Compliance Policy Senior Managers and Certification Regime (SM&CR).
This policy applies only to credit unions that fall under the Limited Scope SM&CR Regime. It does not apply to Core or Enhanced SM&CR firms.
1. Introduction
This policy outlines how [Credit Union Name] complies with the Senior Managers and Certification Regime (SM&CR), as mandated by the Financial Conduct Authority (FCA). As a smaller credit union with assets well below £50 million, we fall under the Limited Scope SM&CR Regime, which has proportionate regulatory requirements. This policy ensures governance, accountability, and compliance while maintaining operational efficiency.
2. Objectives
- Ensure that senior managers meet “fit and proper” standards.
- Promote a culture of accountability and transparency.
- Maintain compliance with FCA regulatory requirements applicable to smaller credit unions.
- Safeguard members' interests and financial stability.
3. Scope
This policy applies to:
Senior Management Functions (SMFs) – Roles requiring FCA approval under the Limited Scope Regime, where applicable.
- Board Members – Responsible for governance and oversight.
- All employees and board members subject to FCA Conduct Rules.
- Volunteers – Where applicable, volunteers carrying out significant management roles should adhere to governance standards.
4. Senior Managers Regime
4.1 Senior Management Functions (SMFs) for Small Credit Unions
For small credit unions operating with limited paid staff or volunteers, only the most critical roles require FCA approval and oversight. The following key roles may apply, depending on the structure of the credit union:
- Chief Executive Officer (SMF1) (if applicable) – Standard DBS Check
- Chair of the Governing Body (SMF9) – Basic DBS Check
- Compliance Oversight (SMF16) (if applicable) – Standard DBS Check
- Money Laundering Reporting Officer (MLRO) (SMF17) (if applicable) – Enhanced DBS Check (due to financial crime prevention responsibilities)
For volunteer-run credit unions, these roles may be held by Board Members with shared responsibilities.
4.2 Responsibilities
Each Senior Manager (where applicable) must have a Statement of Responsibilities clearly defining their duties. Annex A
The Board ensures that Senior Managers and volunteers comply with regulatory standards.
5. Certification Regime (Not Mandatory for Limited Scope Firms)
As a Limited Scope Credit Union, we are not required to implement the full Certification Regime. However, we maintain internal assessments for key individuals in critical roles, such as:
- Branch or Operations Managers (if applicable) – Basic DBS Check
- Risk and Compliance Officers (if applicable) – Standard DBS Check
- Lending Officers and Financial Advisors (if applicable) – Basic DBS Check
For volunteer-based credit unions, roles may be adapted based on operational structure, with board members or designated volunteers assuming key responsibilities.
6. Fit and Proper Assessment
To ensure compliance with FCA expectations, [Credit Union Name] conducts a Fit and Proper Assessment for individuals in senior positions. This assessment includes:
- Honesty, Integrity, and Reputation
- Conducting criminal background checks (DBS checks at the appropriate level) where applicable.
- Reviewing past regulatory breaches, ethical concerns, or disciplinary actions.
- Evaluating financial soundness, including past insolvencies or bankruptcies.
Note: Individuals who have been declared bankrupt are not automatically disqualified from holding a senior role. However, their financial history will be reviewed on a case-by-case basis. Consideration will be given to the cause of bankruptcy, their financial recovery, and whether any ongoing bankruptcy restrictions (e.g., bankruptcy restriction orders) exist. The credit union must assess their ability to make sound financial decisions in a governance role.
Competence and Capability:
- Assessing qualifications, skills, and experience relevant to the role.
- Reviewing job performance in similar positions.
- Ensuring ongoing training and professional development.
- Financial Soundness
The Fit and Proper Assessment is conducted annually, and records are maintained to demonstrate compliance.
7. Conduct Rules
All Senior Managers, Board Members, and key volunteers must adhere to the FCA Conduct Rules, which include:
- Acting with integrity and due care.
- Ensuring fair treatment of credit union members.
- Compliance with all relevant laws and regulations.
8. Governance & Compliance
- The Board of Directors is responsible for ensuring SM&CR compliance.
- The Compliance Officer (if applicable, SMF16) monitors adherence and reports any breaches.
- Training is provided periodically to relevant staff and volunteers.
9. Reporting & Enforcement
Non-compliance with SM&CR requirements may result in disciplinary action or removal from governance responsibilities. Breaches must be reported to the FCA, as necessary.
10. Review & Updates
This policy will be reviewed annually or in response to regulatory changes to ensure compliance.
This policy ensures that [Credit Union Name] operates with integrity, accountability, and in full compliance with the Limited Scope SM&CR Regime applicable to smaller credit unions, including those primarily managed by volunteers.
ANNEX A
Credit Union Name: [Credit Union Name]
Date of Appointment: [DD/MM/YYYY]
1. Purpose of the Statement
This Statement of Responsibility is provided in compliance with the Senior Managers & Certification Regime (SM&CR) under the Limited Scope regime, as applicable to small credit unions. It outlines the specific responsibilities assigned to [Board Member’s Name] in their capacity as a [Role] at [Credit Union Name].
2. Responsibilities
As a board member of [Credit Union Name], I accept responsibility for overseeing and contributing to the effective governance and financial stability of the credit union, ensuring compliance with regulatory requirements and acting in the best interests of members. My key areas of responsibility include:
Governance and Oversight (example)
- Attending and actively participating in board meetings.
- Contributing to the development and implementation of the credit union’s strategic objectives.
- Ensuring that the credit union operates within the framework of its constitution and regulatory obligations.
- Financial Management and Prudential Oversight (if applicable to role)
- Monitoring financial performance and ensuring prudent financial management.
- Ensuring compliance with capital and liquidity requirements.
- Approving budgets and financial statements in line with regulatory requirements.
Risk and Compliance:
- Ensuring that the credit union maintains an effective risk management framework.
- Overseeing compliance with FCA and PRA regulations, including SM&CR obligations.
- Supporting the establishment of appropriate internal controls and procedures to safeguard the credit union and its members.
Senior Manager Conduct Rules:
- Acting with integrity and due skill, care, and diligence in decision-making.
- Cooperating with regulators and ensuring that my responsibilities are carried out effectively.
- Ensuring that the credit union complies with relevant laws and regulations.
- Treating Members Fairly and Promoting Ethical Conduct
- Ensuring that the interests of members remain at the heart of decision-making.
- Encouraging ethical and responsible lending practices.
- Promoting a culture of transparency and accountability.
3. Regulatory Responsibilities under SM&CR
As a board member of a credit union under the Limited Scope SM&CR regime, I am classified as a Senior Manager with designated responsibilities under the regime. My responsibilities include, but are not limited to:
SMF8 (Credit Union Senior Manager Function): Ensuring sound governance and control.
Adherence to the Conduct Rules: Complying with FCA’s Individual Conduct Rules (ICRs), including:
- Acting with integrity.
- Acting with due skill, care, and diligence.
- Treating members fairly.
- Observing proper market conduct.
4. Confirmation and Acknowledgment
I acknowledge and accept the responsibilities set out in this Statement of Responsibility. I understand that failure to carry out my duties in accordance with regulatory and legal obligations may result in personal liability and regulatory action.
Signed: ________________________
Date: [DD/MM/YYYY]
Approved by Chairperson (if required):
Signed: ________________________
Date: [DD/MM/YYYY]