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Smaller firms need to prepare now for SMR, says Howard Kennedy


Smaller firms in the financial services sector need to start preparing now for the impact of the new Senior Mangers Regime (SMR) which came into force this week for UK banks, building societies, credit unions and PRA-designated investment firms.

That’s according to law form Howard Kennedy which points out that HM Treasury has previously announced that they will be extended to all sectors of the financial services industry, perhaps in as little as two years.
The new regime sees a significant shift in the way individuals working in financial institutions are regulated. The FCA will no longer act as gatekeeper – from today, for relevant firms, it will only pre-approve the most senior managers, such as executive directors and heads of key business areas.  Relevant firms will be responsible for certifying other staff who could pose significant risks to the firm or its customers, while from March 2017 almost everyone working for them will be caught by the new Conduct Rules.
Not only has the FCA shifted much of the burden to relevant firms, the emphasis is also now firmly on personal accountability.  Senior managers in relevant firms must now have a statement of responsibilities, setting out the areas for which they are personally accountable, and must take steps to ensure those areas are controlled effectively. 
Karen Mortenson, a senior associate in the employment team at Howard Kennedy, says: “Today’s changes are likely to result in senior managers being far more engaged with, and focused on, internal processes. The risk, if something happens on their watch, of criminal charges means they will want to ensure there is a clear paper trail.
“However, unlike banks and other PRA-regulated firms, which benefit from large, sophisticated HR and compliance teams, smaller firms – who will be caught by the SMR, perhaps in as little as two years – need to start preparing now for the changes.”

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