FAQ: DBS requirements under SM&CR

Most frequent questions answered

In this article, we will review some of the question we frequently receive in relation to criminal checks under the SM&CR regime (also known as DBS checks).

What is SM&CR?

By way of re-cap, SM&CR came into force on 9 December 2019 for all FCA solo-regulated firms. The Regime was designed to improve corporate culture, individual responsibilities and naturally, enhanced consumer outcomes. For further information, you can review our article on the topic here or the FCA’s Guide to Solo Regulated Firms (available here).

Every firm is unique and therefore requirements may slightly differ...

Documenting decision making is key part of compliance

What is a Disclosure and Barring Service (DBS) Check?

DBS checks (previously known as CRB checks) result in certificates being issued to an individual, indicating any past criminal convictions. Employers can then ask to see this certificate to ensure that they are recruiting suitable people into their organisation.

 

There are four levels of check:

  • basic check

  • standard check

  • enhanced check

  • enhanced check with barred list(s)

 

Individuals only able to apply only for a basic check whilst all other types of DBS checks must be done through a “Responsible Organisation”.

 

The FAQs

Before exploring the question, it is important to bear in mind that the FCA’s overarching requirements regarding this element of Fit and Proper test includes:

Firms and candidates for SMFs need to declare if a candidate has a criminal record (to the maximum extent allowed by law).

So in turn, let’s discuss the most frequent questions we have received since the implementation of SM&CR:

  • My Directors has been with the firm for X years. Do I still have to do a DBS check?

    • Not necessarily. Under SM&CR, existing SM functions would not need to be re-checked just because the SM&CR regime has been implemented. Firms may consider relying on annual self-certification as a minimum instead.

    • However, if the role holder changes position or the responsibilities of role changes, a Fit and Proper check should be conducted, including the criminal background check (DBS).

 

  • I do not have any Certified Roles but only head of departments. Do I have to conduct the same level of Fit and Proper checks as if Certified Role?

    • No. Only formally certified roles should be treated as Certified Roles.

    • Criminal records checks are not mandatory for Certification Roles, but firms may choose to conduct these checks for other staff where they are legally allowed to do so – this is for firms to decide.  

  • Do I have to conduct a DBS check on NEDs?

    • Yes. Even if a NED is not a Senior Manager function holder, the Fit and Proper tests apply and therefore the criminal background checks should be conducted in line with the relevant rules.

 

  • My firm has a number of appointed representatives. Do I have to conduct all checks on their directors?

    • No. It is worth noting that ARs are not captured by the SM&CR regime and thus firms are not obligated to conduct criminal background checks.

    • We do however recommend to include some checks on the matter in their initial due diligence checks and in the ongoing annual checks.

 

  • My firm has a number of appointed representatives. Do I have to ask them to comply with SM&CR due diligence rules?

    • No. There is no obligations on Principals to force their ARs to comply with SM&CR requirements.

    • As good industry practice, firms however may choose to apply the new standards, further evidencing appropriate culture.

 

  • If there is an entry on the DBS report, do I have to terminate the Director?

    • Not necessarily. If there is an adverse entry on the individuals DBS certificate, firms should evaluate the circumstances, on a case-by-case basis.

 

  • My Director lives abroad so their DBS check will be clean. Is the DBS check still sufficient under the rules?

    • Potentially. Depending on the time spent abroad, the FCA may reasonably expect firms to conduct an equivalent checks in the foreign jurisdiction.

 

  • I have Certified Roles within the firm so should I conduct the same level of DBS checks as SM functions?

    • Not obligated to. Criminal records checks are not mandatory for Certification Functions, but firms may choose to conduct these checks for other staff where they are legally allowed to do so – this is for firms to decide.  

 

  • What level of DBS check should I conduct for the Senior Managers roles?

    • Standard Checks is likely to be appropriate in most cases. The current FCA requirement states: "A firm must […] obtain the fullest information that it is lawfully able to obtain about the Candidate[…].

    • In our interpretation, the currently available checks is the “Standard” check, however this may be different for firms who conduct face-to-face activity.

 

For further guidance and self-assessment, you may visit the DBS website, available here.

 

We always recommend to firms to document the decisions taken in relation to recruitment and due diligence outcome, either as part of the recruitment process or at the point of induction.

 

If you do have any questions regarding your SM&CR arrangements, please do not hesitate to get in touch.

  

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