Housing associations have less than four weeks to comply with new financial regulations or face potential penalties from the Financial Conduct Authority (FCA), a lawyer has warned.
The Senior Managers and Certification Regime (SM&CR) coming into force on December 9, will replace the Approved Persons regime, changing how those involved in financial services are regulated.
Alice Overton, solicitor in the banking, corporate and governance team at national law firm Devonshires warns that housing associations that are not ready could face sanctions.
Alice says: “SM&CR aims to protect consumers by making those involved in financial services more individually accountable. This means that any housing association which is authorised by the FCA to carry out consumer credit activities will be expected to adhere to the new regime.
“At the moment organisations may have one approved person and this person will automatically become the Senior Manager under the new regime. One of the new requirements is that all Senior Managers need to have what is known as a ‘statement of responsibilities’ in place. This will set out the prescribed responsibilities of the Senior Manager. A statement of responsibilities is not required at the moment but under the new regime will have to be ready if the FCA requests it. If this isn’t in place then housing associations leave themselves open to sanctions.”
Alice, who specialises in advising housing associations, adds that SM&CR now also means that staff who are not Senior Managers, but who have a significant impact on their organisation or its customers, have to be certified internally. Organisations are required to certify that these individuals are fit and proper to carry out their function at the point of employment and to assess at least once a year.
Alice adds: “What is crucial for housing associations here is that all staff involved in consumer credit activities have received the required training within a year of SM&CR coming into effect. They also need to make sure they have individuals in the correct role with the right qualifications.”
In addition, any housing association hiring a new Senior Manager or certified person will have to obtain a regulatory reference covering the last six years of employment. If a Senior Manager is found to have breached the FCA’s Conduct Rules, or it is found that they are not a fit and proper person, then this will have to be reported to the FCA.
Alice says: “Another element that housing associations will need to consider is whether to update their employment contracts and staff handbooks to reflect the new requirements. All in all this is a big task with the deadline fast approaching.”
While the FCA is able to impose fines and even prison sentences for serious breaches of the rules, Alice says that other sanctions against housing associations could be more of a concern.
“While it is unlikely that a housing association will get the most serious penalties, as its consumer credit activities are a generally a small focus within the organisation, a material breach of the rules imposed by SM&CR could result in a governance downgrade,” Alice says. “This would undoubtedly affect the association’s reputation. Our advice to housing associations is to make sure you are ready for December 9 and roll out training for those who need it.”
For more information, please contact Alice Overton, Solicitor in our Banking, Governance & Corporate team.