The Senior Managers and Certification Regime (SMCR) is a relatively new compliance regulation that is designed to increase the accountability of senior financial services executives for malfeasance. It was put in place largely as a result of the financial crisis of 2008 and certain mishaps including the LIBOR scandal.

SMCR stands for Senior Managers and Certification Regime.

It is designed to increase focus on corporate accountability and raise standards of professional behaviour. It is an integral part of a regulatory initiative to improve culture and conduct at financial institutions, which is perceived by many as the most significant piece of regulation in the industry for a generation.

Prescribed Responsibilities are an element of the Senior Managers Regime which is the part of SMCR that applies to the upper echelons within a financial institution. They are specific responsibilities that a firm must give to a Senior Manager, and are designed to ensure that a senior manager is accountable for certain key conduct and prudential risks at a firm.

SMCR initially came into force in March 2016 for banks, buildings societies and credit unions, in December 2018 for insurers and on 9 December 2019 for a significant majority of other FCA regulated entities.

SMCR has come into effect. However for firms that became subject to SMCR in December 2019 there are certain requirements that must be met during a 12 month transitional period, including training all staff on the Conduct Rules and issuing a certificate to staff that are subject to the Certification Regime. The deadline for SMCR for fulfilling these requirements is 9 December 2020.

The Senior Managers Regime applies to the most senior individuals within an organisation. These individuals perform Senior Management Functions (SMFs) specified by either the PRA or Financial Conduct Authority (FCA) and are subject to a number of requirements that reflect their level of responsibility and accountability.

Senior Managers will need to be approved by the FCA to carry out their senior management function. Other staff, including those that previously required FCA approval, are covered by the Certification Regime.

The Financial Conduct Authority (FCA) is a new public register that enables consumers, firms and other stakeholders to find information on key individuals working in financial services, including Certification Function holders.

Senior Managers and Certification Regime (SM&CR).

An SMCR firm is a firm that is authorised by either the Prudential Regulation Authority or the Financial Conduct Authority and that is subject to the Senior Managers & Certification Regime.

This includes a wide range of firms – almost 60,000 in total - including banks, investment firms, financial advisers and consumer credit firms.

The Certification Regime applies to individuals whose activities could cause significant harm to their employer or their employer’s customers. It covers employees at UK firms who are based (or spend more than 30 days a year) in the United Kingdom and to overseas employees who are dealing with UK clients. The Certification Regime also applies to individuals who are ‘material risk takers’ wherever they are based.

There are three main elements to the regime:
(1) the senior managers regime;
(2) the certification regime; and
(3) conduct rules that apply directly to a firm's workforce.

There are two tiers of the Conduct Rules.

Broadly speaking, the first tier – consisting of five rules – applies to everyone. The second tier – consisting of four rules – applies only to Senior Managers. Everyone subject to the Conduct Rules must be provided with appropriate training so that they understand how this important ‘code of conduct’ applies to them.