Why SMCR Checks Matter

Under the SMCR, the firm is responsible for assessing whether a candidate is fit and proper before it applies for approval, and for certified staff before it certifies them. The regulators then assess Senior Manager applications themselves, but they rely heavily on what the firm has done. The FCA’s fit and proper test (FIT) sets out the three criteria: honesty, integrity and reputation; competence and capability; and financial soundness. Background checks provide much of the evidence for the first and third.

Poor checks cause two kinds of problem. A firm can find out about an issue too late, after an offer has been made or an application submitted, which delays approval and damages the relationship with the candidate. Or it can fail to find an issue at all, which exposes the firm and the individual if the regulator later finds something the firm should have spotted. Our guide to the fitness and proper test in full covers the criteria in detail; this guide focuses on the checks themselves.

If you are looking at checks from a recruiting perspective, deciding what to ask a candidate before you make an offer, see our article on pre-offer checks for SMF candidates. This page sets out the regulatory requirements and how firms meet them.

The Checks at a Glance

“Required” means the SMCR rules or the regulators’ application requirements call for it. “Expected” means it’s normal practice and the regulator would expect to see it as part of a reasonable assessment. Firms should check the current FCA and PRA requirements for their own circumstances.

Criminal Records Checks

A criminal records check is the check most people mean when they search for “SMCR DBS checks”. Firms applying for approval of a Senior Manager must obtain a criminal records check on the candidate and take it into account in their fit and proper assessment. The application form asks the firm to confirm it has done so.

In England and Wales, checks are carried out through the Disclosure and Barring Service (DBS). In Scotland, the equivalent is Disclosure Scotland, and in Northern Ireland, AccessNI. The level of check available depends on the role and the eligibility rules of each scheme. Senior Manager roles generally qualify for a higher level of check than a basic disclosure, but firms should confirm the correct level with their screening provider or the relevant body before applying, because the rules on eligibility are specific.

Practical points:

• The check must be obtained with the candidate’s consent, and the candidate should be told why it is needed.
• It should be recent at the point the application is submitted. A check obtained many months earlier may need refreshing.
• For candidates who have lived abroad, an overseas criminal records check or certificate of good conduct is normally needed for the relevant countries.
• A disclosed conviction is not automatically a bar. The firm must assess its relevance, seriousness and age, and be ready to explain its conclusion.

Regulatory References

Regulatory references are a mandatory part of the SMCR for both Senior Managers and certified staff. Before appointing, the hiring firm must request a reference from every regulated firm that has employed the candidate in the past six years, and those firms must provide it in a prescribed form. The reference must disclose matters such as breaches of the Conduct Rules and disciplinary action, and firms must update a reference they have given if new information comes to light within six years.

References often take the longest of all the checks, especially where the candidate has worked for several firms or overseas. Start the requests as soon as the candidate is selected. Our guide to regulatory references and the six-year rule explains the requirements, and our free regulatory reference checklist helps track requests and responses.

Credit and Financial Soundness

The fit and proper test includes financial soundness, so firms normally run a credit check on Senior Manager candidates. The point is not to exclude anyone with a past financial difficulty, but to identify issues the regulator would consider relevant, such as county court judgments, bankruptcy, individual voluntary arrangements or a pattern of unpaid debts. As with criminal records, the question is whether the issue is relevant to the person’s role and how it has been resolved.

For certified staff, the depth of credit checking should be proportionate. A senior trader or someone handling client money may warrant a full check; other certified roles may need less.

Register, Directorship and Prohibition Checks

Firms should check the FCA Register for the candidate’s previous approvals and roles, and for any prohibition order or enforcement action. Our guide to FCA prohibition orders explains what a prohibition means. Companies House searches show current and past directorships, any disqualification and any companies that entered insolvency while the person was a director. A history of failed companies isn’t necessarily a problem, but the firm should understand it.

Sanctions, PEP and Adverse Media Screening

Screening the candidate against sanctions lists and for politically exposed person status is standard practice, particularly for firms with international ownership or business. A candidate who is a PEP, or closely connected to one, isn’t barred, but the firm should consider any conflicts of interest. Our guide to politically exposed persons explains the definitions.

Adverse media searches look for press coverage, court reports and online material that might bear on the candidate’s reputation. Social media checks should be proportionate and focused on information relevant to fitness and propriety, not a general review of the person’s private life.

Employment and Qualification Verification

Competence and capability are part of the fit and proper test, so firms should verify the candidate’s employment history, roles and responsibilities, and any qualifications they rely on, such as accountancy qualifications, compliance certificates or RDR-relevant qualifications. Gaps in the CV should be explained. Inconsistencies between the CV, the references and the regulator’s records are a common source of delay in applications.

Overseas Candidates

Candidates who have lived or worked outside the UK need checks from the relevant countries: criminal records certificates, references from overseas employers and, where available, confirmation from overseas regulators. These can take weeks or months, so they should be started early. Our guide to SMF approval for overseas firms and groups covers wider issues for international candidates.

When to Run the Checks

• Before the offer: discuss previous approvals, regulatory history and anything that might come up in checks, in confidence.
• At conditional offer: make the offer conditional on satisfactory checks and regulatory approval, and obtain the candidate’s consent.
• Start the long-lead items first: regulatory references and overseas checks.
• Complete the core checks: criminal records, credit, Register, directorships, screening and verification.
• Complete the fit and proper assessment: record the findings and the firm’s conclusion.
• Submit Form A: only once the checks are complete and the firm is satisfied.

Submitting an application before the checks are finished is one of the most common causes of delay. Our guide to what goes wrong in Form A submissions covers the others.

What to Do With Adverse Findings

Adverse findings are more common than many firms expect, and most don’t stop an appointment. What matters is how the firm deals with them:

Non-disclosure is often treated more seriously by the regulators than the underlying issue. A candidate who disclosed a minor historic matter early is usually in a far better position than one whose undisclosed matter emerged from a check.

Data Protection and Fair Treatment

Background checks involve personal data, and criminal records data is subject to extra protection under UK data protection law. Firms should have a lawful basis and appropriate policy for processing it, tell candidates what checks will be done and why, keep the information secure, limit access to those who need it, and keep it only as long as necessary. The Rehabilitation of Offenders Act also affects which convictions must be disclosed and how they can be used, although regulated financial services roles are subject to some exceptions. Firms should take advice on how these rules apply to their own checks.

Certified Staff and Annual Reassessment

For certified staff, firms must assess fitness and propriety before certifying and then at least once a year. Annual reassessment doesn’t usually mean repeating every check, but firms should have a process for refreshing relevant information, such as annual declarations, periodic credit or criminal records checks for higher-risk roles, and checks on conduct and performance. Senior Managers should also be reassessed regularly as part of the firm’s ongoing fit and proper process. Our guide to the Certification Regime explains the annual requirement, and our free fit and proper assessment template provides a structure for recording it.

Record Keeping

Whatever checks the firm carries out, it should be able to show what it did, what it found and how it reached its conclusion. A short assessment record for each Senior Manager and certified person, cross-referenced to the underlying checks, is usually enough. The FCA’s SMCR pages set out the regime’s requirements, and our SMCR glossary explains the terms used.

How We Help

When we recruit a Senior Manager, we discuss approvability with every candidate before they reach the shortlist, so the firm’s formal checks rarely bring surprises. We also help clients plan the checks and the application timetable alongside the candidate’s notice period. Whether you are hiring a compliance officer, an MLRO or a board member, our SMF recruitment services build approvability into the search from the start.

Frequently Asked Questions

Is a DBS check mandatory for Senior Managers?

Firms must obtain a criminal records check on Senior Manager candidates before applying for approval. In England and Wales this is done through the DBS; Scotland and Northern Ireland have their own schemes.

Do certified staff need criminal records checks?

Firms must assess certified staff as fit and proper. Criminal records checks are common practice for many certified roles and may be required in some cases; firms should set a proportionate policy.

Does a conviction or CCJ stop someone being approved?

Not automatically. The firm and the regulator consider relevance, seriousness, age and openness. Non-disclosure is often the bigger problem.

How long do SMCR checks take?

Core checks can take days; regulatory references and overseas checks can take several weeks. Start the long-lead items first.

Can we use a screening provider?

Yes. Many firms do. The firm remains responsible for the fit and proper assessment and the conclusions it draws.