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23 June 2022

The third anniversary of the Senior Management and Certification Regime (SM&CR) is fast approaching. It’s not a red-letter day, but with the passing of another year, it seems like a good time to ask if your certification process would stand up to scrutiny or challenge?

Fortunately, good quality compliance folk have moved on from an outdated, tick-box approach, to ensuring that compliance with the certification regime is evidence-based, supported by effective management information. This ultimately gives much more meaningful results that protect the firm, the adviser and the client. Our concern, however, is everyone else.

In the FCA’s own words, the SM&CR was intended to be “a catalyst for change – to establish effective governance by encouraging greater individual accountability and setting a new standard of personal conduct.” Can you, hand on heart, say your supervisory processes and training are up to the job?

Fit and Proper assessment

As we’re sure you know, the mandatory annual assessment for a certified role is the ‘fit and proper’ test. It looks at three areas, as follows:

  1. Honesty, integrity and reputation: Well, it goes without saying that this is the absolute minimum we expect from role holders, but how are you assessing this? Do you use an attestation? Are you adding in social media checks and computer-based questioning? Whatever tools you use, make sure they are applied consistently across the board, irrespective of grade and evidenced in your records.
  2. Financial standing: Credit checks are pretty much standard, but are you reviewing them? Is someone under any financial pressure on a personal level? We know of firms that just gather in their credit checks each year and file them without auditing them. This is not good enough. You need to consider if an individual warrants increased supervision to protect your firm and if pre-advice checking is necessary. We also recommend CRB spot checks are done as another layer of supervisory assessment.
  3. Competence and Capability: Most people will recognise this as ‘training and competence.’ Is your T&C scheme up to date and has it been tailored to your firm? We see a lot of ‘off the shelf’ schemes that are so convoluted they end up being breached or ignored.

Now everyone’s favourite, Key Performance Indicators! It is not unusual to find KPIs that have been around for years and are still looking at the same thing. A real bug bear is provider spread for a firm with a CIP, again breaching the limits of the KPI. So, the question is, are your KPIs measuring the same things they did 30 years ago? Performance indicators should reflect the stage the individual is at. For example, a measure for a trainee should look very different from one used on a competent individual.

Assessing competence

The definition of competence is having the skills, knowledge and expertise to carry out your role. If we break this down, are you actually seeing and assessing your certified person’s skills? Can you truly confirm their knowledge and expertise, benchmarked against your T&C scheme and evidenced to support your annual certification sign off?

The person who authorises the certification process will be the one the regulator has a conversation with, if there is a need. Would you be confident having that conversation and demonstrating that you know, without question, you have a robust ‘fit and proper’ process?

The aim of the SM&CR is to reduce harm to consumers and strengthen market integrity by holding people personally accountable at all levels and making sure firms understand and can demonstrate where responsibility lies. If you are confirming a role holder meets the ‘fit and proper’ test, you are probably holding a certified role and are, therefore, accountable yourself.

Are you the manager of a certified role?

Put another way, are you a T&C supervisor? Well, the good news is we can help demonstrate how you are maintaining and updating your supervisory skills, as you are going to need to do this as part of your own certification process. We run supervisor training and refresher courses, led by very knowledgeable T&C supervisors with years of practical experience.

Is your T&C scheme fit for purpose? Will it pick up your potential risks and crucially, emerging risks that need monitoring? We can critique your scheme and help you personalise it not only to reflect the regulatory requirements, but also those of your business.

For more information about the certification process, don’t hesitate to contact us on (0161) 521 8641 or email:

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