Martyn O’Connor, head of risk and compliance at Wellesley Group, explains why SMCR is a positive step for the alternative lending community
AMID A HOST OF NEW upcoming regulations, the Senior Managers Certification Regime (SMCR) often gets forgotten. Due to become law on 9 December, SMCR aims to make financial firms more accountable by creating a culture where all employees must take responsibility of the operational undertaking of the business – from the chief executive downwards.
SMCR was implemented a couple of years ago for banks, but soon solo-regulated firms will have to come on board. While some firms are only just beginning to get to grips with the new regulation, Wellesley has been preparing for it for at least a year.
“The key behind SMCR is the accountability improvement,” says Martyn O’Connor, head of risk and compliance at Wellesley Group.
“SMCR effectively improves governance, reporting lines, product designs, operational policy procedures – the list goes on. And it ensures that we can show clear accountability within our culture and across to the regulator to ensure the nothing falls between the gaps.”
The purpose of SMCR is to protect the consumer, and this is something that Wellesley has been supporting for years. Wellesley believes that by simplifying the accountability process, it will make it easier for the average retail investor to understand the opportunities and limitations of their alternative lending investments.
“With SMCR, all clients will have the opportunity to understand who is making key decisions within the business,” O’Connor explains. “I think in regards to the alternative investment world, it obviously helps that it continues to move us towards the mainstream investment area. So the more that we’re caught within these regulations in a proportionate way then the better confidence we can offer to investors.”
While SMCR represents a big step forward for the alternative lending community, according to O’Connor, the implementation within Wellesley “has been straight-forward.”
“We’re a core firm which means that the more onerous and detailed issues that you might find in an enhanced firm were not required to be implemented,” he adds. “What we have done is embedded some of the best practice from enhanced firm requirements. This involves adding things like responsibility maps, which aren’t required for a core firm but really helped us to identify key reporting lines and responsibilities. It’s actually been a great way of enhancing how we look at things.”
For Wellesley, SMCR has arrived at the perfect time – following enhanced permissions received earlier this year, the firm has recently launched a new investment platform to give investors both access and a sole focus onto its listed bonds, instead of peer-to-peer loans or mini-bonds. These new regulations mirror Wellesley’s own journey into the mainstream investor community. And just as Wellesley intends to learn and evolve through experience, O’Connor also believes that these new regulations will change over time.
“As an industry we’ve come through eighteen months to two years of intense scrutiny,” adds O’Connor. “I think the regulations that have come out from that are really positive and move the industry toward the mainstream of what people would expect to see.
“But like any new regulation, it probably needs time to bed in and to refine itself. It’s going to create some better client outcomes and transparency but I think it’ll be definitely worth a review by the regulator similar to the banking stocktake report at the end of 2020 to find out that it’s doing what we all want it to do.”
This article featured in the September issue of Peer2Peer Finance News, now available to read online.