Reform of the UK Senior Manager and Certification Regime for financial services firms

By Angela Hayes, Khurram Shamsee, David Sims & David Speakman

Published 13 May 2026

Overview

In Policy Statements published on 22 April 2026 the Financial Conduct Authority ("FCA" - PS26/6) and the Prudential Regulation Authority ("PRA"- PS12/26) confirmed Phase 1 of reforms to the Senior Manager and Certification regime ("SMCR"). The changes are largely in line with those consulted upon by the regulators in mid-2025, covered in our client note here. These are incremental changes that the regulators are able to make without needing amended legislation.

On the same date HM Treasury published the results of its consultation last year on the reform of SMCR, confirming the government's intention to amend primary legislation to give the PRA and FCA greater flexibility in the application of the SMCR. Once that legislation is brought forward regulator consultations will be issued on more significant reforms.

Some of the Phase 1 changes have taken effect from 24 April 2026, with the balance due to take effect from 10 July 2026. The PRA's updated Supervisory Statements on individual accountability for banks (SS28/15) and insurers (SS35/15) and accompanying rule changes took effect on 24 April 2026.

In this client note we summarise the main Phase 1 changes. We also look ahead to likely more significant Phase 2 reforms which will follow legislative changes to the Financial Services and Markets Act 2000 ("FSMA").

Phase 1 SMCR reforms

Changes that take effect from 24 April 2026

Criminal record checks	Validity period extended from 3 to 6 months; no longer required for intragroup moves. Relevant forms will be updated from 10 July 2026.
The "12 week rule" for covering the temporary or unforeseeable absence of a SMF holder	Application for regulator approval of interim or permanent SMF replacement to be filed by 12 weeks. Senior Manager Conduct Rules to apply to the covering individual. Once the application for approval has been filed the candidate can act in role until determination. Additional regulator guidance on appropriate use of the 12 week rule.
Statements of Responsibility (SoRs) and Management Responsibilities Maps (MRMs)	Firms have up to six months to notify the regulators of significant changes in responsibilities. When notifying only the latest version of the relevant SoR and MRM needs to be filed. Firms are still required to maintain an up to date set of SoRs and MRM at all times.
Certification Regime	Guidance clarifying regulator expectations about firms' process/procedures when recertifying individuals as fit and proper. There is no prescription about the form the annual assessment and certification process should take. Recertification can be incorporated into the existing annual appraisal cycle and processes and can be proportionate and less detailed where there are no changes from the previous year. Digital confirmation of certification can suffice.
Further guidance on applicability of SMF 7 – Group Entity Senior Manager	The FCA's guidance applies for solo-regulated firms. The PRA's guidance applies to dual-regulated firms.
PRA scope of SMF 7 extended to include controllers or their nominated representatives	Controllers or their nominated representatives who exercise significant influence over a firm's management and conduct of business without being a member of the firm's board will now be in scope of SMF 7 in dual regulated firms. Individuals will only be in scope where they have (or plan to have) a continued and sustained involvement in the day-to-day management or conduct of business of a PRA-authorised firm. The PRA would not expect an individual to be an SMF7 where their influence is restricted to operating as a non-executive director.
Further guidance on applicability of SMF 18 – Other overall responsibility function	FCA guidance on the appropriate use of SMF 18, tweaked slightly from the consultation text to acknowledge that SMF 18 holders do not need to have equal status to the firm's executive directors but must be the most senior person reporting into the governing body regarding the relevant responsibility.
Regulatory references	FCA Handbook guidance that firms should respond to regulatory reference requests within 4 weeks (down from 6) and further Handbook guidance on what should be included in a regulatory reference if an employee leaves the firm before an investigation into potential misconduct has concluded.
Directory of certified and assessed persons	The time for updating Directory information is extended to 20 business days for most updates. Where staff depart, the details must still be updated within 7 business days
Prescribed Responsibilities (PRs)	Further FCA Handbook guidance on the appropriate allocation of PRs and the limited circumstances when splitting a PR between 2 SMF managers may be appropriate
Notification of Conduct Rule breaches	Further FCA Handbook guidance on the triggers for notification of Conduct Rule breaches and the timing of notifications.

Changes that take effect on 10 July 2026

Prescribed responsibilities	Rule change permitting SMF 18 at solo-regulated firms to hold any PR, where this is appropriate, for example reallocating the PRs of an absent SMF manager
Thresholds for becoming an Enhanced SMCR firm	Increase in certain thresholds of up to 30%; 5 year mechanism for threshold increases
Certification Regime	Removal of certain overlapping certification functions – the FCA Significant Management Function does not apply for a person with a valid certificate performing the FCA Material Risk Taker function at the same firm; the FCA Manager of a Certification Employee function does not apply for persons with a valid certificate performing another Certification Function at the same firm; the FCA Material Risk Taker function does not apply for a person performing a PRA certification function with a valid certificate at the same firm.

Looking ahead to Phase 2

The regulators have been undertaking extensive pre-consultation, including reaching out to firms through industry bodies, to enable them to develop Phase 2 proposals. They are focussed on delivering the Government’s and regulators’ targeted 50% reduction in regulatory burden without undermining the core objectives of the SMCR. For example, the FCA has just launched an on line survey about the compliance cost burden for firms for SMCR related activities.

The recent HM Treasury consultation feedback statement confirmed that the government intends to make legislative changes to:

Remove the Certification Regime from primary legislation, including the annual recertification requirement, and enable the regulators to consider a more proportionate and flexible framework in their rulebooks.
Reduce the number of senior management functions that require regulator pre-approval. Regulators will be given a new power to specify circumstances where it would be suitable for a firm to notify the regulators of the appointment of a senior manager following the firm’s assessment of fitness and propriety.
Repeal the prescriptive legislative provisions relating to Statements of Responsibilities, enabling regulators to consider appropriate requirements in their rulebooks.
Streamline Conduct Rules by repealing the prescriptive legislative requirements on firms to notify regulators of breaches and to conduct mandatory training, while retaining the regulators’ power to make Conduct Rules and set out appropriate requirements in their rulebooks.
Give regulators the power to specify in rules and guidance the circumstances in which they may accept senior manager applications subject to time-limits or conditions, approval of which would not trigger statutory notice requirements.
Amend the Financial Markets Infrastructure SMCR regime legislated for in FSMA 2023 in relation to central counterparties, central securities depositories and recognised investment exchanges to ensure it is consistent with the wider SMCR changes when it is brought into force.

The government has separately published a consultation on proposals to change the legislative framework for Appointed Representatives, including bringing them into scope of the SMCR.

Respondents to the HM Treasury consultation noted concerns that the current certification requirements in legislation would be replaced with something similarly onerous in regulator rules. HM Treasury has acknowledged that it will be important for regulators to work closely with industry as they design and implement any replacement framework, including through consultation on draft rules and transitional arrangements. This will help to ensure that any replacement rules are clear, risk‑based and coherent, as well as helping to mitigate concerns raised about the potential for regulatory rules to replicate existing burdens.

The regulators will be considering whether some of the current designated SMF roles can be removed and/or some roles considered to be lower risk can be notified to the regulators following a firm's fit and proper assessment without regulator pre-approval and whether some existing Certification Functions can be removed, as well as generally streamlining recertification requirements to reduce administrative and cost burdens.