“One of the challenges is if firms build themselves that initial process for complying and they get comfortable with it, will they actually feel the need to upgrade their solution or not? Time will tell,” says Michael Beaton, founder and chief executive of SMCR compliance tech company Corterum.
“A lot of the conversations we have are with firms who struggle to actually know what the regulation is in the first place,” he says, stating that many firms are currently looking to internal approaches via spreadsheets for reporting, rather than external solutions.
“I do sometimes wonder whether or not firms who are already up the curve, but they’re using a spreadsheet, will just be happy with that. There comes a certain point when a firm is too large that spreadsheets are not a good solution, but that’s up to the firm and its own risk appetite,” he says.
“Obviously this is a huge exercise in capturing data and that’s where the [tech] solution comes in, because we have that. But some of the firms we’ve chatted to have been more than happy to stick with their excel spreadsheet based approach. Whether or not they’ll feel the same in a year, two years, three years: who knows?”
On July 17, the FCA published a consultation paper on extending the implementation deadlines for the Certification Regime and Conduct Rules of the SMCR. The consultation period will close on August 14.
The first round of fit and proper testing for solo-regulated firms has already been delayed from December 9 to March 31, 2021 following potential complications due to coronavirus.
For regtech companies focussed on managing SMCR compliance and reporting, the delay and consultation are welcomed, says Beaton.
“[Firms] are now raising their head above the parapet and starting to think more strategically, so actually for a firm like ours, the delay is incredibly welcomed,” he says.
While the FCA warned that firms must not wait to remove staff who are not fit and proper from certified roles despite the delay, this process cannot be guaranteed.
“There is certainly a bit of a grey area,” says Beaton.
“The FCA said: ‘We think most firms should be able to hit this December deadline anyway and you should do so if you can.’ Where there’s a grey area, firms are always going to exploit it.
“A client we’re bringing on board has just said: ‘Given this extra time, we’re just going to kick this into the long grass. We’re going to exploit the deadline to the fullest expense.’
Despite potential grey areas, Beaton believes the delay has been necessary.
“Roughly speaking about half of [our clients] breathed a huge sigh of relief because they were really struggling, or they would have really struggled to meet this deadline, particularly because it’s new and they’re getting their heads around it,” he says.
“I was slightly surprised it took them until the middle of July to say we’ll give you some extra time. But it’s without a doubt the right thing.”