Common Pitfalls in FCA SMCR Compliance and How to Avoid Them
The Senior Managers and Certification Regime (SMCR) has reshaped how accountability works in UK financial services. Introduced by the FCA in 2016 for banks and later expanded to all FCA-regulated businesses in 2019, the SMCR isn’t just another regulatory checkbox, it’s a cultural shift that demands transparency, responsibility, and compliance.
Yet, despite its widespread implementation, SM&CR compliance remains a challenge. From poor planning to patchy processes, many organisations still stumble through it. So, whether you’re an HR professional, a recruiter, or a business leader trying to steer the SMCR ship smoothly, this guide is for you.
First, A Quick Refresher: What is SMCR?
The FCA SMCR aims to improve conduct standards and accountability among financial services businesses. It’s split into three key parts:
- Senior Managers Regime: For top-level roles with key responsibilities.
- Certification Regime: For employees who could cause significant harm if they get it wrong.
- Conduct Rules: Basic standards of behaviour that apply to almost everyone.
To stay compliant with the SM&CR (Senior Managers and Certification Regime), companies should:
- Assign clear responsibilities with Statements of Responsibility (SoRs)
- Conduct SMCR screening and background checks
- Assess and certify “fit and proper” status annually
- Provide conduct training across the workforce
The Most Common SMCR Compliance Pitfalls (and How to Avoid Them)
1. Vague or Overlapping Responsibilities
Generic or overlapping Statements of Responsibility (SoRs) can lead to confusion and regulatory risk. Each Prescribed Responsibility must be clearly assigned.
How to Avoid It:- Assign a unique SoR to each senior manager
- Avoid "joint ownership" for key functions
- Update SoRs with every role change or restructuring
2. Letting Documents Collect Dust
SMCR compliance isn’t a one-time project. Outdated documentation puts your business at risk.
How to Avoid It:- Use a compliance calendar for key reminders
- Conduct internal audits annually
- Automate updates, reminders, and storage
3. Weak Fitness and Propriety Checks
FCA SMCR screening is not just a regular background check. It must be thorough and recurring.
How to Avoid It:- Include criminal records, references (6 years), credit, and directorship checks
- Document everything for FCA evidence
- Integrate checks into onboarding and annual recertification
4. Misunderstanding the Cultural Shift
SMCR is more than compliance, it’s about embedding a culture of accountability.
How to Avoid It:- Encourage transparency and open dialogue
- Train staff on SMCR's role in daily tasks
- Include conduct expectations in performance reviews
5. Reactive Rather Than Proactive Approach
Only thinking about SMCR when deadlines loom is risky and stressful.
How to Avoid It:- Use a compliance calendar
- Audit at least once a year
- Automate repetitive tasks
6. Inadequate Handling of Conduct Rule Breaches
Without clear procedures, misconduct can go unreported or mishandled, a major risk.
How to Avoid It:- Define breaches, investigations, and disciplinary processes
- Train managers to identify and escalate misconduct
7. Misaligned HR, Legal, and Compliance Teams
Disjointed departments mean fragmented SMCR processes and greater risk.
How to Avoid It:- Centralise compliance records
- Sync documentation between teams
- Ensure accessible audit-ready files
8. Weak Record-Keeping Practices
If it’s not on file, it didn’t happen, at least to the FCA. Many businesses fail to keep consistent SMCR documentation.
How to Avoid It:- Set up a digital record-keeping system
- Track everything from hire to exit
How to Stay Ahead with SMCR Compliance
- Automate Your Processes: Use tools for SMCR checks, training, certifications, and document control.
- Align HR and Compliance: Joint ownership creates better accountability and fewer gaps.
- Conduct Internal Audits: Simulate FCA audits annually to test the strength of your system.
Final Thoughts
The FCA SMCR framework is here to stay. When implemented effectively, it drives cultural change as much as compliance. Avoiding common pitfalls boils down to being clear, consistent, and accountable.
Whether you’re managing FCA SMCR screening, certifications, or senior manager training, the goal is to build a reliable and repeatable process. Done right, SMCR protects your business and builds trust, from regulators and employees alike.
We offer expert-led SMCR solutions, from FCA SMCR screening to custom compliance systems. If you're unsure whether your current process meets expectations, reach out to us today!
