The Financial Conduct Authority (FCA) has published its second consultation on reforming the Senior Managers & Certification Regime (SM&CR).
Consultation paper CP26/37 proposes abolishing the Certification Regime and the Directory, cutting the number of roles that need FCA approval, simplifying responsibility records and changing how firms handle Conduct Rules training and breach reporting, stated ACA Group.
The package is not a retreat from individual accountability, according to ACA. Instead, it moves responsibility away from processes set by the regulator and towards firms’ own governance, competence and record-keeping arrangements.
Routine submissions may fall, but firms will need to make sound decisions on how responsibilities are allocated, how fitness and propriety is assessed and how conduct standards are upheld.
For dual-regulated and Enhanced firms, SMF5 and SMF10 to 15 would become notified rather than approved functions. Firms would carry out their own checks and inform the FCA instead of waiting for sign-off.
These individuals would still be subject to the Duty of Responsibility and the Senior Manager Conduct Rules. The FCA-only SMF18 and SMF22 functions would be removed, so firms would need to reallocate those responsibilities. Solo-regulated firms would also need to reassess SMF7 holders against a new two-limb test.
Enhanced regime thresholds would rise. Consumer credit lenders would move from £130m to £200m revenue, asset managers from £65bn to £100bn AUM, and intermediaries from £45m to £75m revenue. Wholesale market firms would face a new £750m assets test. Some firms could therefore exit the Enhanced regime, although the FCA wants powers to pull smaller firms back in based on size, complexity or market impact.
Other changes include extending the temporary SMF cover period from 12 to 18 weeks. Firms would also no longer need to submit updated Statements of Responsibilities and Management Responsibilities Maps after every change, though they would still need to keep them and produce them on request. Nine Prescribed Responsibilities would be removed.
Ending certification would remove a heavy annual exercise, but competence and suitability duties would remain under SYSC, Training and Competence rules and the Consumer Duty. Prescribed Conduct Rules training would be replaced by a duty to notify staff of the rules. For non-SMF staff, only final written warnings or dismissals would need to be reported.
The proposals are not yet in force. Firms should keep applying the current regime, map affected roles and processes, and consider responding before the 22 January 2027 deadline. The FCA expects final rules in the first half of 2027, with implementation around six months later.
The wider message is clear. Lighter process means the quality of firms’ own governance, recruitment checks and record keeping will matter more than ever.
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