On the 22nd of April, the Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA), and the Treasury published statements on reforms to the Senior Managers & Certification Regime (SMCR).
In this article we take a look at some of the changes that take effect under Phase 1 of the reforms and consider the Government’s plans for Phase 2.
What are the regulators looking to achieve?
The FCA has said its goal is to “increase the efficiency and effectiveness” of SMCR and reduce “unnecessary regulatory and compliance burden.” Phase 1 is largely a procedural clean-up — helpful in places, but not (yet) a fundamental redesign.
What’s changing (and when)?
Effective 24 April 2026
- Criminal record checks – these are no longer required for intragroup moves and the validity window for SMF criminal record certificates was extended from 3 to 6 months (with forms updated from the 10th of July 2026).
- 12-week rule – firms have 12 weeks to submit an SMF application (not obtain approval) and candidates can continue in-role until the application is determined.
- Statements of Responsibilities (SoRs) and responsibility maps – the new guidance dictates that firms have up to 6 months to notify the regulator of changes (rather than ‘as they occur’).
- Certification – email confirmation is now sufficient for re-certification and can be aligned to annual appraisal cycles.
- Directory updates – companies now have more time to update directory entries for certified and assessed persons. Updates must be made within 7 working days for staff departures (as was previously the case) but for all other changes, firms now have 20 working days.
- Regulatory references – the response deadline for firms was reduced from 6 weeks to 4.
- Conduct Rules reporting – where someone is temporarily performing an SMF role, but isn’t approved as an SMF, Senior Manager Conduct Rules and report breaches via SUP15 now apply, rather than via annual REP008, as was previously the case.
Effective 10 July 2026
- Prescribed Responsibilities – additions to this area; guidance is to be issued on splitting PRs at solo-regulated firms, SMF18 (Other Overall Responsibility) can hold any Prescribed Responsibility. Previously SMF18s were only permitted to hold PRs directly related to the specific “other overall responsibility” they were appointed for – broader governance PRs were expected to sit with core SMFs.
- Enhanced firm boundary – the financial thresholds for becoming an Enhanced SMCR firm have been increased (being raised by 30% initially) with periodic reviews to ensure they remain in line with inflation. The main impact of this will be on firms with assets under management (AUM) or consumer credit lenders, where the boundaries are increasing from £50bn to £65bn AUM, and £100m to £130m lending revenue respectively. There is also a change for firms with intermediary regulated business revenue, with an increase in the revenue boundary from £35m to £45m.
- Overlapping certification roles – the new changes include the removal of ~15% of certification roles identified as overlapping, aiming to simplify the appointment of certification staff. Separate certification will no longer be required for:
- an FCA Material Risk Taker where an individual at a dual‑regulated firm is also certified by the PRA in one of its certification functions (e.g. being a Material Risk Taker, Significant Risk Taker, or Key Function Holder) at the same firm.
- a Significant Management Function holder where the individual is also certified as an FCA Material Risk Taker at the same firm.
- the manager of a certification employee if the individual is already certified for another certification function at the same firm.
In addition to the proposed reductions, there will also no longer be a need to issue multiple certificates to an individual performing multiple Certification Functions – they can all be included in one certificate.
Effective 1 September 2026
- Conduct Rules guidance (non-financial misconduct) – updated guidance takes effect, confirming serious non-financial misconduct can constitute a Conduct Rule breach even where it doesn’t directly relate to regulated activities.
There are also some additional changes effecting dual-regulated firms, which are detailed in the PRA’s statement PS12/26.
What to watch out for in Phase 2
The Treasury has set out its proposed legislative changes to SMCR. In the next phase the reforms could become significantly more substantive — particularly in areas where they reduce technical compliance risks. The FCA and the PRA will be seeking to preserve accountability, but the Government’s response is clear that changes do need to be made. Its statement confirms that legislative changes will allow:
- Removal of the Certification Regime from primary legislation – this could deliver a real reduction in the administrative burden and the unnecessary formality that firms currently face. The Certification Regime can cause confusion, is not well defined in what it seeks to achieve and is often considered to be the lesser regime for Senior Managers.
- Regulators to designate certain SMFs as “notification only” – this will mean that pre-approval may not be required for all SMF roles. Depending on how this is implemented, this could materially speed up the onboarding process for senior hires.
- Removal of the prescriptive requirements for Statements of Responsibilities – this will give regulators scope to introduce a more outcomes-focused approach to the use of Statements of Responsibilities (hopefully leading to less technical compliance risk, especially for smaller firms).
- Changes to how regulators implement Conduct Rules – regulators will retain their current powers to make conduct rules, but prescriptive requirements on firms to notify breaches and conduct mandatory training on the rules will be removed.
- Regulators more flexibility around Senior Manager applications subject to time limits/conditions – the Government will legislate so that regulators can decide whether to allow firms to request application approvals, subject to either a time limit or conditions. This is introduced because, although regulators can impose conditions or time limits on an SMF appointment (via a warning and decision notice), there is currently no mechanism for firms to request this.
Our takeaways
Phase 1 makes some sensible process improvements, but it won’t dramatically change the day-to-day SMCR burden for most firms.
The second stage of reforms are more interesting, as they have the potential to reduce the compliance risk that some of the technicalities of the current regime inadvertently create.
This second stage is one to watch and we hope, following consultation by the FCA and the PRA, a balance can be struck to retain the required levels of accountability, whilst offering firms more flexibility to run their businesses without fear of SMCR non-compliance.
How are you approaching the Phase 1 changes?
If you’d like to sanity-check your implementation plan, or compare notes on what’s most operationally tricky, feel free to get in touch with Capital today.
Charlotte Gregory
Partner
Business Crime and Investigations, Consumer Credit, Cryptoassets, FCA Investigations, Financial Services
Charlotte provides strategic advice to clients operating within the financial services sector, supporting businesses at every stage of a firm’s growth and development. She works with clients incl... Read More
Sarah Drew
Senior Associate
Consumer Credit, Cryptoassets, FCA Investigations, Financial Services, Financial Services Regulation
Sarah is a Senior Associate in our Financial Services Team, specialising in the regulation of consumer credit and lending. Sarah has experience in a wide range of regulatory compliance issues, with... Read More
