Overview of the Consultations on the Future of the Senior Managers and Certification Regime

Background

On 15 July 2025, the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) (together the Regulators) each published a consultation paper, CP25/21 (the FCA Consultation Paper) and CP18/25 (the PRA Consultation Paper) (together, the Consultation Papers) proposing reforms to the Senior Managers and Certification Regime (SM&CR). The Consultation Papers followed the joint Discussion Paper (DP1/23) published by the Regulators on 30 March 2023 which sought input on potential ways to improve the SM&CR regime.

Concurrently, HM Treasury has launched a consultation seeking responses on legislative changes aimed at reducing regulatory burdens imposed by the SM&CR (the HMT Consultation Paper), which took into account responses to the Call for Evidence regarding the performance, effectiveness and scope of the Regime launched by the previous government in March 2023.

Collectively, these consultations signal the most significant re-calibration of the SM&CR since its introduction.

FCA Consultation Paper

The FCA Consultation Paper, which is relevant to all solo-regulated and dual-regulated firms already within the scope of the SM&CR (including third country branches), represents the first stage of the FCA’s reform of the SM&CR (Phase 1). The FCA intends to consider further changes in the next stage (Phase 2), following HM Treasury’s consultation on the legal aspects of the Regime.

1. Overview of proposals

Phase 1

In Phase 1, the FCA aims to introduce several practical changes.

The FCA’s key proposals are detailed below.

• The 12-week rule – The current 12-week rule permits firms to appoint an individual to cover for a Senior Management Function (SMF) holder who is temporarily absent, without needing regulatory approval, provided the absence is temporary or reasonably unforeseen and the appointment lasts fewer than 12 consecutive weeks. The FCA proposes to amend this rule, allowing firms 12 weeks to submit an application for an SMF after a temporary appointment, rather than requiring approval within 12 weeks. The individual may continue in the role until the application is determined, provided the firm submits the application within the 12-week period. Firms would not need to routinely notify the FCA of the use of the 12-week rule.
  The FCA also proposes additional rules and guidance on when the new 12-week rule can be used. Firms must ensure that the individual performing the role under the 12-week rule is fit and proper and that a high-quality application is submitted.
  Furthermore, the FCA proposes that the person performing the SMF role under the 12-week rule would be subject to the Senior Manager Conduct Rules during the 12-week period and until the SMF application is determined.
• SMF assessment process – Form A – The FCA will introduce changes to Form A, which firms use to apply for an individual to perform SMF roles. These changes will allow some documentation requested in the Form A to be reduced or consolidated where appropriate. It will also clarify that evidence for skills gap analysis, competency assessment, and learning and development plans may be included within a single document.
• Criminal records checks and disclosure – The FCA proposes setting the validity period for criminal record checks obtained for an SMF candidate at six months, rather than the current three. Additionally, the FCA proposes removing the requirement for firms to undertake criminal record checks when an existing SMF holder applies for an SMF role within the same firm or group.
• Thresholds for becoming an Enhanced SM&CR firm – In response to inflation, the FCA proposes raising the financial criteria thresholds for becoming an Enhanced SMCR firm by 30 percent. The proposed thresholds will increase for assets under management (from £50 billion to £65 billion), total intermediary regulated business revenue (from £35 million to £45 million), and annual revenue generated by regulated consumer credit lending (from £100 million to £130 million). The FCA also proposes creating a mechanism to update these thresholds periodically every five years to keep pace with inflation.
• Statements of Responsibilities (SoRs) and Management Responsibilities Maps (MRMs) – The FCA proposes streamlining the submission of updated SoRs by allowing periodic submissions of changed SoRs, no later than every six months after the last submission. Firms are required to keep SoRs (and MRMs, where relevant) up to date at all times, but would only need to submit them periodically rather than after each change.
  Solo-regulated firms could gather all SoRs that have changed over the last six months and submit only the latest version of each, along with one up-to-date MRM, where relevant. For dual-regulated firms, the FCA proposes aligning with the PRA’s proposal, requiring all relevant versions of SoRs and MRMs to be submitted no later than every six months.
  The FCA also proposes minor changes to existing guidance at SUP 10C.11.6G to clarify when a change is sufficiently material to require submission of an updated SoR.
• Guidance on Senior Management Functions and Prescribed Responsibilities – The FCA proposes to provide further guidance on SMF7 Group Entity Senior Manager function and SMF18 Other Overall Responsibility function to assist firms in determining whether a person falls within either function. Additionally, the FCA proposes to provide Handbook guidance on the allocation of FCA-designated prescribed responsibilities(PRs), including those shared with the PRA for dual-regulated firms.
• Streamlining certification and re-certification – The FCA proposes additional guidance to streamline the certification and re-certification process. This guidance would clarify that the certificate can be provided digitally rather than in hard copy, that firms can embed re-certification within existing processes such as performance reviews, and that firms can conduct the certification process proportionately when there are no changes from the previous year. It also plans to change the scope of the Certification Regime by removing duplication where individuals are currently required to be certified for multiple functions.
• Directory of certified and assessed persons – The FCA proposes reducing the scope of the Directory to reflect changes to the scope of Certification Regime. It also proposes allowing firms more time to update most of the information on the Directory, extending the deadline to 20 business days for most updates.
• Regulatory references – The FCA proposes amending guidance to require firms to provide regulatory references within four weeks of a request to expedite the application process, as opposed to the current six weeks. Additionally, the FCA proposes guidance on what should be included in a regulatory reference if an employee leaves the firm before the conclusion of an investigation into potential misconduct. The FCA also plans to amend SYSC 22.2 to explicitly require firms to provide regulatory references to firms applying for authorisation, not just to firms that are already authorised.
• Conduct rules – The FCA proposes to issue additional guidance to further assist firms in determining how to apply the Conduct Rules, including:
  • reiterate that only Conduct Rule breaches where specified disciplinary action was taken by the firm need to be notified to the regulator;
  • highlight that the notification requirements for breaches under SUP 15.11 are separate to any other reporting requirements;
  • outline matters that the regulator might expect notification about pursuant to Senior Manager Conduct Rule 4;
  • clarify the impact of legal privilege and Senior Manager Conduct Rule 4;
  • clarify when cases in which the firm suspended an individual, or reduced or recovered their remuneration, need to be notified to the regulator; and
  • clarify regulatory reference expectations where an individual has breached a Conduct Rule and disciplinary action was not taken.

The FCA is proposing to update the Conduct Rules separately to address non-financial misconduct – see our separate article for more on that development.

Phase 2

Phase 2 will focus on exploring more substantial changes to further reduce complexity and administrative burden, such as reducing the number of SMF approvals by either removing certain roles or lessening pre-approval requirements, as well as providing greater flexibility for appointing interim SMFs by expanding the use of the 12-week rule.

The FCA also plans to further streamline the SMF assessment process, including reviewing required documents and systems, the frequency of SoR submissions, the list of PRs, and simplifying MRMs. A more straightforward regime may be designed to replace the current certification process, aiming to reduce complexity while ensuring individuals remain fit and proper for their roles.

Additionally, the FCA is considering removing the Directory of certified and assessed persons and collaborating with the industry to identify alternative methods for consumers to access necessary information. The process for reporting breaches of Conduct Rules may also be streamlined.

PRA Consultation Paper

Similar to the FCA’s approach, the PRA’s proposals will be set out in stages. The PRA Consultation Paper sets out the targeted Phase 1 policy proposals. The PRA will consider consulting on additional changes as part of Phase 2 to take advantage of any additional flexibility arising from HM Treasury’s proposals.

1. Overview of proposals

Phase 1

In Phase 1, the PRA aims to introduce several practical changes.

The PRA’s key proposals are detailed below.

• 12-week rule – Similar to the FCA’s proposal, the PRA proposes that firms submit a complete SMF application within 12 weeks of the unforeseen departure or temporary absence of the current SMF holder, rather than requiring that the full approval process be completed within 12 weeks. The PRA will then have a further statutory three months to review and decide on the application, and the individual may continue acting in the role until a decision is made. The Senior Manager Conduct Rules will be applied to individuals operating under the 12-week rule.
• Clarifications on fitness and propriety tests – The PRA proposes to clarify its approach to fitness and propriety assessments for SMF applicants, emphasising that while previous professional experience is often highly relevant, it does not constitute an automatic ‘fast track’ to approval.
• Group Entity Senior Manager (SMF7) – The PRA proposes to provide further guidance on the scope of the SMF7 function. The PRA also proposes to extend the SMF7 definition to include controllers and their representatives who exercise significant influence over the day-to-day management or conduct of the firm’s affairs in relation to its regulated activities, regardless of the legal structure of the group.
• Resolution administrators – The PRA intends to exempt certain resolution-related roles from the requirements of the SM&CR to facilitate their appointment; however, the Individual Conduct Rules would continue to apply to these individuals.
• SoRs and MRMs – The PRA intends to amend its supervisory statements (SS28/15 and SS35/15) to clarify the expectation that updated SoRs and MRMs should be submitted within six months of a significant change in responsibilities or management structures, unless an earlier submission is required by the firm’s supervisor or as a result of the revised 12-week rule.
• Regulatory references – The PRA proposes to amend its supervisory statements (SS28/15 and SS35/15) to clarify that, where an internal investigation into misconduct relevant to the assessment of fitness and propriety was commenced but disciplinary procedures were not concluded because the individual left the firm, firms should consider whether to include details of this in the reference. While the FCA proposes reducing the window for responding to a regulatory reference to 4 weeks, the PRA is not proposing to set such a period.
• Criminal record checks – In line with the FCA’s proposals, the PRA proposes to amend relevant forms to extend the validity period for criminal record checks from up to three months to up to six months before an application is submitted. The PRA will also clarify requirements for criminal record checks for non-SMF holders by updating its supervisory statements (SS28/15 and SS35/15).
• Certification regime – The PRA proposes to update its supervisory statements (SS28/15 and SS35/15) to clarify that while firms must conduct fitness and propriety assessments for certified staff at least annually, they have discretion in how these assessments are conducted and documented.
• Key function holders and notifications – The PRA proposes to clarify in SS35/15 that where an individual is performing both an SMF and is a key function holder, firms would be required to submit only the SMF application form (Form A/Form E) and accompanying material. Firms are not expected to submit a Form M notification in addition to an SMF application.
• Inventory of Senior Manager responsibilities – The PRA aims to make existing guidance more navigable and reduce the compliance burden on firms by creating a dedicated SM&CR policy index and enhancing signposting on the Bank of England’s website.
• Removal of EU references – The PRA proposes to remove all references to certain EU policy materials from SS28/15 and the SM&CR-related sections of the PRA Rulebook, as well as any redundant references to the Approved Persons Regime.

Phase 2

While the PRA has not set out the intended Phase 2 proposals in detail, it expects that Phase 2 will deliver a further significant reduction in regulatory burden, while continuing to support the overall objectives of the SM&CR and the safety and soundness of firms.

HMT Consultation Paper

Taking into account the feedback received through the March 2023 Call for Evidence, the government proposes a package of measures which will enable the Regulators to radically streamline the SM&CR, while maintaining its role in supporting high standards in financial services firms.

The key proposals are outlined below:

1. Removal of the Certification Regime from legislation

The current Certification Regime under the Financial Services and Markets Act 2000 (FSMA) requires individuals performing roles which involve or could involve a risk of significant harm to the firm or its customers to be assessed and certified as ‘fit and proper’ annually. The government proposes to repeal the Certification Regime from FSMA, which will allow the Regulators to use their rule-making powers to set up a replacement regime in rules. This would allow for a more flexible and proportionate approach, enabling the Regulators to tailor requirements to the actual risks posed by different roles and firms, and to adapt the regime more easily over time, reducing regulatory burdens for firms while still ensuring that people in the most significant roles are ‘fit and proper’.

2. Reforming the approach to regulator pre-approval under the Senior Managers Regime

The government proposes reforming the approach to regulator pre-approval via two proposals:

1. provide greater flexibility for the Regulators in specifying the list of Senior Management Functions which require regulatory pre-approval, which would help reduce the overall number of senior managers within the Regime; and
2. allow firms to appoint certain Senior Managers without pre-approval by the Regulators.

Under the proposals, some Senior Managers would continue to require the pre-approval of the Regulators, but the Regulators would have the ability to specify certain senior management roles for which pre-approval is no longer required. For those individuals who are not required to be pre-approved, firms would be required to ensure that individuals meet fitness and propriety standards and would be required to notify the relevant Regulator of such appointments. The Regulator would also be able to introduce proportionate systems and controls to vary the process if necessary.

3. Further measures to ease the regulatory burden of the SM&CR

The consultation identifies several prescriptive legislative requirements that may be removed to support a more proportionate regulatory approach, which include:

1. requirements relating to provision, maintenance and updating of SoR; and
2. requirements which cover, for example, training about the Conduct Rules, and where breaches of the rules must be reported to the Regulators.

The government also invites views on other potential legislative changes to reduce unnecessary regulatory burdens on firms.

Commentary

The consultations issued by the FCA, PRA and HM Treasury represent a clear progression from the themes and feedback gathered in the previous 2023 joint Discussion Paper and Call for Evidence. The current proposals are, for the most part, sensible tweaks to the existing Regime rather than a wholesale rethink, closely aligned with the issues and potential improvements identified in earlier engagements and now setting out concrete reforms and a clear direction of travel.

Collectively, the consultations signal a concerted effort to streamline the Regime and reduce regulatory burdens. The government’s proposals demonstrate a commitment to reducing statutory requirements, thereby allowing greater flexibility for the Regulators to set proportionate and risk-based rules through their own rule-making powers. Both the FCA and PRA are proposing a range of operational improvements and intend to provide clearer or additional guidance across a number of areas.

While the majority of the proposals are incremental, it is important to note that the potential removal of the Certification Regime from FSMA – though not yet confirmed – could represent a significant departure from the current framework. Such a change would require legislation and could result in more staff falling outside the scope of formal fit and proper checks, marking a fundamental shift in approach. For now, however, the focus remains on targeted adjustments rather than sweeping reform.

The timing of these proposals is also notable. Some relief is being offered to firms just days after the FCA has pushed to expand the Conduct Rules for solo-regulated firms to capture non-financial misconduct – a move that many see as extending beyond the Regime’s core remit. This juxtaposition highlights the evolving and sometimes conflicting pressures on the Regulators.

Firms within scope should begin preparing for the anticipated changes. This may include revisiting succession planning in light of the revised 12-week rule and considering whether any controllers could fall within the extended definition of SMF7. Looking ahead, firms should closely monitor how the potential removal of the Certification Regime and other developments may affect their operations and compliance arrangements.

Next steps

The Consultation Papers and HMT Consultation Paper are open for responses until 7 October 2025. The FCA expects to develop final regulatory requirements for publication in a Policy Statement expected in mid-2026. Meanwhile, the PRA proposes that the implementation date for the changes resulting from the PRA Consultation Paper would likely be mid-2026.

Article co-authored by Rowena Lee, a trainee solicitor in the Financial Services Regulatory Team at CMS.