Strengthening individual accountability: The Senior Managers and Certification Regime

Strengthening individual accountability: The Senior Managers and Certification Regime

Strengthening individual accountability: The Senior Managers and Certification Regime


The Senior Managers and Certification Regime (SMCR) came in to force on 7th March 2016. It has introduced a number of changes across the UK financial services industry, focused on strengthening individual accountability within financial institutions.  Alongside the SMCR, the Senior Insurance Managers Regime (SIMR) was also introduced, applying the same principles to the UK’s insurance industry.


While SMCR will ensure that senior managers can be held accountable for any misconduct that falls within their respective areas of responsibilities, Conduct Rules aim to hold individuals, across all levels of the organisation, to appropriate standards of conduct and behaviours.


Anyone captured under the SMCR will be immediately bound by Conduct Rules but firms will have a year to roll them out across the wider population.


While individuals who fall under this regime will continue to be pre-approved by regulators, firms will also be legally required to ensure that they have procedures in place to complete “fit and proper” assessments before submitting individuals for approval and at least annually afterwards.


The Certification Regime (introduced alongside the Regime for Senior Managers) applies to those individuals identified as either “material risk-takers” or who could pose a risk of “significant” harm to the firm or any of its customers (for example, staff who give investment advice or submit to benchmarks).


Specifically, the SMCR brings about the following changes:

  • Chairmen and non-executive directors are now included as "Senior Management Functions"
  • Prescribed Responsibilities" have been introduced and must be allocated to the most senior of those performing "Senior Management Functions". 
  • A firm's management and governance arrangements must now be documented within a "Management Responsibilities Map" and must clearly show how the statements of responsibility have been allocated.
  • The introduction of a "Presumption of Responsibility" reverses the burden of proof, and brings in the demand for improved evidence of oversight to show that "reasonable steps" have been taken to prevent, stop or remedy breaches.
  • A "Group Entity Senior Manager" has been introduced to bring individuals employed by a parent, holding or other group undertaking that exercises significant influence over activities in the UK into the scope of the regime, whether physically based in the UK or overseas, subject to the effectiveness of UK governance arrangements.
  • Parallel regimes now operate for mixed financial services groups (e.g. bancassurers) and there is an expectation of consistency in the way governance operates in the mixed activity group as a whole. 


How Protiviti can help

The SMCR first wave of implementation applies to Banks, Insurers, PRA-designated Investment Firms, Building Societies, Credit Unions and Incoming Branches of Overseas Banks. This new regime is about delivering sustainable change in UK financial services firms. At Protiviti we have a number of high-value offerings to support our clients in achieving that change. Few are enlisted below:


Validation and Assurance Review of Current Implementation:

Working with you to undertake a review and provide assurance around your implementation of the Senior Manager Regime to date to ensure that:

  • All aspects of the requirements have been covered and that the organisation has fully delivered against all obligations, and 
  • The extent to which the implementation covers the behavioural changes that are required to fulfil the requirements of the SMCR.


Embedding Behavioural Change:

Working with you to:

  • Understand the behavioural changes required to ensure the SMR is fully embedded in to the organisational culture.
  • Assess and interpret the current organisation cultural indicators, identifying any issues and/or gaps and recommending a change roadmap.


Board Effectiveness Reviews and Training for NED's/SMF Holders:

The implementation of the SMCR across firms should be adequately reflected in the running of the Board. At Protiviti we have experience of working with a host of clients to undertake Board Effectiveness Reviews as part of the ongoing fit & proper requirements.


Along with this comes the need to provide education and awareness to Non-Executive Directors and holders of Senior Manager Functions, either as part of the induction requirements for new appointments or as ongoing refreshers to the existing team.


Supporting firms in the next wave of SMCR implementation:

Given the phased implementation of the SMCR, there are a number of regulated companies for whom the implementation planning and execution is yet to begin, e.g. insurance brokers and consumer credit firms.


At Protiviti, we have the required knowledge, skills and credentials to support your teams as they plan and execute the implementation programme.