Regulatory Update: Senior Managers and Certification Regime

2016 was certainly a year to remember in the financial services sector. With the implementation of the Senior Managers and Certification Regime (SM&CR) which came into effect in March 2016, financial institutions will no doubt be aware of the shift of responsibility from regulatory bodies to corporate organisations and; ultimately, to individuals in their personal capacity holding senior positions within those organisations.

The finer details of the regime have been addressed and (partially!) clarified by the regulatory bodies throughout 2016 and, looking forward towards 2017, we have summarised some of the key matters to be addressed and timeframes which apply over the coming months.

Conduct Rules

Conduct Rules were implemented on 7 March 2016 in relation to Senior Managers and staff to whom the Certification Regime applies (please see 'Certification Regime' below).

From 7 March 2017, certain Conduct Rules will be applied to almost all members of staff (save for certain ancillary staff).

Action point: Organisations should ensure the contractual and policy documentation is reviewed and updated, where necessary, to encompass these rules on a continuing basis.

Regulatory References

Under the new rules regarding regulatory references, relevant financial institutions will be required to request, and provide, references which address the individual's conduct and which express a view as to the fitness and propriety in the context of carrying out 'relevant functions'.

These rules will also come into effect on 7 March 2017.

Action points: Organisations should review and refresh their processes for dealing with employment reference requests to ensure that all mandatory information, as required by the rules, will be included within a reference being prepared and issued.

Organisations should also consider providing training to staff who have responsibilities in relation to providing and requesting references.

Whistleblowing Rules

New whistleblowing rules require organisations to have in place satisfactory whistleblowing arrangements, as set out by the regulatory bodies, so as to encourage individuals to raise concerns and challenge poor practice and behaviour within financial institutions, as may be required from time to time.

Consultation is ongoing in respect of proposed implementation of certain whistleblowing requirements to UK branches of non-EEA deposit-takers and insurers (both EEA and non-EEA), including re-insurers. Such proposals include introducing requirements that:

  • UK branches of non-EEA banks (and of both EEA and non-EEA insurers) to inform their workers about the FCA and PRA’s whistleblowing services; and
  • non-EEA banking groups (with both a UK branch and UK subsidiary which is subject to our whistleblowing rules), to inform the staff of the branch of the subsidiary’s whistleblowing arrangements (this proposal does not apply to insurers).

Action Points:  Review and update whistleblowing policies and associated documentation to ensure compliance with the new whistleblowing rules.

Given the obligations placed on organisations under the whistleblowing rules, particularly around informing staff about their rights in respect of whistleblowing, organisations should consider providing training to staff which will address those obligations and provide employees with clarity on their rights relating to protected disclosures.

Certification Regime

The Certification Regime applies to all 'material risk-takers'. Any such individuals should have been identified by 7 March 2016. Firms will be required to assess those individuals as 'fit and proper' to undertake their controlled function by no later than 7 March 2017.

Action Points:  Organisations, and particularly individuals  within the organisation who have responsibility to assess the fitness and propriety of 'material risk-takers' should become familiar with the factors which are to be taken into account when assessing whether an individual is in fact 'fit and proper' to act.

Organisations should also note that procedures should be put in place to address the requirement to re-assess certified staff members' fitness and propriety on an annual basis.

Extension of SM&CR to all FMSA authorised firms

The legislation governing the SM&CR anticipates an extension of the regime, to apply to all FMSA authorised firms (at present, the regime only applies to banks, building societies, credit unions, and PRA-designated investment firms).

It is anticipated that the regime will be extended to all FMSA authorised firms throughout the course of 2018

Action Point:  If you anticipate that the SM&CR will extend to your organisation, we would recommend that your legal, compliance, HR and regulatory departments liaise now and collaborate to create an 'action plan' of what will need to be addressed in order to comply with the regime.

Policies and contractual documentation will need to be reviewed and updated; various prescribed documentation (for example statements of responsibilities and responsibilities maps) will need to be prepared for submission to the regulatory bodies, and training should be considered in order to educate staff (and Non-Executive Directors) in relation to the regime and its implications.

Timetable of key dates

9 January 2017

7 March 2017

September 2017



Deadline for responses to various 'live' regulatory consultation papers


Application of Conduct Rules to banking sector staff who are not within the Senior Managers or Certification Regime



Whistleblowing rules to apply to UK branches of non-EEA deposit takers and insurers (both EEA and non-EEA)


Anticipated extension to the SM&CR to all FMSA authorised firms


Assessment of 'material risk-takers' as 'fit and proper'




Regulatory references rules to come into force



Contact us

We have a team of specialist advisers in our Belfast office who would be delighted to assist you with any needs you may have arising from the new regulatory framework.

From auditing your existing contractual documentation, to providing bespoke training for your organisation, or indeed simply providing general guidance and assistance, please do not hesitate to contact a member of the A&L Goodbody team at any time.

Date Published: 12 January 2017