Welcome to SMF Capital. In this episode, we look at fractional Compliance Officers and the SMF16 Compliance Oversight function: why regulated firms use fractional appointments, what the FCA expects and how to recruit the right individual.

For smaller financial services businesses, employing a full-time Compliance Officer may not be practical. The firm still needs experienced regulatory oversight, but perhaps only for one or two days a week. A fractional SMF16 can provide that senior expertise without the cost of a full-time appointment.

Our recruitment service is explained here:

https://www.smfcapital.co.uk/fractional-compliance-officer-smf16/

what is a fractional Compliance Officer?

A fractional Compliance Officer is an experienced professional engaged for an agreed number of days each week or month. They are appointed and approved to hold the SMF16 function at the firm.

This is more than buying occasional compliance advice. The individual is a named Senior Manager with defined responsibilities and personal accountability under the Senior Managers and Certification Regime.

They oversee the compliance function, monitor regulatory risks, report to the board and ensure that compliance arrangements are effective and appropriately resourced.

The model is particularly suitable for smaller insurance brokers, financial advisers, wealth managers, investment firms, consumer credit businesses, lenders, payments firms and other FCA-regulated organisations.

fractional, outsourced or interim?

A fractional Compliance Officer provides ongoing senior oversight for an agreed part of the week. A part-time employee performs a similar role but is directly employed by the firm.

An outsourced Compliance Officer is generally supplied through a consultancy, potentially with access to wider compliance resources. An interim Compliance Officer is usually engaged temporarily to cover a vacancy or support a specific project.

The important distinction is accountability. Outsourcing compliance work does not remove the firm's regulatory responsibilities. Where an individual holds SMF16, their responsibilities must be properly documented and supported by appropriate authority and access to the board.

what does SMF16 involve?

The SMF16 Compliance Oversight function applies to Core and Enhanced firms under SMCR. Limited Scope firms have a different regime, so the applicable functions should be checked against the firm's regulatory status.

Typical responsibilities include:

• Establishing and overseeing a risk-based compliance monitoring programme.
• Reporting compliance risks, breaches and monitoring findings to the board.
• Reviewing financial promotions and customer communications.
• Supporting Consumer Duty oversight and board reporting where applicable.
• Monitoring regulatory developments and implementing required changes.
• Overseeing breach recording and relevant FCA notifications.
• Reviewing complaints arrangements and compliance training.

The individual must be sufficiently independent to challenge directors and senior management. They also need enough time, information and resources to discharge their responsibilities and demonstrate the reasonable steps they have taken.

how many days are required