Proposals put forward by The Financial Conduct Authority (FCA) this week could see brokers forced to comply with the senior management and certification regime (SM&CR) – and reactions are rolling in from the industry.
The regulator published a consultation document on Wednesday putting forward a system in which almost all regulated firms would fall under the regime, noting that the new proposals would essentially replace the approved persons regime.
The three-part proposal is part of the watchdog’s aim to increase accountability across the financial services sector.
“Culture and governance in financial services and its impact on consumer outcomes is a priority for the FCA,” the body’s director of supervision, Jonathan Davidson said. “The new conduct rules will ensure that individuals in financial services are held to high standards, and that consumers know what is required of the individuals they deal with.”
While the Chartered Insurance Institute (
CII) welcomed the move as a “common-sense,” and “user-friendly,” approach, others in the industry have taken a difference stance.
“Insurers have barely implemented the current Senior Insurance Managers Regime and now face further changes and an extension in its scope,” Mathew Rutter, partner at international law firm DAC Beachcroft, told Insurance Business. One of the major changes will be the certification of key function holders who are not currently within the regime – including those responsible for underwriting, claims, capital and liquidity management, IT, operational systems and controls, reinsurance and investment management, as a minimum, Rutter explained.
Insurers will be responsible for identifying which individuals need certification and for satisfying itself that they are fit and proper, he continued.
“It is delegation of regulation – the burden falls on the insurer in the first instance to get it right,” he said.
For brokers getting to grips with the proposed regime for the first time, they should draw on the previous experience of banks and insurers – which is that early preparation is key.
“That involves understanding what is expected, making sure roles and responsibilities are clearly defined and mapped, and that what happens in practice reflects your responsibilities map,” Rutter commented.
Training will also be crucial, as well as thinking about wider implications for employees, including reviewing employment contracts to make sure they reflect the requirements of the new regime.
“These are not just superficial changes,” he noted. “There is a lot to think about."
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