On 9th December 2019, the Senior Managers and Certification Regime (SMCR) will come into force for all firms authorised under the Financial Services and Markets Act 2000.

SMCR has applied to insurers and reinsurers since 10th December 2018 but will now be extended more widely.

SMCR replaces the Approved Persons Regime and is designed to increase individual accountability and responsibility and make it easier for regulators to take enforcement action where individuals and firms are not meeting the required standards.

The changes will have important implications for HR teams in regulated firms in terms of ensuring that contracts of employment and policies and procedures reflect the new requirements.

The Senior Managers Regime (SMR) applies to all individuals performing a senior management function on behalf of the firm. Individuals holding senior management functions must be allocated prescribed responsibilities. These must be recorded in a “management responsibilities map”. These individuals must be pre-approved by the regulator and firms are required to conduct annual assessments of fitness and propriety. Individuals must comply with the Conduct Rules, which are a set of high-level principles which reflect core standards. Firms must also have in place procedures addressing handovers of senior management functions between individuals.

The Certification Regime (CR) extends regulation to a wider group than under the previous Approved Persons Regime. Any employees who potentially pose a risk of significant harm to the firm or any of its customers, or, for PRA regulated firms, are a significant risk taker, must be certified by the firm as being fit and proper (and re-certified as such annually) and must comply with the Conduct Rules.

Amongst other matters, firms will therefore need to ensure that contracts of employment for senior managers and CR employees address the requirements of the new regime and will need to consider whether any changes to performance management or disciplinary policies are necessary.


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Author: Lucy Gordon

Senior Solicitor, ESP Law Ltd

Lucy is an employment solicitor who brings to ESP over a decade’s experience at DLA Piper, one of the world’s most prestigious law firms. At DLA Piper, Lucy was involved in a number of global projects for major international customers and handled a varied case-load of employment matters for a range of UK customers, including complex Employment Tribunal cases involving whistleblowing and TUPE.

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