Senior Managers & Certification Regime and asset managers: Where are we now?

SMCR and asset managers: Where are we now?

Fail to prepare, prepare to fail!

David Yim - Partner


KPMG in the UK


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The extension of the Senior Managers and Certification Regime (SMCR) is set to have a significant impact on the asset management industry. The deadline for implementing the new regime is expected to be confirmed imminently but there’s plenty that asset managers can do now to prepare for implementation, to clarify and rationalise their existing governance arrangements.

At our last asset management SMCR roundtable discussion, it was largely agreed that SMCR is an important and demanding topic with significant implications for the sector. However, there are three main challenges in implementing the new regime:

  1. Impact assessment - Understanding the impact of SMCR on operating models and group structures, in particular the challenges to implementation posed by complicated matrix management arrangements.
  2. Regulatory expectations - Obtaining sufficient clarity in terms of the regulatory requirements, especially around the proposed duty of responsibility.
  3. Maintaining BAU compliance - Putting the right technology in place to manage and maintain compliance, whether that’s via an existing technology platform or purchasing an external solution from a provider. Either way, the answer lies in agile solutions that are fit for purpose.

Senior managers will need the most support in taking and evidencing ‘reasonable steps’ under the proposed duty of responsibility, particularly in the following areas:

  • Assessing the quality and completeness of management information to enable effective oversight;
  • The clarification and formalisation of delegations; 
  • Defining and allocating accountability for value for money; 
  • Scoping the responsibility for developing and managing the business model; 
  • Over half of asset managers we spoke to have already identified their senior manager population and over a third have started an initial current state assessment; and 
  • Once the regime is up and running, over half of attendees believe that senior manager policies and procedures will be owned by the firm’s compliance function – and that human resources will be responsible for the certification policies and procedures.


The KPMG view

It’s understandable that many in the asset management industry are concerned about what SMCR means and how best to respond. There’s still a lack of clarity about elements of the new regime and a great deal of work to be done, particularly in formalising the internal policies and procedures to enable the regime to operate properly.

KPMG has already worked with numerous financial services firms on the implementation of SMCR over the past four years. We have a solid understanding of what asset managers should be doing and when, plus how the new regime can be a catalyst for clarifying opaque responsibility allocations, simplifying complex matrix management structures and optimising management time.

In the run-up to the implementation of the SMCR for banking firms we saw that unsurprisingly the most proactive and early-engaging firms were better equipped for the go-live date and better informed to address any subsequent regulatory scrutiny. This is one of the most valuable lessons we can learn as an industry when implementing SMCR.

Six key steps for asset managers

  • Be proactive - make sure your CEO, Board and Executive Committee are fully engaged in the process and that a senior level steering group is driving the implementation of the regime.
  • Assess whether you have the right people in the correct approved functions before the conversion of approved individuals takes place.
  • If you’re part of a group, consider the practicalities of running different regimes for different entities or ‘opting up’ core entities to meet the more onerous enhanced arrangements.
  • Examine the processes you already have in place and how you can embed SMCR into your existing governance structure. That includes the ability to manage and maintain a clear view of your workforce at all times, including, crucially, when senior managers leave the company.
  • Create an effective communications plan for both internal and external audiences, including the regulators and parent companies or branches of the firm.
  • Engage early with the regulator to be clear on what they will expect and engage with future industry consultation.

Please get in touch if you would like to discuss how we can help your firm with the implementation of SMCR or if you would like to be kept informed of future asset management SMCR roundtables.

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