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The UK’s Senior Managers and Certification Regime (SMCR)

The UK's Senior Managers and Certification Regime (SMCR)

By Chris Finney, Partner at Fox Williams.

Until December 9, 2019 the Senior Managers and Certification Regime (SMCR) only really applied to banks and insurers. Since then, it’s applied to 50,000 solo-regulated firms as well. From claims management companies, to fintechs, to dentists that offer consumer credit, a whole range of businesses now have to be keenly aware of the regime and their employees’ responsibilities under it.

The SMCR’s focus on placing responsibility on individuals within an organisation, rather than the organisation itself, represents a huge cultural shift for many organisations. This focus is not going to change. Yet the sheer number of firms added to the regime, coupled with the fact that many will be smaller or not see obeying financial regulation as their main concern, means a vast number of organisations do not realise they have to change the way they operate. Still more will be aware of the SMCR’s expansion, but unaware of the extent of preparation needed. When the main focus is on running and growing the business, rather than responding to every rule change that comes along, it’s perhaps understandable that so many firms still aren’t ready – and therefore in breach of the FCA’s new rules.

Auditioning for a new role

The greatest challenge for firms that have to comply with the SMCR for the first time, is that the regime doesn’t just place greater regulatory obligations on the business. It transfers some of the regulators’ responsibilities to the business as well.

For instance, the organisation has to put every employee into at least 1 of the 4 SMCR categories.

When that’s done, the organisation will know (for example) who its Senior Management Function holders and Certified Function Employees are. When it knows that, the organisation must:

  1. Train almost every employee on the FCA Conduct Rules that apply to them;
  2. Ask the FCA to approve its Senior Management Function holders, before they start work;
  3. Approve the Certified Function Employees itself, before they can start work; and
  4. Carry out an annual fitness and propriety assessment of every Senior Management Function Holder and every Certified Function Employee, before:
    1. Telling the FCA, if the organisation has any doubts about the fitness and propriety of a Senior Management Function holder, so the FCA can decide whether to stop a Senior Management Function holder doing his job (or not);
    2. Deciding whether the organisation can give its Certified Function Employees, a certificate or not. If the organisation gives a Certified Function Employee a certificate, he can do his job for up to another year. If the organisation can’t give a Certified Function Employee a certificate, the organisation must stop him doing his job, unless and until a certificate can be given – and that will be the start of a second nightmare for some firms. (The organisation has employed one person to do a job, it’s paying him to do that job, but it can’t let him do it. Now, it has to find someone else to do that job and pay them as well.)

The new regulatory referencing regime is a big change too. Before the SMCR, employers would usually only give a reference which confirmed the start and end dates of employment; salary and job title. And, if an employee was leaving in difficult circumstances, the reference might be agreed as part of a settlement. Each of these things is impossible now.

If a regulated firm is hiring a new employee for a Senior Management Function role, or a Certified Function Employee role, it must ask for 6 years’ worth of regulatory references. And, if a regulated firm is asked for a regulatory reference, it must give one. The result is that the new employer must ask, and the old employer must answer, a detailed list of prescribed questions. The policy objective is to make sure that every new employer knows, before it hires a new employee, if there is any reason to doubt the new employee’s fitness for the new role. This creates significant legal and regulatory risk for old and new employer alike. (The old employer has to get it right, or it will be sued for libel. And the new employer has to get it right as well, or there’s a risk of an employment law claim, as well or instead.)

As if that wasn’t enough, if something comes to light after the old employer has given the new employer a regulatory reference, the old employer must update the reference – and, depending on the update, the relevant individual might lose his job. So a problem in one job will follow an employee around the market, as they move from job to job. This makes sense from a regulator’s perspective. Every potential employer will know what you have and haven’t done. And, if you shouldn’t be working in the financial services industry, this will stop you. However, these changes create cost and risk for employers, and job security risks for employees. And these risks are already changing the job market: some employees are staying in jobs they would have left before now, if a regulatory reference wasn’t required; some employers are having to pay more to hire the people they need to do these jobs (if they can find someone who’s willing and able to do them); and other employers are turning good people away, for reasons that probably didn’t matter before (and might not really matter now).

The interview process is also changing. Some organisations are asking their potential employees to attend more, and more challenging, interviews than before – and some recruits are refusing, because they see this as reticence or a lack of commitment from their potential employee.

Cultural changes

To protect themselves and their employees, businesses need to understand how the SMCR has changed the job market; the role of the employee and the role of employer. They also need to understand the impact this is having, and will continue to have, on culture. The most important first step for some businesses is realising they don’t necessarily have what they need in-house to make these changes themselves. For some, there is a disappointing second and third step that others don’t have to take – and that’s realising that their compliance consultant and/or employment advisors are getting things wrong. We’re already seeing cases where firms that quite properly rely on compliance consultants for advice about new FCA developments, either haven’t been told about the SMCR (and haven’t therefore prepared for it), or they’ve been told about it – and wrongly advised that it doesn’t apply to them (and haven’t prepared for it either). We’ve also seen some cases, where the firm’s employment law advisors aren’t fully aware of the SMCR. So the firm’s given an agreed reference it shouldn’t have given, or unlawfully refused to answer the prescribed questions in a regulatory reference request.

Some of this is understandable. There are at least 6 different versions of the SMCR; and they’re complicated (to say the least). So mistakes are easily made. Mistakes are also expensive, and easily avoided if you choose experienced advisors.

Business

Do your contracts and policies stand up to the Covid-19 test? A view from the UK

Do your contracts and policies stand up to the Covid-19 test? A view from the UK 1

By Amy Cooper of Ius Laboris UK firm Lewis Silkin

The coronavirus pandemic and lockdown have stress-tested employment contracts and policies, with some showing signs of strain. What should you do now to make sure your employment documentation is ready for the post-Covid future?

A host of new issues for employers has arisen out of the pandemic, from health and safety concerns, to handling furlough and unanticipated homeworking. Employment contracts and policies were not drafted with the current situation in mind, yet restrictions on how people live and work could continue until a vaccine or effective treatment is found, possibly for years. And it seems likely that, as we gradually emerge from the shadow of coronavirus, it will be into a different world of work where home and flexible working is standard.

Furlough and changes to hours and salaries

In March, the UK government intervened to protect millions of jobs with its Coronavirus Job Retention Scheme, encouraging employers to furlough their staff rather than make redundancies. But most employers did not have any contractual right to ‘furlough’ or lay off staff. The concept of furlough leave was completely new and lay-off clauses in employment contracts are unusual, as are flexibility clauses that might allow an employer to reduce employees’ salaries or hours.

As a result, many employers have had to seek explicit agreement from employees to vary their terms where furloughing or changes to hours or salaries have been necessary to avoid redundancies.

Working from home

For those businesses that unexpectedly had to ask employees to work from home, there have been numerous other concerns. These include the health and safety of employees working in their homes, over which employers have little oversight and control.

Also problematic is the protection of personal data where employees are more likely to be using personal devices for work or work devices for personal reasons. And another issue is information security and confidentiality. This is more difficult to manage where employees are hosting calls and meetings at home with family members or housemates in earshot, or they do not remember to lock away any devices and documents.

Finally, grievances, disciplinaries and performance management problems may still need to be dealt with, albeit remotely. Most employers’ policies did not envisage or provide for this eventuality.

These concerns need to be managed in the short term, but they may also become longer-term issues for those employees who opt to work from home for the foreseeable future. Employment contracts should be updated as necessary, and certain terms such as place of work may need to be renegotiated.

Some employers may also wish to reconsider salaries. For example, some employees are paid a premium to work in central London: it may be decided that such high salaries are not justified if they do not need to live in London or spend thousands of pounds commuting. Conversely, if employees work from home, they may wish to be provided with home office equipment and possibly recover other expenses.

The workplace

Some work cannot be done from home and employees, such as those who work in factories, supermarkets or on building sites, have in many cases continued going to the workplace throughout lockdown. These employers have different problems, such as implementing new health and safety measures in the workplace and ensuring employees abide by them. They may also have new data protection issues as they seek to collect more health data about employees, which might require new policies or changes to their privacy notice.

An increasing number of employers will face issues of this kind as they start to plan for the return of staff currently furloughed or working from home.

Sickness policies

Employers’ policies on sickness absence and sick pay are unlikely adequately to cover employees who are self-isolating in accordance with government guidance but not unwell. Although we hope that Covid-19 will not be with us forever, it would be good practice to amend sickness absence provisions to set out expectations for employees who are either suffering from the virus, shielding or otherwise self-isolating. Alternatively, a temporary policy could be introduced covering these matters.

What should employers do now?

Amy Cooper

Amy Cooper

Some problems employers are facing will only require short term solutions, while others might need permanent changes to contracts and policies. Bear in mind that we may see a second wave of coronavirus in the coming months which might result in another lockdown, or there could be local lockdowns or further requirements for vulnerable employees to shield. Employers should think about whether they need any of the following:

  • A temporary homeworking policy dealing specifically with health and safety, information security and data privacy, supervision and management, provision of homeworking equipment or how to expense any necessary items. If employers think employees may wish to work from home much more in future, they should start considering what sort of permanent homeworking policy they may require.
  • An updated health and safety policy or a return to work policy that considers relevant matters in the workplace (e.g. masks, 1m+ distancing, safety equipment, cleaning, shared spaces, one-way systems) and also how to manage employees’ commute so as to reduce risks. A return to work policy could also deal with data privacy issues and new conditions on processing health information.
  • Revision of disciplinary, grievance and performance management procedures to cater for remote working, for example, holding meetings by video conferencing, accompaniment, conduct of investigations.
  • A temporary change to sickness policies to deal with employees who are not sick but are self-isolating, quarantined after returning from abroad, or ‘shielding’ because they are clinically extremely vulnerable. Employers may want to pay employees sick pay in these circumstances even if they’re not ill, for example, to prevent those who may be ill from coming into the workplace and infecting others. They may also wish to amend policies to deal with any notification or evidential requirements.
  • Any changes to contracts of employment? Employers may wish to consider a range of new contractual provisions, such as including a right to lay off employees if work diminishes, or rights to alter working hours, the place of work, or to redeploy employees (e.g. to cover work if other employees are sick). If an employee’s place of work is changing permanently, the employer may want to renegotiate the contract.

Employers should take advice on their specific situation before attempting to make changes to contracts and policies. This can be a troublesome area and, if not handled correctly, could lead to employees claiming constructive dismissal on the basis that the employer has committed a fundamental breach of the employment contract. And remember that, even where employees agree to changes, the employer is still constrained not to exercise its contractual rights unreasonably by the term of mutual trust and confidence that is implied into every contract of employment.

Employers should also bear in mind that if their contracts and policies are regarded too unfavourably, employees may simply vote with their feet and choose to work elsewhere. On the other hand, judicious changes to employment contracts of employment could give employers valuable flexibility to operate in the emerging, post-Covid world of work.

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Business

Board Report Highlights Complex Decision-Making Process Across Banking and Finance sector

Board Report Highlights Complex Decision-Making Process Across Banking and Finance sector 2

‘The State Of Decision-Making’ report from Board, reveals business decisions made in silos without modern planning tools

A third (33%) of Banking & Finance decision-makers believe decisions made in silos, despite majority (63%) of decisions being implemented worldwide

More than half (57%) of Banking & Finance decision-makers rely on spreadsheets for decision-making despite modern planning tools now available

The #1 decision-making platform, has today released ‘The State Of Decision-Making’ report focussing on how UK organisations make their important business decisions.

Based on a survey of 500 senior decision-makers, across industries including, Banking & Financial Services, Consumer Goods, Manufacturing, Pharmaceutical, Professional Services, Retail, and Transport & Logistics,  ‘The State Of Decision-Making’ report from Board shows that today’s business decision-making process is increasingly complex, with multiple departments and seniority levels all responsible for some form of decision-making, leading to a lack of cohesion between units and a waste of business resources.

The State Of Decision-Making’ research found that while a clear majority of respondents (63%) working within the banking and finance sector say the important decisions they are responsible for get implemented globally, the decision-making process itself is not joined-up across the business, with one third (33%) also saying that crucial business decisions are made in departmental silos.

The research, conducted on behalf of Board International by independent research organisation 3GEM, also asked respondents the tools they use to make decisions and, while almost every action within an organisation today will lead to the creation of new data, it seems many businesses are not using the crucial insights which data can provide to make important decisions.

More than half (55%) of respondents in the banking and finance industry said they were making business decisions based on data and insights, but ‘gut feeling’ decisions are still made by up to 44% of companies. What’s more over half (57%) of the sector’s companies still rely on spreadsheets to aid their decision-making, despite more modern and reliable tools now available.

“In today’s fast-paced, data rich and evolving business environment, making quick and effective decisions is critical to both compete and survive,” explains Gavin Fallon, Managing Director for UK, Nordics & South Africa at Board International. “Important decisions are being made at any one time across multiple business functions, but all too often, important decision-making is disconnected, modular or fragmented.”

The research also asked respondents about the challenges banking and finance decision-makers face at their organisation,  with nearly a third (29%) citing a lack of available data and insights and one quarter (25%) citing the fact there are too many people in the decision-making process as their biggest frustrations. However, industry decision-makers believe that the process can be improved with the introduction of new technology, with the majority (57%) of respondents saying this would make their decision-making better, while 41% also felt increased use of data and insights would help.

“Businesses have to plan every day for a far more uncertain future and set themselves up to prepare for change and keep changing against the backdrop of a more volatile and uncertain marketplace than ever,” continues Fallon. “A bad decision can have wide-ranging impact across the whole organisation and no business can afford to waste time and resources on bets that may or may not come off.  As the business environment increases in complexity, the ability to not just react, but predict, in real-time, becomes more important than ever.”

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Business

Reinventing Your Digital Marketing Strategy Post-Covid

Reinventing Your Digital Marketing Strategy Post-Covid 3

By Paige Arnof-Fenn, Founder & CEO Mavens & Moguls

I started a global branding and marketing firm 19 years ago. Marketing is a term that means different things to different people so it helps to clarify whether you are talking about market research, PR, social media, advertising, promotions, guerrilla marketing, strategy, analytics, SEO, SEM, B2B, B2C, content, etc. There are so many tools in the marketing toolkit today but I think it is redundant to say digital marketing because truly everything has a digital element since everyone is accessing and interacting with your brand online, through their phone or via the website at some point. In the old days there was print, TV, radio, direct mail and outdoor those were your only options but today technology runs our lives so everything is digital eventually. If digital is not part of your strategy then you would not be relevant so digital marketing is marketing in 2020.

As far as digital goes I am a big fan of SEO, social media especially LinkedIn and Content Marketing. Because we are always online now 24/7 it is easy to get sucked into it but you do not have to let it run your life!  My advice is to pick a few things you enjoy doing and do them really well.  You cannot be everywhere all the time so choose high impact activities that work for you and play to your strengths.  It does not matter which platform you choose just pick one or 2 that are authentic to you. It should look and sound like you and the brand you have built.  Whether yours is polished or more informal, chatty or academic, humorous or snarky, it is a way for your personality to come through.  Everyone is not going to like you or hire you but for the ones who would be a great fit for you make sure they feel and keep a connection and give them a reason to remember you so that when they need your help they think of you first.

There have been a lot of changes in the past few months due to the virus crisis but one thing that has not changed is that smart technology still runs our lives today and it is hard to stay on top of the latest tools and platforms to take advantage of current trends so you may feel lost, confused or frustrated by all the options and noise in the market today.  There will be new tools and technologies coming for sure but here are some digital strategies to include in your plans to grow your audience:

*  Smart speakers and voice search are growing in importance so being able to optimize for voice search will be key to maximize the marketing and advertising opportunities on Siri, Alexa, Google Home, etc. I predict that the brands that perfect the “branded skill” with more customer-friendly, less invasive ads are going to win big. Are you prepared when customers ask your specific brand for help like “Alexa ask Nestle for an oatmeal cookie recipe” or “What is the best Mexican restaurant in Boston?” if not you are missing a big opportunity!

*  Live video grabs attention – live streaming is available on every major social media platform and it is only getting bigger to hook in users with short attention spans, in a mobile first world, you have less time to grab people, attention spans are shorter than ever so video will be used even more, show don’t tell for maximum impact, rich content drives engagement.

*  Interactive marketing makes it stickier — brands will drive engagement even more with polls, surveys, quizzes, contests, interactive videos, etc. to grab audience attention even quicker

*  AI-powered chatbots cut costs and convert visitors into leads by encouraging themed content to answer FAQs with voice search-friendly semantic keyword phrases, is your content strategy ready?

*  More confidence in trusted content, friends and influencers than advertising – the world has been moving this way for years with people seeking their friends’ and influencers’ opinions and advice online on what to buy, where to go, and what to do more than a paid ad or fancily packaged content. Customers are savvy today they are happy to buy what they want and need but they do not like to be sold things. Curated content and ideas from a trusted source beat paid content every time. Partnering and building relationships with the right influencers with content that is co-created helps brands scale and grow faster and amplify and boost their message.

* Authentic relationships beat marketing automation — technology runs our lives more than ever but it is relationships that drive business and commerce so people will find more ways to connect in-person to build trust and strengthen connections. Make sure you offer several ways to talk with them and get to know them. Algorithms can only tell you so much about a customer, transactions are driven by relationships. Use automation where you can but do not ignore the power of the personal touch.

*  Big data is getting bigger but customer conversations are key to best insights for content. Talking directly to your customers to get first-hand in real-time their experience and knowledge will be a priority and competitive advantage to get the messages right.

*  Content will match the buyer’s journey and understanding that journey will inform how to attract, engage and convert customers and which keywords and topics are used.

*  Influencers will continue to rise in prominence so partnering and building relationships with the right influencers with content that is co-created helps brands scale and grow faster and amplify and boost their message.

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