How SM&CR will impact single regulated firms

The Senior Managers and Certification Regime (SM&CR) was introduced for dual regulated firms (those regulated by both the FCA and PRA) in March 2016. The spur was a general feeling in the wake of the 2008 financial crisis that the approved persons regime was not working effectively. From December 2019, SM&CR will be extended to cover all regulated firms. So how will the changes it brings affect single regulated firms – and what do they need to do to get appropriate systems and controls in place in good time.

Objectives

SM&CR aims to reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct and competence.

Specifically SMCR aims to encourage a culture in which staff at all levels take personal responsibility for their actions, and to ensure firms and their staff clearly understand – and can demonstrate – where responsibility lies.

Critically, SM&CR aims to embed personal responsibility into the functions held by the Boards and Senior Managers of regulated firms.

Core, Enhanced or Limited Scope?

There will be three tiers of firm under the SM&CR:

Core: firms in this tier will have to comply with the baseline requirements of SM&CR.

Enhanced: this will apply to a small number of firms whose size, complexity and potential impact on consumers or markets warrant more attention. These firms will have extra requirements.

Limited scope: this will apply to firms that already have exemptions under the Approved Persons Regime. These firms will be exempt from some baseline requirements and will typically have fewer senior management functions.

Documents required under SM&CR

SM&CR defines prescribed responsibilities that each firm must review and allocate to a member of the Senior Management team. This document is known as the Management Responsibilities Map, a firm is required to maintain a responsibilities map that outlines the areas of responsibility that is kept up to date.

Each individual is required hold a Statement of Responsibility that builds on the responsibilities map and outlines the areas the individual is personally responsible for. This will be augmented by a Handover Document that must be kept up to date to account for a planned or unplanned succession.

Three-Tiered Approach

For Senior Managers the core concepts that affect individual accountability are as follows:

Senior Management Functions

The PRA and FCA have established a combined list of Senior Management Functions (SMFs) requiring regulatory pre-approval and who are subject to the SMR. The list replaces the existing Controlled Functions (CFs) under the APER and focuses on a smaller number of more senior roles. Generally, these roles are limited to those in the top two tiers of management within the firm (e.g. board of directors and executive management).

Accordingly, the list excludes a number of the current APER Controlled Functions typically occupied by less senior staff, including: the CF30 Customer function; the CF10a CASS Oversight Operation function. These roles are now captured under the Certification Regime.

The Certification Regime

Certification covers specific functions that aren’t Senior Management Functions, but can have a significant impact on customers, the firm and/or market integrity. The FCA won’t approve these people, but a firm will need to check and confirm (certify) at least once a year that these people are suitable to do their job.

If a role meets the definition of a Certification Function, the firm needs to make sure that anyone doing that role has been certified. This means the firm must check and confirm that the person is fit and proper to do the job, and issue them with a certificate.
This certification must be done at least once a year, and the firm should take into account whether the individual:

has obtained a qualification during the year;
has undergone, or is undergoing, training; and
possesses the required level of competence.

Certificates should:

state that the firm is satisfied that the person is a fit and proper person to perform the Certification Function; and
set out the aspects of the firm’s business in which the individual will be involved

Some of the staff in scope of the Certification Regime may have been previously approved persons. The FCA won’t approve these people any more, as one objective of the Certification Regime is to reinforce that firms, rather than the regulator, are responsible for making sure their staff are fit and proper.

Fitness and Propriety

SMCR requires firms to evidence how they have established that an individual is fit and proper to carry out the Senior Management or Certified function. There are three elements:

  • Honesty, integrity and reputation
  • Competence and capability
  • Financial soundness

Conduct Rules

These are a new set of enforceable rules that set basic standards of good personal conduct, against which the regulator can hold people to account. The Conduct Rules apply to staff directly, they will help shape the culture, standards and policies of firms as a whole and promote positive behaviours that reduce harm. The Conduct Rules are intended to improve standards of individual behaviour in financial services from the top down and the bottom up. They represent a meaningful change in the standards of conduct expected from those working in the industry. By applying the Conduct Rules to a broad range of staff the aim is to improve individual accountability and awareness of conduct issues across firms.

Two tiers of Conduct Rules apply to staff at all firms and build on the FCA’s principles for business that apply to firms themselves.

The first is a general set of rules that applies to most employees and directors in a firm
(see below for more detail on who these rules apply to). The second tier consists of
rules that only apply to Senior Managers. There is also one Senior Manager rule, SC4,
that applies to NEDs who are not Senior Managers.

First Tier – Individual Conduct Rules

  • You must act with integrity
  • You must act with due care, skill and diligence
  • You must be open and cooperative with the FCA, the PRA and other regulators
  • You must pay due regard to the interests of customers and treat them fairly
  • You must observe proper standards of market conduct

Second Tier – Senior Manager Conduct Rules

  • 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 responsibilities 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 or PRA would reasonably expect notice

The conduct rules apply to all activities carried out by the firm, both regulated and unregulated and apply to:

  • all Senior Managers (including the Board)
  • all Certified Functions
  • all Non-Executive Directors who are not Senior Managers
  • all other employees, except ancillary staff (i.e. people who don’t perform a role specific
  • to financial services)

Training requirements

Firms are required to train relevant staff on how our Conduct Rules apply to their role and a Senior Manager is required to be allocated the personal responsibility for this. Senior Managers and Certification Staff will need to have been trained and abide by the Conduct Rules from the start of the new regime. Firms will have 12 months to put in place processes to comply with the training and reporting requirements and train their other staff on the Conduct Rules.

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To celebrate the launch of our 2019 programme, we’re offering 20% off all pre-Christmas bookings

We are delighted to announce the release of our 2019 Programme of open-market courses.

Click here  to see the full programme. If you would prefer to have a hard copy, simply phone or text us using the contact details below.

And if you book before December 25th, you’ll receive a whopping a 20% discount on any of the workshops advertised.

Call 01372 361177 or email brokeracademy@ssluk.net and quote XMAS 18.

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Move fast to snap up Searchlight’s crazy Black Friday deals!

Yes, yes, we know it’s not very British. But, even now, even at a time when it’s more important than ever that we should all be as British as we possibly can, Searchlight just couldn’t resist the all-enveloping allure of Black Friday.

You may think we’ve finally taken leave of our senses, but we’re offering an utterly ridiculous 50% discount on any NEW Broker Academy bookings made and paid for on or before Monday 26th November.

Click here to see all the Broker Academy courses you could snap up at a price so absurdly low we might as well be paying you to book places at them (although – to be completely clear – we will NOT be paying you, or anyone else, to do that).

If you want to take advantage of this offer just email brokeracademy@ssluk.net or call us on 01372 361177

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How to write the perfect business letter

Always use language that is:

  • Clear
  • Direct
  • Open
  • Confident

Use positive language

Insurance language can often be rather passive and lifeless. In a marketing context, don’t be too fussy about the language you use. You are not writing a legal document. Come out and say things straight wherever possible.

Don’t talk about the abstract possibility of things being done. Say we can, or we will, do this. Not we could or we would. Don’t talk about striving, aiming, aspiring or hoping. Use more positive and confident language.

Avoid sentences using the ‘passive voice’ and those without a subject noun or pronoun. Don’t just say X will be done. Say we will do X. Some people think using the passive voice conveys gravitas. It doesn’t. Be positive and definite, and don’t write things you wouldn’t say.

Don’t be afraid to express some passion. But keep it real and avoid excessive hyperbole.

Don’t skirt around the issues. Be clear about who you are and what you do. Let the language you use express confidence and willingness to be judged on results.

Quote hard facts and figures wherever possible. Anchor your message in something hard and fast.

Use language like a human being

Read back what you write and ask yourself: would I say this face to face? Keep the language fresh and real. Don’t use the kind of unnatural stilted sentences found in technical manuals and letters from bureaucrats.

Write something you would happily read yourself.

Get colleagues to review your documents. Take their comments on board. The reader is never wrong.

Keep it customer focused

Customers and their needs must always be at the centre of what you write. Think carefully about what your customers need from any document you send out. Tailor it to deliver this clearly and succinctly, minimising standardised generic content.

Present things from the customer’s perspective from beginning to end. Cut out anything the customer doesn’t need to know. Remember: it’s the client’s document not something you are writing for your own pleasure or entertainment.

Use ‘you’ for the client and ‘we’ for your company name as often as possible. Avoid talking about ‘the customer’ or ‘the client’ in the abstract.

Use terminology that fits the customer’s perspective – not yours. Think yourself into your reader’s head and consider what language they would naturally use to describe the things you are discussing.

Give your audience credit for their intelligence. Keep it succinct and relevant to them. Don’t patronise your readers.

Precision

Make everything you say clear, compelling, and persuasive.

Always try to use the right word. Get to the point and say what you mean. Careless language suggests careless thinking and careless service.

Always choose the least ambiguous word. Select your sentence order carefully. If something doesn’t ring true at the first attempt, try changing the word order until you’re sure you have the clearest sentence structure.

The language we use reflects and influences the way we think. Getting rid of clichéd insurance industry phrases can lead to fresh insights. Describing a process clearly helps you manage it better.

Concision

Don’t use 10 words where three will suffice. Give the reader the information they need with brevity and authority.

Don’t discard essential detail, but lose excessive wordiness.

If something drags when you read it back, try distilling it further. Resist the temptation to pad things out. If you’re particularly pleased with something you’ve written, alarm bells should ring. Could you have said it in a simpler way?

Insurance can be complex. Your role is to manage that complexity, not to revel in it.

Writing something shorter can take longer. Better you should spend the time to make it simpler, than leave that task to your readers. Time is money, as they say.

Keep your sentences short. Leaven them with longer sentences here and there, when the context justifies it. But avoid long sentences with multiple clauses or parentheses. Stop one sentence. Start again.

Say providing, not the provision of.

Say delivering, not the delivery of.

But is often better than however. Primary school teachers may claim you can’t start sentences with but or and. But you can! And effective marketing literature often does.

Jargon

Avoid jargon at all costs. Use the words your readers know, not the fancy terms you think will make you sound like an expert.

Buzzwords

Avoid buzzwords. They turn people off more often than they impress. Don’t risk using any term that may not be familiar to your readers. Use the right word not the most impressive sounding word.

For example: don’t talk about actioning something. Talk about doing it, or, better still, simply use the verb form of the noun in question.

Pompous words and phrases

Don’t say things like ‘when we met you indicated that’ i.e. things you would never say to someone face to face.

Avoid words like:

therein,

hitherto,

pertaining,

notwithstanding,

upon,

wherein,

thereby,

hence

and all other pompous stilted language.

Don’t say commence. Say start or begin.

Say need, not require or requirement.

Say get, not acquire.

Say can, not ‘has the ability to’.

Punctuation

Full stops

Short sentences are good. Never hold back from using a full stop.

Commas

Use commas to indicate logical breaks in sentence structure, or natural pauses for breath.

Semicolons

Avoid semicolons. Start a new sentence if in doubt.

Brackets

Don’t get carried away with brackets. Use them only where strictly necessary e.g. when introducing an abbreviation for the first time.

Quotation marks

Don’t use inverted commas to distance yourself from what you are saying. Use them only for actual quotations of something someone else has said or written.

Use single quotation marks e.g. ‘quote’. Only use double quotation marks if a longer quotation contains a quote and you need to differentiate e.g. ‘this quote has “another quote” within it.’

Underlined text

Do not use underlining in text.

Abbreviating with apostrophes

Using apostrophised abbreviations (e.g. ‘we’re’ for ‘we are’) is perfectly acceptable, providing you think your reader will be comfortable with it. Don’t do it if you think it might not play well with a more conservative or traditional reader.

Non-regulation punctuation

Use a standard colon. Don’t use one of these: :-

Don’t use mathematical characters in text e.g. > ≠ ±

An ellipsis (…) is always exactly three dots: not 2, not 4, nor anything else.

Adjectives

Avoid any adjective that doesn’t need to be there. Readers will not take aimless superlatives (like vast, unrivalled, unique, unmatched, outstanding) seriously. Overstating things undermines credibility.

Conclusion

Every document needs a strong conclusion. Make it client-focused.

Numbers

Sentences beginning with a number always start with the Four or Nineteen rather than 4 or 19. Otherwise numbers from one to nine in sentences always appear as words. Numbers from 10 upwards always appear as numerals.

Thousands, millions, billions

Figures in thousands should be written with a comma for ease of reading (e.g. 1,000, 43,220 etc.) Millions should be written as 5m rather than 5M or 5 million. Likewise, use 5bn, not 5Bn, five billion etc. Do not use k as an abbreviation for thousand. Show thousands in figures as ,000.

Apostrophes

Write 1980s not 1980’s. SMEs not SME’s.

Ampersand

Do not use & in sentences, except where it is part of a registered company name. Write marine and energy or mergers and acquisitions, not Marine & Energy or mergers & acquisitions.

Dates

Dates should be written as Monday 23 June 2011 (day of week and year are obviously optional depending on context). Do not include st, th, rd etc.

Hyphenation

For clarity, hyphenate words when combining them to function as an adjective, e.g. third-party provider or in-house solution. Do not hyphenate when used as follows: outsourced to a third party or kept in house.

Paragraphs

There is nothing wrong with short paragraphs. Too many single-sentence paragraphs may look strange. But two or three sentences is plenty. Each time you switch to a new topic, it’s a good idea to use a paragraph.

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Who are we, and what do we do?

Want to know more about Searchlight Insurance Training?

Our short and snappy corporate video offers an overview.

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SMCR is almost upon us…

A key strand in the FCA’s campaign  to strengthen individual accountability in insurance is the Senior Managers and Certification Regime (SM&CR). Important changes come into effect for insurers from 10 December.  Are you ready for the deadline?

If you’re not fully confident you are – or if you think you could use some guidance and assistance, call Searchlight today on 01372 361177 or email us at training@ssluk.net and we’ll be ready to help all we can.

For well-prepared firms SM&CR is nothing to be afraid of practice. In fact it’s an opportunity to make your business stronger by reviewing your governance arrangements and how you manage the competence and culture within your firm.

Whether it’s through cace-to-face training, consultancy, E-learning or the provision of technical content to load on to your own e-learning platform, we can help! So don’t delay – get in touch now!

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Even high flyers have to take off from somewhere

If you’re looking for a good entry-level workshop on Aviation Insurance, you’ve come to the right place.

Starting with the theory of flight itself, our one-day Introduction to Aviation Insurance equips delegates with a sound understanding of the need for aviation insurance, the different types and classes (including hull, passenger and products and airport liability) and the history and current make-up of the aviation sector.

Among other things to numerous to mention here, delegates will also learn about the different types of policy wording applicable to aviation insurance, factors affecting ratings and the key legal and regulatory considerations.

Click here for further information about this workshop.

We can also tailor our aviation workshops to your individual specification and deliver on or offsite.

To find out more contact Searchlight Insurance Training on 01372 361177 or email training@ssluk.net.

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