UK streamlines senior manager accountability processes

New papers confirm several reforms to the UK’s Senior Managers and Certification Regime. HM Treasury has released a consultation response on the legislative framework for SMCR and the Financial Conduct Authority and Prudential Regulation Authority have published policy statements. This is a first set of relatively incremental rule changes to the SMCR, with more substantive reform to follow.

The SMCR has been in place for over ten years. Over that period firms have raised concerns about the proportionality of certain processes, including in response to last year’s consultations which were included in the government’s Leeds Reforms. The Phase 1 reforms seek to addresses some of those concerns.

Firms are given a few months to prepare for some rule changes. The following take effect on 10 July 2026:

• Enhanced SMCR firms: The FCA is raising its financial thresholds for becoming an enhanced SMCR firm by 30%. For example, the assets under management threshold will increase from £50 billion to £65 billion. Some firms currently subject to the FCA’s enhanced regime may fall into the core SMCR regime as a result.

• Certification regime: The FCA is removing overlapping certification requirements so that individuals performing more than one certified function will not need to be separately certified for each.

• Prescribed responsibilities: A restriction is removed allowing SMF18 holders at FCA solo-regulated firms to hold any PR.

Other changes take effect on 24 April 2026 so that firms can benefit from them straightaway. These include:

• The 12-week rule: Firms will have 12 weeks to submit an SMF application rather than having to obtain approval within 12 weeks. Once the application is submitted, the individual may continue to act in the role until the FCA determines the application.

• Statements and maps: Firms will be given up to six months to notify significant changes to Statements of Responsibilities and Management Responsibilities Maps. Where there have been several changes during the relevant period, firms need only submit the latest version rather than all versions created between submissions.

• Senior Management Functions: The FCA and PRA have provided more guidance to help firms determine when an individual falls within the scope of the Group Entity Senior Manager function (SMF7), although there remain concerns that the PRA’s relatively expansive approach could trigger new SMF7 classifications. The FCA has also removed the expectation that the Other Overall Responsibility function (SMF18) holder should have “equal status” to the firm’s executive directors, which had been viewed as overly restrictive. The FCA maintains that individuals holding the SMF18 function should be the most senior individual reporting into the governing body.

• Criminal records checks: The FCA and PRA extended the validity period for criminal records checks obtained for an SMF candidate from three to six months, and have removed the requirement for firms to undertake CRCs where an existing SMF holder is applying for an SMF role in the same firm or group.

• Certification Regime: Certificates may be issued by email and firms may incorporate the certification process into their existing annual appraisal cycles.

• Directory updates: Firms will have more time to update most Directory information, with the period extending from seven to 20 working days.

• Regulatory references: The period for firms to respond to reference requests is reducing from six to four weeks to help avoid recruitment delays. Where an internal investigation into misconduct was commenced but disciplinary measures were not concluded because the individual left the firm, firms should consider whether to include details of this in regulatory references.

Whilst these Phase 1 measures are generally welcome, greater benefits are expected to arise from the potential changes in Phase 2. For example, in its consultation response, HMT confirms plans to remove some of the prescriptive firm-facing requirements in legislation and allow the regulators to replace these with more flexible requirements. This includes the Certification Regime, the requirement for firms to seek regulatory pre-approval when appointing an individual into a senior manager role, and the notification of Conduct Rule breaches to the regulators.

The FCA and PRA will consult on their Phase 2 proposals later this year, subject to any legislative changes taken forward by HM Treasury.