking, following up on F&P checks, tracking and communicating change, providing appropriate training and competency work as needed – these tasks fast become unmanageable without a secure, central system to control them. Systems such as Pentana Compliance work to reduce disruption and reliance on stretched resources by automating several of the key processes involved in F&P assessments. Software can also make sure tasks are not duplicated down the line and that alerts are sent to those that need it.
Efficiency and transparency
To meet the FCA’s requirements for SM&CR implementation, it is vital that the systems and processes in place to assess F&P are as efficient and transparent as possible. For this reason, firms need to make sure the software they implement gives them full control over processes and allows for complete ownership and responsibility of cross-functional compliance. It is also crucial that firms can monitor their system with live audits and provide full accountability trails.
Streamlined business processes
As well as efficiencies, software also provides firms with a streamlined approach to the key business processes involved in F&P assessments. This is an important benefit that will allow many firms to avoid falling into the traps outlined in the FCA’s negative indicators list. Some software systems can provide standard forms for assessment of F&P staff, dashboards that allow SMFs to actively oversee the F&P process and integrates performance management into the F&P process. Without these types of benefits, F&P assessments becomes a much more laborious task than necessary.
Proactive governance & oversight
Above all, the FCA want to ensure that firms are enacting proactive governance and oversight to the SM&CR. The overall goal of improving standards in banking and creating healthy working cultures is a vital tenet of the FCA’s remit and it is appropriate that the application of the SM&CR is top of their priority list. The value of software solutions such as Pentana Compliance cannot be understated here. SM&CR is a huge piece of regulation that requires a level of attention proportionate to its impact. Software helps those working on SM&CR tasks such as F&P assessments to do their jobs correctly and gives them the tools needed to ensure that maintaining compliance with the FCA does not become a burden.
No matter where your firm is at on its journey towards SM&CR implementation compliance, technology can provide a path that leads towards true operational excellence. Whether that’s by helping to manage compliance obligations and reduce the risks and cost of compliance, or raising standards and boosting productivity, software solutions have become a vital part of ensuring the financial services industry is fit for the future.
To find out more about Ideagen and its software solutions for SM&CR and T&C, visit their website.