The SM&CR Case Study Series - Senior managers, certification staff or conduct staff?
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About our SM&CR case study series
This series, designed to help you prepare for the implementation of the SM&CR, charts the preparatory efforts and challenges a typical core firm will encounter. Our case study follows fictitious firm “Smith & Cromer Limited” with key milestones and tips being released to you periodically throughout the year.
This is the second instalment in this series. Before you read on, have you:
- Read the first instalment?
- Watched our one-minute video - SM&CR in a Nutshell?
If you are up to date, read on...
Our case study firm
Smith & Cromer Limited is a fictional solo-regulated firm active in the wholesale markets with 25 staff in total, including 20 approved persons. There are five executive directors and two non-executives. All but one of the executive directors also performs the customer function under the approved persons regime. The compliance oversight function and the MLRO function are both performed by Sam Carr, who is not a director of the firm.
Sam is steering the SM&CR project plan and she has reached the second stage where she will identify the senior managers at the firm, those that need to be certified as fit and proper, and the remaining staff. She will also identify any staff members that are considered ancillary and decide whether they will be trained on the conduct rules.
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Senior managers, certification staff or conduct staff?
Senior managers
Sam is aware that the FCA prescribes six potential senior management functions (SMFs) for core firms like Smith and Cromer.
Four governing functions:
- SMF 1 Chief Executive
- SMF 3 Executive Director
- SMF 27 Partner
- SMF 9 Chair
And two required functions:
- SMF 16 Compliance Oversight
- SMF 17 Money Laundering Reporting Officer
Since Smith and Cromer is a limited company and not a partnership, Sam can immediately ignore SMF 27 – Partner.
So, Smith and Cromer will have five senior management functions, and the persons holding these functions will be considered senior managers. SMF 1 – the Chief Executive is easy. That will go to the CEO of the firm. Similarly straightforward are the SMF 3 senior managers – that will be the other four executive directors at Smith and Cromer.
It is one of the non-executive directors that currently acts as chair at Smith and Cromer, so this individual will be SMF 9 – Chair as well as a non-executive director (NED). This will necessitate submitting Form K to the FCA to convert this individual from CF 2 NED status to SMF 9. The second NED will not hold a senior management function.
Things become a little more difficult in considering who is to take on the SMF 16 & 17 roles. Read this instalment to find out who Sam allocates these roles to and see how she handles identification of certification and conduct staff...
