SMCR REFORMS: KEY CHANGES FOR FINANCIAL SERVICES FIRMS
The SMCR consultation paper sets out proposed changes to the Senior Managers and Certification Regime, aiming to simplify regulatory requirements for financial services firms while maintaining individual accountability.
The FCA has issued its consultation on proposed reforms to streamline the Senior Managers and Certification Regime (SMCR), which follows on from its first phase of reforms which were set out in PS26/6 Senior Managers & Certification Regime review https://www.fca.org.uk/publication/policy/ps26-6.pdf.
The proposed reforms follow legislative changes proposed by the Government in the Financial Services and Market (FSM) Bill 2026 https://bills.parliament.uk/bills/4129, removing many of the prescriptive SMCR requirements and making the FCA and the PRA responsible for deciding how SMCR should apply.
Although the reforms proposed will fundamentally change the structure and operation of the SMCR, the FCA has said in its consultation paper that robust individual accountability and conduct standards will still be maintained.
The consultation paper proposes many reforms and some of the key elements are as follows:
FEWER SMF APPROVALS REQUIRED
- Pre-approval for the SMF5 (Head of Internal Audit) and SMF10-15 (Heads of Risk/Audit/Rem/Nom/With-profits Cos and the Senior Independent Director) roles will not be required and they will be notifiable only.
- FCA-only SMF18 (Other Overall Responsibility) and SMF22 (Other Local Responsibility) will be removed and responsibilities allocated to other SMFs.
- The definition of SMF7 (Group Entity Senior Manager) will be clarified and the scope will be narrowed.
RAISE THE ENHANCED FIRM THRESHOLD
- Raise the threshold for qualification as an Enhanced SMCR firm so that fewer firms will be classified as Enhanced.
CHANGES TO THE 12 WEEK RULE
- Extend the period for submitting an SMF application or notification under the “12 week rule” to 18 weeks.
STATEMENTS OF RESPONSIBILITIES (SoRs)
- Firms will not be required to submit revised SoRs to the FCA, but will still be required to maintain up to date SoRs on file.
- Where one person performs all SMF roles in a firm, the requirement to have a SoR will be removed.
CHANGES TO PRESCRIBED RESPONSIBILITIES
- The consultation proposes to remove 9 PRs and retain only the following:
Core and Enhanced Firms:
- PR A – Responsibility for the Senior Managers Regime
- PR D – Responsibility for Financial Crime
- PR Z – Responsibility for CASS
Enhanced Firms only:
- PR J-3 – Responsibility for oversight over outsourced internal audit
CERTIFICATION REGIME
- Remove the Certification Regime and rely instead on other rules to achieve good outcomes.
REGULATORY REFERENCES FOR CERTIFIED INDIVIDUALS
- Remove regulatory reference requirement for individuals who were previously certified.
FS DIRECTORY
- Remove the FS Directory and associated reporting and attestations.
(The FCA is also asking for views on what features should be retained if the Certification Regime, regulatory reference requirements and the FS Directory remains in place).
CONDUCT RULES
- Replace Conduct Rules training requirements with an obligation to notify staff of the Conduct Rules which apply to them and the consequences for them if they breach the Rules.
- Changes to the threshold for reporting of breaches and streamlining the reporting form.
- Allow firms up to 14 months to report final decisions for most non-SMF staff, although the existing reporting requirements for SMFs will be retained.
MANAGEMENT RESPONSIBILITIES MAP
- Similar to the proposal for SoRs, firms who are required to have MRMs will not be required to submit revised versions to the FCA, but they will be required to hold up-to-date copies on their files.
TIME-LIMITED AND CONDITION APPROVALS
- Dual-regulated firms, solo-regulated firms in dual-regulated groups and Enhanced firms will be able to apply for time limited or conditional approvals.
NEXT STEPS
Firms are invited to respond to the consultation until the 22 January 2027. The FCA intends to publish the final rules during H1, 2027 and they will be implemented circa. 6 months later in H2, 2027.
If you would like to discuss any of the proposed reforms and how they may impact your firm, please get in contact.
