SMCR for Payment Institutions and EMIs: Getting Senior Management Accountability Right

The Senior Managers and Certification Regime (SMCR) establishes a framework of individual accountability within regulated financial services firms. For payment institutions and electronic money institutions, SMCR compliance is not optional — it is a regulatory requirement that the FCA actively supervises and enforces. This article provides practical guidance on implementing SMCR effectively.

How SMCR Applies to PIs and EMIs

Payment institutions and EMIs are classified as "Limited Scope" firms under SMCR. This means they are subject to a simplified version of the regime compared to banks and insurers, but the core requirements still apply:

Senior Management Functions. Firms must identify individuals holding Senior Management Functions (SMFs) and submit applications for FCA approval. For PIs and EMIs, the most common SMFs include: - SMF1 — Chief Executive - SMF3 — Executive Director - SMF9 — Chair - SMF16 — Compliance Oversight - SMF17 — Money Laundering Reporting Officer - SMF27 — Partner

Each SMF holder must be approved by the FCA before assuming the role, and must maintain fitness and propriety throughout their tenure.

Statements of Responsibilities. Each SMF holder must have a Statement of Responsibilities (SoR) documenting their specific areas of accountability. The SoR must be clear, complete and reflective of the individual's actual responsibilities — not a generic description.

Responsibilities Map. The firm must maintain a responsibilities map showing how responsibilities are allocated across senior management, ensuring no gaps in accountability and clear lines of reporting.

Certification Regime. Staff performing significant functions that could cause significant harm to the firm or its customers must be certified as fit and proper by the firm on an annual basis. This includes staff responsible for material risk-taking, compliance, customer-facing activities and other significant functions.

Conduct Rules. All employees are subject to individual conduct rules requiring them to act with integrity, act with due skill, care and diligence, be open and cooperative with regulators, pay due regard to customers' interests and observe proper standards of market conduct. Senior managers face additional conduct rules including taking reasonable steps to ensure the business is controlled effectively.

Common SMCR Compliance Gaps

1. Incomplete responsibility allocation. Responsibilities that fall between SMF holders without clear ownership — creating accountability gaps.
2. Generic SoRs. Statements of Responsibilities that use template language rather than reflecting the individual's actual responsibilities.
3. Certification regime neglect. Failure to conduct annual certification assessments for all relevant staff, or conducting assessments that are superficial.
4. Conduct rules training gaps. Failure to provide adequate training on individual conduct rules to all staff, with refresher training at appropriate intervals.
5. Fitness and propriety assessment weakness. Inadequate processes for assessing and monitoring the fitness and propriety of SMF holders and certified staff.

FCA Enforcement Trends

The FCA is increasingly using SMCR as an enforcement tool against individual senior managers. Recent cases have involved personal fines and prohibition orders for senior managers who failed to take reasonable steps to prevent compliance failures. This trend reinforces the importance of clear responsibility allocation, documented decision-making and proactive compliance engagement by all SMF holders.

Practical Implementation Steps

1. Identify all SMF roles within your firm and ensure each is filled by an FCA-approved individual.
2. Prepare comprehensive, firm-specific Statements of Responsibilities for each SMF holder.
3. Maintain an up-to-date responsibilities map showing clear accountability for all business areas.
4. Implement an annual certification process for all staff in significant functions.
5. Provide conduct rules training to all employees with annual refresher training.
6. Document all fitness and propriety assessments and maintain records.

Regulatory Counsel advises payment institutions and EMIs on SMCR implementation, responsibility mapping and senior manager accountability frameworks. Contact us for a free initial consultation.