On 7th March 2016, the current Approved Persons Regime (APER) will make way for the Senior Managers Regime (SMR) and Senior Insurance Managers Regime (SIMR). This will mark a significant increase in emphasis on individual accountability and responsibility in the management of financial services firms across industry in the UK.

The SMR (and SIMR) allocates responsibility to persons in Senior Management Functions (SMFs) e.g. CEOs, CFOs and CROs along with some non-executive oversight roles such as Chairman, Chairman of Risk Committee and Chairman of Remuneration Committee.

The scope of the SMR was last month extended beyond banking and insurance workers to thousands of asset managers, hedge fund managers and other professionals in the fixed income, commodity and currency markets.

Last Tuesday the FCA extended the Regime further to include individuals who advise on investments, deal as principal agents and arrange deals in investments, act in the capacity of an investment manager, and those who act as a bidder’s representative.

The second category added last week was Algorithmic Trading. Specifically, those who approve the deployment of a trading algorithm (or a material part of one), individuals who approve the deployment of material amendments to trading algorithms (or the combination of trading algorithms), as well as those who decide whether or not the use or deployment of a trading algorithm is compliant with the firm’s obligations.

The SMR requires firms to perform regular assessments for fitness and propriety of those persons in Senior Management Functions and Certification Functions.

Fitness and propriety assessments will cover:

  • Personal characteristics e.g. reputation and integrity
  • Competency i.e. knowledge and experience
  • Qualifications and training
  • 5 years of employment references

Firms will also be required to provide:

  • A Management Responsibilities Map covering reporting lines, personal details and Prescribed Responsibilities of persons in Senior Management Functions and Certification Functions, and Terms of Reference for governance committees
  • Certificates for Certification Functions before a person performs the function
  • Handover Certificates when a person stops performing the function

Firms will need enhanced governance and controls with Management Information, escalation points, and attestation; along with clarity of strategic goals, risk appetite and roles and responsibilities, in an environment where ‘safe challenge’ is culturally acceptable.

So, what can StratexPoint do today?

StratexPoint includes a range of capabilities to support both firms and individuals covered by the SMR and there are immediate steps that our customers can (and should) take to prepare for it.

Key steps in preparing for the SMR include:

Immediate Recommendations:

  1. Ensure your organisational structure is fully captured and defined in the Stratex framework
  2. Ensure that the RACI framework is populated with Accountables and Responsibles for all Entities. For completeness, populating Consult and Inform shows all stakeholders related to the Entity
  3. For the Corporate level entity, and at least the level directly below, define the following:

    • Objectives (take these from your Strategy or Business plan documents)
    • Drivers (Critical Success factors from your Business Model, often documented in your Strategy or Business plan documents)
    • Risk Appetite per Objective (and/or per Risk)
    • Key Risks (to the achievement of the objectives)
    • Roles – at a minimum add the Senior Management Functions and Certification Functions to the Stratex Framework
    • People – at a minimum add the actual people in the Senior Management Functions and Certification Functions to the Stratex Framework
    • Use the Process management part of StratexPoint to document, measure and monitor key processes that will underpin the SMR, such as on-boarding, handover, certification and personal performance management
    • Use the Initiative Management part of StratexPoint to document, measure and monitor the change programme to prepare for the Senior Managers Regime
    • Generate the Responsibilities matrix automatically via the existing RACI Matrix dashboard and the Statement of Responsibilities matrix using the existing Entity Overview Report

Other Recommendations:

  1. Define Processes, Initiatives, Relationships, Risks and Controls element types within the Stratex Framework to define the operational infrastructure of your firm and define the RACI around each item to embed accountabilities and responsibilities throughout your firm.
  2. Implement a clear reporting calendar with clear deadlines for data update. Based on this calendar, schedule key management reports and automate a delivery of these reports to senior managers and post these reports to a SharePoint folder to create a reporting repository.

StratexPoint Senior Managers Regime Related Enhancements

There are a series of enhancements planned for StratexPoint in the coming months, and well in time for the commencement next March, to provide great support for the Senior Managers Regime (and better corporate governance in general). The main enhancements planned include:

  • Adding a Type drop-down to the Roles element type with the following options:
    • Unassigned
    • Senior Management Function
    • Certification Function
  • Adding the following element types to the framework:
    • Values (under Entity, Role and People)
    • Behaviours (under Role and People)
    • Attitudes (under Role and People)
    • Skills (under Role and People)
    • An alignment matrix which enables Values, Behaviours, Attitudes and Skills to be rated, so that the entity compares people to roles
    • Meeting (under Entity, Audit, Relationships, Initiatives and Sub-Initiatives). This is similar to the Audit functionality where we have created a workspace per meeting and enable actions, issues to be escalated to meetings. Additionally, actions can be created within a meeting and ‘push’ the business
    • Decisions (under Entity and Meeting)

Do not hesitate to get in touch if you would like to discuss this in more detail, or if you have any questions.

If you are not yet a customer of ours, contact us to find out what StratexPoint can do for you.