An SM&CR review: feedback from leaders in financial services

The Trailight team have been speaking to leaders in the financial services market, our clients included, to understand the reception to SM&CR in light of the Edinburgh Reforms within organisations. The resounding answer is that, overall, people believe SM&CR has had a positive effect on the industry.

Stakeholders have agreed that it is achieving its purpose – to improve individual accountability, conduct, culture and good customer outcomes – and that it has brought with it an overarching improvement in governance processes across organisations.

This is supported also by Andrew Bailey who believes that the regime has had a positive outcome in improving operations and implementing fundamental principles of good governance.

Nevertheless, there are still a few areas where the organisations implementing this regulation see room for improvement. Although different firms we’ve spoken to have raised their own concerns, there are some common themes. These are the overarching concerns we’re seeing across the industry:

1. Bureaucratic administration is a burden

With the implementation of SM&CR firms are expected to administer and update a significant number of tasks, particularly in relation to certified staff and updating the FCA Directory. For example, the FCA directory needs to be updated within seven days for any certified persons changes. This is a stringent requirement which many feel is not directly related to protecting the consumer and the FCA Directory should not need to include this information such as managers of certified staff.

Overall, there is a particular focus on documenting and evidencing matters. Although this may be necessary for recording accountability, organisations are finding it difficult to meet all their administrative requirements. This was one of the reasons the regime was called into review.

2. There is a lack of proportionality

Organisations have noted that there is no regulatory differentiation between small and large companies when it comes to certain requirements. For example, the requirements imposed on an enhanced firm are very similar to that of a bank, which hold substantially more risk and has a direct correlation with consumers. Some enhanced firms do not have the same resource or financial capability in place.  In comparison, larger organisations likely have dedicated teams or department for meeting the requirements of the regime.

When you consider the problems noted with administrative tasks, this becomes more significant. The question is whether SM&CR requirements should be more effectively scaled according to other attributes such as the number of people in an organisation or certified staff they have. As its currently structured, a risk exists that some firms may fall short of compliance simply because they didn’t have the time to complete tasks that could and should be deemed ‘unnecessary’.

The need to systemise with SM&CR compliance software

In light of this feedback, systemising SM&CR is clearly a necessity for firms.

Without a digital system that benefits from automation, systemised workflows and processes, and repeatable templates, SM&CR compliance will be an impossible burden for some. There just isn’t enough people or time and something is bound to slip through the cracks without technological support.

From annual attestations to the FCA directory updates, if financial services organisations don’t have the manual resource to manage governance, they will need to introduce regulatory compliance software to support them in meeting regulation.

Trailight enables people to do this with a purpose-built SM&CR compliance solution for financial services. Our individual regulatory compliance platform pulls all the elements of individual accountability, culture and conduct, performance, and global requirements together. With a unified platform, you can easily see all individual activity and manage compliance from a single place. From automation to digital versioning to systemised requirements, our tools enable you to implement best practice easily and drive cultural change from your people up.

Learn more about Trailight’s financial services compliance software for SM&CR today, simply contact us to set up a consultation call.