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Senior Managers & Certification Regime (SM&CR) – Are you preparing?

The Senior Managers and Certification Regime (SM&CR) becomes regulation for General Insurance Brokers with effect from 9th December 2019 – will you be ready?

Whilst the date may seem a long way off, there are some preparations that you should be considering in advance of this date. Our Risk & Compliance team here at Broker Network guide you through the key subjects in this preparation period.

Control Functions vs Senior Management Functions

Under the new regime, most current control functions (CF) will be ‘auto-mapped’ by the FCA, over to the corresponding Senior Management Function (SMF). However, some CF functions will no longer require FCA approval under the new regulation and there are some exceptions to SMF requirements and auto-mapping.

It is important that you review your current approved persons and the requirements applicable to them under the new rules.

This a good opportunity to review your current firms’ structure and, where applicable, remove or make changes to your approved persons.

Certified Roles

Certain roles come under the new Certification Regime – a regulatory tier which sits underneath the SMF and which is designed to cover staff in roles where they could cause significant harm to the firm or its customers. There are three prescribed areas applicable to general insurance brokers; CASS operational oversight, significant management influence and managers (or supervisors) of those roles.

Fit & Proper

Whilst many of you may have been conducting DBS and credit checks on staff since the implementation of the Insurance Distribution Directive, the SM&CR introduces additional requirements which will bring more employees into scope. SMF and Non-Executive Directors require criminal record checks and regulatory references, whilst Certified Roles require regulatory references (with DBS checks at your firm’s discretion). Certified Roles also require an annual assessment and formal sign-off to confirm their competence.

Conduct Rules

Before 9th December, all SMF will need to be trained on the two tiers of conduct rules as set out in COCON 4.1 & COCON 4.2, and all Certified Roles will need to receive training on the rules in COCON 4.1.  All other staff will have a period of 12 months from 9th December to receive training on the rules in COCON 4.1.  Note that only ancillary roles are exempt from the conduct rules requirements – this is an FCA-prescribed list which covers jobs such as security guards, cleaners, facilities etc.

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