By the end of 2019, the FCA will be extending the Senior Managers & Certification Regime (SM&CR) to almost all regulated firms, including motor dealers. In a nutshell, SM&CR embodies the principles of good conduct and promotes a culture where ‘doing the right thing’ for customers is at its very heart. So, are you ready for SM&CR and the additional responsibility it will place on you?
What is SM&CR and what does it mean for me?
The Senior Managers and Certification Regime (SM&CR) aims to strengthen individual accountability in financial services, improve conduct at all levels of a business , ensure key people in firms are fit and proper to perform their role as well as ensuring that firms and staff clearly understand and can demonstrate who does what. On December 9th 2019, the SM&CR will be extended to include motor dealers.
It is critical that every dealership and especially their ‘Approved Person’ – most commonly in dealerships a senior business leader or owner - understands that this is a significant change and that action is needed. It is important that motor dealers start preparing now.
So, what needs to change?
SM&CR replaces the current Approved Persons Regime. The majority of motor dealers are likely to either be a limited scope or core firm and therefore the Approved Persons currently in place will convert to Senior Managers automatically come December 9th*. You can find out which firm type you are here.
There are two tiers of conduct rules under the SM&CR:
Tier one applies to the majority of employees within a firm:
- You must act with integrity
- You must act with due skill, care and diligence
- You must be open and co-operative with the FCA
- You must pay due regard to the interests of customers and treat them fairly
- You must observe proper standards of market conduct.
Tier two applies to Senior Managers only:
- You must take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively
- You must take reasonable steps to ensure that the business of the firm for which you are responsible complies with the relevant requirements and standards of the regulatory system
- You must take reasonable steps to ensure that any delegation of your responsibility is to an appropriate person and that you oversee the discharge of the delegated responsibility effectively
- You must disclose appropriately any information of which the FCA would reasonably expect notice.
If this sounds like a lot, is confusing or leaves you asking; ‘where do I start?’ then don’t worry – you’re already on the right tracks by asking these kinds of questions; and there’s plenty of information out there to help you.
Some possible next steps for you and your dealership:
- Do some research to make sure you understand all the requirements, the FCA website is a really good place to start – smaller firms might also find this document useful - click here
- Review your current approach to finance; from financial promotions to documentation, and ensure you have written processes and controls with evidenced sign-offs
- Don’t just follow another dealer’s approach to finance on the basis that they are large and therefore compliant. The FCA is currently investigating some big players in the industry, which demonstrates that sometimes even the larger dealerships might not be getting things quite right.
To prepare for the change of regime, you may want to consider the following (to name a few):
- Identify who your Senior Managers and Certified staff are
- Ensure it is clear which Senior Manager is responsible for what and that this can be demonstrated
- Train Senior Managers and Certified staff on the Conduct Rules and how they apply to their roles – you have until December 2020 to train the rest of your staff (ancillary staff can be excluded)
- Consider how you will assess the fitness and propriety of your certified staff, which you will need to do at least annually
- Consider how your hiring process might need to change to incorporate new requirements
SM&CR is a lot to do with culture at your dealership. While some requirements of SM&CR are prescriptive, what every firm needs to establish and sustain is a culture that actively protects and empowers customers, which will naturally create a good working environment and a brighter future for our industry and our customers.
*Core firms with a Non-Executive Chair and Enhanced firms will need to complete a conversion form.