The Senior Managers and Certification Regime: what’s changing?

As the SMCR is set to extend to 47,000 firms by the end of 2018, Lucy Gordon, senior solicitor at ESP Law, explains what HR professionals can do to prepare


Corporate governance Employment law


As the SMCR is set to extend to 47,000 firms by the end of 2018, Lucy Gordon, senior solicitor at ESP Law, explains what HR professionals can do to prepare

The Senior Managers and Certification regime (SMCR) was introduced to UK banks, building societies, credit unions and some investment firms in March 2016. The government has committed to extending this to a wider number of companies in 2018*; estimates put the number of companies likely to be affected at around 47,000, which includes any company that offers credit to customers – whether that’s a tool-hire company or used car dealership.

The SMCR has two aims: to ensure that everyone acting within these types of businesses is ‘fit and proper’ to do such work, and to ensure that banks and investment firms, in particular, are not taking unreasonable risks.

Although the SMCR extension is unlikely to apply until late in 2018 (or possibly even early 2019), there’s a lot of work that companies can – and should – be doing to prepare. You can use 2018 to familiarise yourself with what the regime looks like; audit your policies, processes and contracts of employment; and make sure that you are compliant. You need to have a clear picture of which roles and employees are in the scope of the SMCR, and the obligations on these employees. One of the key features of the SMCR is that the regulator is putting far more onus on firms themselves to check that the individuals they employ are ‘fit and proper’ to do their roles.

The SMCR’s extension will add to HR’s workload in three key areas:

  1. Companies will be obliged to internally recertify an employee’s fitness and propriety annually. This should be incorporated into your appraisal process. But, if anything happens during the year that brings this into question – such as a misconduct issue – HR must deal with that immediately and not wait until the annual appraisal
  2. Recruitment timescales will be extended, especially for roles that need pre-approval from the regulator. It can typically take around three months to get pre-approval, and someone can’t start performing their new role until this approval is granted. HR will therefore inevitably need to be thinking further ahead when it comes to recruiting for key roles
  3. Disciplinary processes will need to be reviewed, because there is a real risk that a business could inadvertently trigger an unfair dismissal claim if decisions are inconsistent. So if, for example, a disciplinary hearing decides to issue a final written warning rather than dismiss an employee, but a separate panel reviews their fitness and proprietary in the context of the SMCR and decides that person has to be dismissed, those inconsistent decisions could trigger an unfair dismissal claim

Companies that don’t comply with the SMCR’s requirements will face sanctions from the Financial Conduct Authority (FCA), including fines levied on both the firm and individual/s involved.

Reviewing and altering your policies and procedures now will give you a chance to practice before the SMCR comes into effect. This is a complex and technical area; while the FCA offers resources to assist, you may find it helpful to seek out a law firm, such as ESP Law, that can offer advice on the SMCR’s obligations, and how to comply with them.

Lucy Gordon is a senior solicitor at ESP Law. This article was powered by esphr – a Ciphr strategic partner. Talk to a very different employment law firm and HR business partner on 0333 006 2929 or find out more at

* Editor’s note: after this article was published, the SMCR was extended to all dual-regulated insurers effective from 10 December 2018. It will apply to all FCA-solo-regulated firms from 9 December 2019. 

Read next

HR implications of the SMCR’s extension

When the Senior Managers and Certification Regime is extended in December 2019 to more than 40,000 UK financial services firms, there are set to be profound ramifications for HR policies and procedures