The following is a guest post from Liz Hornby, a Principal Learning Consultant in Eukleia Training's London office and the November 28th MCO Webinar presenter and co-host.
In October 2015, HM Treasury announced its intention to extend the Senior Managers and Certification Regime (SM&CR) to almost all regulated firms. In July, the Financial Conduct Authority (FCA) published their Consultation Paper (CP17/26). The implementation date for the extension is still unclear, although the end of 2018 has been earmarked.
The extended regime closely mirrors the current regime for banks and there is much to be learned from their experience. The main lesson is, perhaps, that the SM&CR takes time to implement; it is more than just a compliance exercise.
“This is about the importance of individual decision making and behaviour,” Martin Wheatley, then CEO of the Financial Conduct Authority.
Lesson 1: Start early.
Don’t under-estimate the lead time required.
Although the SM&CR essentially replaces the Approved Persons Regime, it does much more than that. The SM&CR requires a different mind-set and considerable changes to corporate governance frameworks, employee assessment and breach reporting infrastructures, employee training and, as a consequence, behaviours across the firm. Behavioural change doesn’t happen overnight. It takes time and reinforcement.
Lesson 2: Begin at the top.
Your communication and training plan will need to touch every area of the firm – from the Board down.
The SM&CR broadly introduces three categories of employee. Each category will require a different communication and training approach.
- Senior Managers
- Certified Persons
- Other Conduct Rule Staff
Lesson 3: Be positive.
Framing is important.
Be aware that many employees will be anxious about the regime, in particular the consequences of Conduct Rule breaches and regulatory references. Experience shows that framing is key to the delivery of a successful communication and training strategy and to sustained behavioural change.
Try to avoid negative messaging and focus on the positive. Emphasise that the SM&CR is welcomed by the firm, is good for business, clients and the industry and, in any event, is in line with the firm’s values and principles and what is currently expected of employees.
Lesson 4: Think about infrastructure.
Implementation of the SM&CR means building new infrastructure.
Notable examples include changes to the corporate governance framework and recruitment and appraisal processes and the introduction of Conduct Rule breach reporting and annual Certification processes.
HR and Compliance will have a key role to play.
Lesson 5: Think about different training and communication options
Good training and communication are central to a successful implementation of the SM&CR.
Your strategy is likely to cover several stages, from communicating the basic ethos and themes through to role specific training on the Individual Conduct Rules.
MCO ran a free Webinar featuring the author, Liz Hornby, on Nov 28 at 12 pm GMT. You can view the full recordings from it here: 'SM&CR: 5 Free Lessons Learned from the Banking Sector'
About the Author
Liz Hornby (LLB, M.Phil, M.Res) Principal Learning Consultant, Eukleia
Liz is a barrister and worked for the Stock Exchange before Compliance roles at Nomura and Goldman Sachs. Then, after 15 years as a compliance consultant, she joined Eukleia as a Principal Learning Consultant. She is Deputy Chairman of the CISI Compliance Forum Committee and is undertaking a PhD on whistleblowing.
Should you have any questions on the above or to find out how Eukleia can help with your Governance, Risk and Compliance training needs, contact them here.
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