The deadline for Senior Managers and Certification Regime (SM&CR) compliance is fast approaching. Let us help you prepare!
By 31 March 2021 all FCA solo-regulated firms must have undertaken the first assessment of the fitness and propriety of their Certified Persons and provided role specific conduct rules training to their Conduct Rules Staff. Here are the top 10 things that we recommend that all firms need to know before the implementation deadline.
1. What are key dates for firms to consider?
Originally the FCA required all firms to submit information on Directory Persons to the FCA by 9 December 2020. However, as a result of the ongoing COVID-19 pandemic, the FCA has extended this deadline to 31 March 2021 (the “Directory Deadline”).
The FCA has emphasized that there is a difference in submission dates depending on whether firms wish to use the single entry submission form or multiple entry submission forms. More information on the difference between single entry and multiple entry deadlines is below.
2. Who should be included in the Directory?
There are broadly three categories of individuals that fall within the definition of Directory Persons:
- all certified staff under the SMCR
- non-Senior Management Function (SMF) Directors – executive (eg director of a limited scope firm) and non-executive (eg a non-executive director who is not the chair of the board (or a board committee at an enhanced firm))
- other individuals who are sole traders where they are undertaking business with clients and require a qualification to do so (this is relevant even if they are not certified staff).
Only those who have actually been certified by the firm should be included in the Directory. On this basis, if there are some individuals who have ceased or will cease to be certified staff before 31 March 2021, and the firm has not certified them as fit and proper (because it is not obliged to do so until 31 March 21), they should not be included in the Directory.
3. What information will be provided by the Directory?
The FCA will publish the following information:
- Individual’s full name
- Employer details – this is the same information as on the FS Register (e.g. firm name, FRN etc)
- Details of PRA/FCA restrictions applying to a firm’s regulated activities or permissions
- Individual Reference Number – each individual will have a unique identifier (if an individual doesn’t currently have one they will be assigned one upon submission of their information)
- Relevant role(s) held and the start and end date of each role
- Type of business activities the individual is qualified to undertake (if a qualification is required – e.g. mortgage advisers, retail investment advisers, pension transfer specialists etc)
- Workplace location(s) (for customer-facing roles requiring qualification) – displayed at the town/city level (but postcode submitted to the FCA) for those holding a customer-facing role (unless the individual does not offer face-to-face meetings or making public their location would put them at risk)
- Customer engagement methods (for customer-facing roles requiring qualification) – list of all the different ways that the individual engages with customers – ie There is a drop-down option for firms to use of: online, by phone, in person (video calls (i.e. Zoom) are classified as “online”).
- Memberships of relevant accredited bodies (for customer-facing roles requiring qualification) – there is a list of relevant bodies including the CFA Society of the UK, CISI, CIOBS, CII, LIBF and Pensions Management Institute.
- Regulatory sanctions/prohibitions – e.g. public action such as a Final Notice, withdrawal of approval, regulatory penalty/action.
- Date information was last updated by the individual’s current employer
The information that firms will need to provide to the FCA is in bold above (the other information the FCA will currently already have on the FS Register / Connect).
In addition, the firm will need to submit unique identifiers to the FCA (but this will not be published on the Directory): NI number, passport number (if there is no NI number available), and date of birth.
4. What about GDPR?
The FCA consider that the Directory and their approach is consistent with GDPR (and also the European Convention of Human Rights). They have through their consultation period adjusted their approach in some cases (e.g. allowing firms to leave out workplace location if it would put an individual at risk) to ensure their approach is proportionate and strikes the right balance.
5. How do firms submit their information to the FCA?
Firms should submit their Directory Persons data through Connect. Firms are able to log-in any time and amend/update the information held on Directory Persons.
6. What is a single entry form and what are the submission deadlines?
Broadly speaking, firms with 10 Directory Persons or less are expected by the FCA to use the single entry form provided by the FCA when submitting Directory Person Data. This means the firm will have to submit the relevant information for each person in turn. Please note the following:
- If firms would like their data to show by the Earliest Publication Date then they can submit their single entry data up to 9 December 2020.
- If firms are submitting their data before the Directory Deadline, but after the Earliest Publication Date then they can submit single entry data up to 31 March 2021.
There is guidance on the Directory Persons report at SUP 16, Annex 47BG (this is also relevant to (7) below).
7. What is a multiple entry form and what are the submission deadlines?
Broadly speaking, firms with more than 10 Directory Persons can submit Directory information using the multiple add form and will be provided with a timeslot by the FCA to do so. This should be a more efficient way for firms to submit such data to the FCA as multiple individuals’ details can be submitted in one go.
In October 2020 the FCA contacted c. 2,000 firms who they believed may want to use the multiple entry form and provided dates available to such firms to use the multiple data submission. In summary:
- If firms would like their data to show by the Earliest Publication Date then they must submit their multiple entry data between 26 November and 4 December 2020.
- If firms are submitting their data before the Directory Deadline, but after the Earliest Publication Date then they should submit their multiple entry data between 11 January and 18 March 2021.
The FCA has a User Guide which was updated in October 2020 assisting firms with the submission or amendment process for multiple entry data. It also has a helpful FAQ at the end.
8. What are a firm’s key obligations on a go-forwards basis?
Firms are obliged to keep the information on the Directory up to date. Firms need to update Directory when an individual begins to undertake a relevant role, when their circumstances change or when they cease to perform a relevant role. Firms are responsible for reporting accurate and timely information and for complying with applicable data protection legislation.
There is a £250 administrative fee for late or inaccurate data to cover the costs of resolving the issue and also where firms do not complete their confirmation of accuracy.
Firms that have not made any changes to their population within 12 months will be required to confirm the information is still up to date for all Directory Persons on Connect. Firms can also submit a confirmation of accuracy at any time. There is a Data Attestation User Guide available here with more information on this.
9. What are the timing requirements for updating the Directory?
Firms must provide Directory information on joiners, leavers and changes in circumstance to the FCA within 7 business days of (1) the individual starting to perform their relevant role, (2) the individual ceasing to perform their relevant role, and (3) the firm being aware of a change to the information last reported to the FCA, respectively. Firms are encouraged to report sooner if they can.
10. Are there other links between SMCR and the Directory?
Yes. Please see the other key links below:
(1) Senior Manager responsibility – Prescribed Responsibility (b) (Performance by the firm of its obligations under the Certification Regime) covers the reporting requirements for individuals who are to be included in the Directory. The Senior Manager who holds this PR will have ultimate accountability for the information provided on Directory Persons. The FCA has indicated that they would consider necessary action if there were repeated breaches of the reporting requirements.
Note, Limited Scope firms do not need to allocate Prescribed Responsibilities, but they must still ensure clear allocation of responsibilities within their firm and make sure they have adequate systems, processes and controls in place to support compliance.
(2) Conduct Rules – under the conduct rules, relevant Directory Persons are responsible for providing accurate information to their employer. The FCA has said (page 34) where there is an error is due to an employee withholding information or knowingly supplying incorrect information, “it may be reasonable for the firm to instigate a disciplinary, particularly when considering individual Conduct Rule 3 (You must be open and cooperative with the FCA, the PRA and other regulators)”.
How can firms keep on top of their SM&CR compliance?
That one is easy! We’re constantly updating our website and offer a variety of training solutions on SM&CR as well as assessments and full reporting facilities to ensure that firms meet the regulatory requirements. To discuss your requirements and enquire as to how we can tailor any of our courses to your individual needs, call: 01372 361177 or email: firstname.lastname@example.org