Almost all the attention paid recently to SMCR has focused on the in-force date and features of the transition (CP17/40: Individual accountability: Transitioning FCA firms and individuals to the Senior Managers & Certification Regime | FCA). Both are important to all 47000 firms affected, but that is not the whole story.

First the good news. On the matter of the commencement, the pragmatists have won the day. There was tension in the air as 2018 was repeatedly cited as the date that it would all happen – when the whole regulated industry would be subject to Parliament’s new regime for managers, devised as a way to control the banks and then applied, like European capital standards, to an audience for whom it was never originally intended. All along, FCA behaved as though 2018 was unrealistic, promising its Policy Statement in the summer of that year, not leaving room for the essential industry processing before year end. Abnormally, the date decision lay outside FCA’s authority, so it could only seek to influence the Treasury-based decision-makers. “Well, Steve old boy”, they will have said to the minister, “don’t you remember your old colleagues down at the Wharf struggling to make it all work, while those jokers in Brussels dribble out their ill-considered measures, to the excited applause of every EU government that has no financial services industry? If you want a shambles on the senior manager requirements – your own measure, so we can’t blame the clowns on this one –  go for 2018. Anyway, whatever you go for, we will say we support you. Yes, they won’t be fooled. You can please your parliamentary colleagues if you like. Or you can do the sensible thing. Wouldn’t it be fun to be known as the minister who knew what he was talking about?” And the rest is history. So, 2019 it is, a year better known for………

Of course, an orderly exit from the Approved Persons Regime will be welcome. But excuses for tardy transition will not be met with the recently acclaimed tolerance for struggling firms. Extra time means enough time, so they say. Firms who now sit back will be running the risk of accusations of arrogance and complacency, all over again.

Many had also supposed that a key part of the new regime was the Statement of Responsibility, required under the legislation that brought SMCR to your doorstep. Much as it must dread the day, when a senior manager seeks new approval, FCA will have to look through the magic Statement and use it as part of the decision-making process, whether or not they know the context or the bigger picture. It seemed as though Parliament’s enthusiasm was embedded in the Statement but it is wonderful to see what can be achieved by a minister with the knowledge. There is to be no submission of the Statement for those who are transitioning. All this and gender neutrality too.

So, what more is there to be said? Well, the SMCR is not all about senior managers and those waiting to be certified. This is about everyone in financial services, many of whom enter only through the side door marked Other Conduct Rules Staff, the un-sung victims of the regime that claims to be about someone else. Can it be that the FCA suspected a fall-off in sales had they named it the Senior Managers, Certification and Everyone Else (except Ancillary Staff) Regime? How else can we excuse the Regulator from burying in the small print the full impact on those who thought that this was all firmly above their pay-grade? Inexplicably it falls to firms to ensure that the news reaches the OCRS that they are not forgotten.

It may be little more than five measly rules that land in the laps of the masses, on a day thoughtfully deferred for twelve months, but they are accompanied by the ever-longer arm of the Regulator, who quaintly describes them as ‘enforceable rules’, ‘against which we can hold people to account’. Until now the only individuals that could be directly penalised by the Regulator were those who applied for the privilege, destined to perform leading roles, prominent in management or visible to the clients. But now the very act of accepting employment at a regulated firm brings with it the groping arm of FCA.

So, we need to know how the FCA proposes to treat the silent majority. In a little noticed but nevertheless explicit document (CP17/42: https://www.fca.org.uk/publication/consultation/cp17-42.pdf), FCA tells all in relation to judging senior managers who, bearing the duty of responsibility too lightly, have allowed foul deeds to be perpetrated in their domain. But when it comes to the poor bloody OCRS, why bother? Digging out old guidance, deemed unworthy of a mention in recent publications, one finds not very enlightening observations about proportionality and the nature and seriousness of the misconduct by the individual. Where, we are left wondering, might the threshold lie? How much will FCA intervene? How, if at all, will FCA de-bar the miscreant rank and file from firm-hopping? How large might the penalty be for abominable heinousness? These questions may not trouble the Regulator, but they should trouble those now within its reach.

May your Christmas be very happy, your New Year well MiFID and your 2018 a joyful anticipation of forthcoming events.

Oliver Lodge                                                                                                 December 2017