SM&CR: the countdown begins


SM&CR: the countdown begins

The Senior Management and Certification Regime (or SM&CR) will become part of everyday life for thousands of smaller regulated firms on the 10th December 2019. So, what’s it all about?  What is the impact of this likely to be? Read on to understand more about this important change; what it is and how you might be affected.

What is SM&CR?

After the dust settled on the Financial Crisis in 2008, the Government looked long and hard about what caused it to understand how such a melt-down could be avoided in the future. They concluded that the primary fault didn’t lie with regulation, but in a failure of the culture within authorised firms. In some cases, the actions and messages being communicated by senior managers undermined, rather than supported, good regulation and good business practice.

The result is SM&CR, also increasingly (and accurately) referred to as the ‘accountability regime’. This is designed to make the people who run authorised firms – of all types – personally responsible for their actions and for failings that lead to significant customer detriment. The intention is to put individual responsibility at the heart of how regulated firms conduct themselves. The banks and insurers have been subject to these requirements for over 2 1/2 years and on the 10th December 2019, it will also apply to all solo-regulated firms, i.e. FCA-only regulated firms.

The new rules will replace and expand the current approved persons regime. There are 3 key parts to the SM&CR:

  1. the Senior Managers Regime
  2. the Certification Regime
  3. Conduct Rules

Earlier this year, the Patterson Group conducted a survey that asked those preparing for SM&CR for their views. The results of this are shared with you to identify some of the likely key issues. It should also enable you to better understand what other smaller firms are thinking and how of people perceive the potential impact of SM&CR.

Click here and here for further details of SM&CR from the FCA website

Click here for the very useful CII SM&CR resource hub

Prepared for SM&CR?

This article was written on the 11th December 2018 so we know that SM&CR will be extended to all authorised firms in a years time. The next few months will be crucial in planning the implementation of this.  A year sounds like a long time but not when you look more deeply at what it entails.

SM&CR will apply to firms irrespective of size. 76% of those who responded worked for larger firms, 24% for medium sized firms and, interestingly, there were no responses from small firms.  This could  possibly indicate that their awareness of SM&CR is lower and they felt less able to comment on it.

Reassuringly, the survey found that most respondents felt senior management understood the key issues. A respectable 82% of respondents agreed or strongly agreed that management grasped the key issues; only 18% of respondents did not.  Many appeared to already be making plans for the introduction of SM&CR.

What will SM&CR cost?

We asked about the perceived expense of meeting SM&CR. Significantly, 65% believe that SM&CR will represent a significant cost to their business. This is broadly in line with what the existing banks and insurers have found. That said, these larger organisations already have many of the processes that are necessary such as performance management systems and appropriate record keeping. The costs for smaller firms – in terms of time and expense – may well be higher.

Finally, we asked respondents what they thought the three main challenges would be in introducing SM&CR in their firm.  Four key areas stood out:

  1. How to define the competence of people within the business and evidence this
  2. Communicating and educating staff about SM&CR
  3. Allocating prescribed responsibilities
  4. Defining who is covered by the ‘significant harm’ function

It was slightly surprising that record keeping and the lack of money or resource didn’t feature more highly. Whether this turns out to be the  case (or misplaced optimism), we’ll have to wait and see.


SM&CR is intended to strengthening consumer protection by increasing the personal accountability of staff across the organisation and through strengthened governance processes.  Whatever the potential benefits, it’s clear that many firms expect SM&CR to come at a cost. The research flags up four areas that are most likely to challenge firms. Overall, the research suggests a generally positive picture but with work still to do.   Time will tell.

Click here for details of our services.

Ian Patterson

Founder of The Patterson Group and author of the CII’s AF6 study text on Senior Management and Supervision, and J07 study text Supervision in a Regulated Environment.

Marie Patterson
Ian Patterson