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Regulatory References – should you be doing better? The FCA thinks so…

On 22 January 2022, the FCA published its “January 2022 Regulation Round-Up”.

Within its “Hot Topics” section, the FCA provides clarification to firms on certain aspects of the regulatory reference requirements that exist under the Senior Managers & Certification Regime (the “SM&CR”).  The key points are that:

  1. The ‘6 week limit’ for responding to a regulatory reference under SYSC 22.5.17G is a LIMIT, not a TARGET.
  2. Firms must use the template provided in SYSC 22 Annex 1.  It must be complete and accurate when sent to the requesting firm.
  3. Firms need only take reasonable steps to obtain a regulatory reference – it is NOT an absolute obligation.  However, firms should record the steps taken to obtain a regulatory reference in the event that they do not receive a response.
  4. Individuals should not be automatically rejected by a firm simply because there is some kind of qualification in a regulatory reference which has been received.

SYSC 22.9.1R requires all firms to keep “orderly records” of fit and proper testing and disciplinaries so that they can respond to regulatory references in a timely manner.  This is an understandable requirement – there is quite a bit of information that goes into completing the regulatory reference template found in SYSC 22 Annex 1, including:

  • The role performed by the individual (and the dates between which it was performed)
  • The ‘fit and proper’ history of the individual
  • Any disciplinary action taken against the individual
  • Any breach of the Conduct Rules by the individual (including the rationale behind the conclusion that a breach had occurred, the dates of the breach, and the outcome of any disciplinary action).

Regulatory references are a “Hot Topic” that is clearly on the FCA’s radar.  Irrespective of the number of regulatory reference requests ACTUALLY received, you will have to invest time in maintaining the “orderly records” necessary to ENABLE YOU to properly respond to a reference request – even if you never actually receive a request.  To that extent, all firms find themselves in that classic “buy or build?” conundrum.

Time is money, so it’s in your interests to make the process around regulatory references as efficient as possible.  Fortunately, help is at hand.  Corterum, our SM&CR software solution provides the “orderly” framework in which you can easily record all of the information needed in order to produce a regulatory reference, or to capture the steps taken if it was not possible to obtain a reference.  Our SM&CR software will even produce the reference itself – using the SYSC 22 template – all at the push of a button.

Save yourself time and money.  Forget spreadsheets.  Move beyond manual processes.  Spreadsheets largely fail the “orderly records” requirement of SYSC 22.92.1R, so think bigger.  Beyond considerations of baseline compliance, spreadsheets don’t deliver the functionality you need in order to subsume SM&CR compliance into BAU.  Only a dedicated SMCR software solution can do this.  The cost, in terms of lost time, associated with manual processes is too high.  But don’t fall into the trap of thinking that the cost associated with SMCR software will be too high.  The right SMCR software solution will REDUCE your overall cost of owning SM&CR data.

The business case for using SMCR software for regulatory references and SM&CR compliance more generally exists – even for the smallest firms.  Drop us a line and we’ll show you.