First phase of Senior Managers and Certification Regime (SM&CR) reforms go ahead
On 22 April 2026, the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) confirmed the first phase of changes to the Senior Managers and Certification Regime (SM&CR) (FCA PS26/6 and PRA PS12/26). At the same time, HM Treasury published a Consultation Response confirming the direction of travel for the second phase of reforms.
The FCA, PRA and HMT are implementing their proposals largely as consulted on. For an overview of the July 2025 consultations, see our earlier article.
When do the changes take effect?
The majority of the first phase of changes take effect on 24 April 2026, with some further changes on 10 July 2026. Changes relating to non-financial misconduct will take effect on 1 September 2026 to align with FCA PS25/23.
The second phase of reforms will require amendments to the Financial Services and Markets Act 2000 and further changes to the PRA and FCA rules. No timing for this has been given and the changes are not expected to take effect for some time.
What are the key changes in this first phase?
Changes taking effect from 24 April 2026:
| Change | Summary | FCA | PRA |
|---|---|---|---|
| Criminal record checks (CRCs) | The validity period for CRCs has been extended from three to six months. CRCs are no longer required for internal or intra-group moves. While these rule changes take effect on 24 April, the relevant FCA and PRA forms will not be updated until 10 July, meaning that for a limited time the wording on the forms will not match the revised requirements. Firms should complete the existing forms on the basis of the 24 April requirements until the forms are updated. | ✓ | ✓ |
| The ‘12-week rule’ | Solo and dual-regulated firms will now have 12 weeks to submit an SMF application (rather than 12 weeks to submit and receive approval). The candidate can act in the role until the application has been determined. The Senior Manager Conduct Rules will apply to non-SMFs covering roles under the 12-week rule. Any breaches of the Conduct Rules by these non-SMF individuals should be reported to the FCA via SUP 15 as soon as practicable, rather than on a collated annual basis on FCA Form H/REP008. Breaches should be reported to the PRA via Form L. | ✓ | ✓ |
| Statements of Responsibilities (SoRs) and Management Responsibilities Maps (MRMs) | Solo and dual-regulated firms will no longer need to update documents when changes occur and will now have up to six months to notify changes to SoRs and MRMs following a significant change in responsibilities. Only the latest version needs to be submitted if more than one change has been made in the 6-month period. | ✓ | ✓ |
| Regulatory references | The FCA has reduced the period for firms to respond to requests for regulatory references from six to four weeks. The PRA has not set a response time, noting that the FCA's four week window will in practice be binding for all firms. The FCA and PRA have provided guidance on what may need to be included in a reference if an employee leaves the firm before an investigation into potential misconduct has concluded. | ✓ | ✓ |
| Additional guidance on SMF7 (Group Entity Senior Manager) | The FCA has provided further guidance to help firms determine whether a person is captured by the SMF7 (Group Entity Senior Manager) function. This is intended to reduce the number of SMF7 applications. The PRA has amended its guidance to clarify that its intends to capture those individuals with responsibility for implementing the strategy, or who otherwise may be able to affect the safety and soundness of a firm's UK-regulated activities, rather than broader group-wide strategy setting. The PRA has consolidated the tables of examples so that one table covers both international and UK-headquartered firms. The PRA and FCA consulted on different approaches to the scope of the SMF7 role, reflecting their different statutory objectives. The changes introduced by the PRA are separate from, and do not conflict with, the FCA’s guidance. | ✓ | ✓ |
| Certification Regime – additional guidance | The FCA has added new guidance to clarify that certificates can be provided digitally or by email, firms can incorporate certification into annual appraisal cycles, and the annual certification exercise can be undertaken proportionately when there are no changes from the previous year. The PRA has confirmed 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. However, a firm must clearly record that it is satisfied the person is fit and proper to perform the function to which the certificate relates and the aspects of the firm’s affairs the person will be involved in when performing the function. Firms must also allocate the PR for the firm’s performance of its obligations under the certification regime (PR B) to an accountable SMF holder. | ✓ | ✓ |
| Additional guidance on SMF18 (Other Overall Responsibility) | The FCA has proceeded with its amended guidance on the SMF18 function, emphasising what a firm should consider when determining if SMF18 applies. In response to feedback, the FCA has removed the requirement that the SMF18 holder have 'equal status' to the firm's executive directors, acknowledging that this could be overly restrictive for firms with complex or group-level governance structures. The FCA reiterates that it expects individuals holding this function to be the most senior individual reporting into the governing body. This change will also apply to the SMF22 (Other Local Responsibility Function) for branches. | ✓ | |
| Prescribed Responsibilities (PRs) – guidance | The FCA has confirmed Handbook guidance on PR allocations, including guidance on appropriate circumstances for splitting PRs and on allocating PRs to SMFs. | ✓ | |
| Directory of certified and assessed persons | Solo-regulated firms are now given more time to update most Directory information, extended from 7 to 20 working days. The existing 7 working day timescale is retained for updating details about staff departures, due to the higher risk of fraud and consumer harm. | ✓ | |
| Conduct Rules – clarifying guidance | The FCA has confirmed clarifying guidance on notification requirements, regulatory references without disciplinary action, and application of the Senior Manager Conduct Rules. In response to feedback, the FCA has removed proposed expanded guidance on circumstances under which Conduct Rule breaches should be reported to the regulator (SUP 15.11), and made a small change to proposed guidance on Senior Manager Conduct Rule 2 (SC2) to align it more closely with the wording under Senior Manager Conduct Rule 4 (SC4). Some of the new COCON guidance on notification requirements and SC4 will come into effect on 1 September 2026, to align with PS25/23 on tackling non-financial misconduct. | ✓ | |
| Extending SMF7 to controllers | The PRA has confirmed the extension of SMF7 to controllers and, where appropriate, their representatives who exercise significant influence over the day-to-day management of a PRA-authorised firm. | ✓ | |
| Fitness and propriety clarifications | The PRA has confirmed additional text in its supervisory statements to make clear that assessments of an individual's fitness and propriety take account of any previous approvals in other jurisdictions or similar accountability regimes and experience as an SMF in other firms. | ✓ | |
| Resolution administrators | The PRA has confirmed the exemption of resolution administrators or officials performing similar roles appointed by the Bank of England or HMT from SM&CR requirements, although the Individual Conduct Rules will continue to apply. | ✓ | |
| Key Function Holders and notifications | For insurers, the PRA has confirmed that where an individual is performing both an SMF and is a key function holder, firms need only submit the SMF application form (Form A/Form E) and accompanying material, not a Form M notification as well. | ✓ |
Changes taking effect from 10 July 2026:
| Change | Summary | FCA | PRA |
|---|---|---|---|
| Prescribed Responsibilities – rule change | An FCA rule change to allow SMF18 holders at solo-regulated firms to hold any FCA-prescribed senior management responsibility. | ✓ | |
| Thresholds for becoming an Enhanced SM&CR firm | The FCA has confirmed a 30% increase in certain Enhanced Firm financial thresholds, updated in line with inflation since their introduction in 2019. FCA plans to update these thresholds every five years and will look at the thresholds further as part of Phase 2. | ✓ | |
| Certification Regime – removal of overlapping certifications | The FCA has removed overlapping multiple certifications, reducing the total number of certification roles by approximately 15%. For dual-regulated firms, the FCA will remove FCA material risk taker (MRT) roles where an individual is also certified by the PRA in one of its certification functions at the same firm, minimising operational overlap. The FCA will itself make the necessary changes to the Directory to reflect that a person has ceased to carry on an FCA certification function as a result of these amendments. | ✓ |
Further changes to the SM&CR Regime – Phase 2
HMT has confirmed its intention to proceed with more fundamental changes to the SM&CR in its consultation response. This package of reforms, referred to as ‘Phase 2’, will require changes to primary legislation and is not expected to take effect for some time.
The changes confirmed by HMT are:
Removal of the Certification Regime from legislation - The Government intends to repeal the Certification Regime, including the annual re-certification requirement. This will enable the Regulators to use their existing rule-making powers to develop a more proportionate, flexible and risk-sensitive replacement framework in their rules. The Government has confirmed that any commencement of the legislative changes will be aligned with the development of replacement rules, in order to smooth the transition and avoid regulatory gaps.
Reforming regulatory pre-approval - The Government intends to legislate so that firms will not always be required to seek regulatory pre-approval when appointing an individual into a senior management role. Regulators will be given a new power to specify in rules where it is suitable for a firm to notify them of the appointment, following an internal fitness and propriety assessment. Individuals appointed under this route will still be subject to the same SM&CR requirements as those requiring pre-approval.
Removal of the legislative requirements for Statements of Responsibilities - The Government will repeal the prescriptive provisions relating to Statements of Responsibilities from FSMA 2000, enabling the regulators to determine appropriate requirements through their rules.
Streamlining of Conduct Rules - The Government will retain the regulators’ power to make Conduct Rules but repeal the prescriptive legislative requirements on firms to notify breaches and conduct mandatory training.
Conditional and time-limited senior manager approvals - Regulators will be given the power to specify in rules and guidance the circumstances in which they may accept senior manager applications subject to time-limits or conditions, without triggering statutory notice requirements. This will provide additional flexibility for managing interim appointments.
Shorter statutory deadline for senior manager applications – The Government proposes to shorten the regulators’ statutory deadlines for determining senior manager applications from three months to two months.
Financial Market Infrastructure (FMI) SM&CR - The Government is not planning to commence the SM&CR for FMIs at this stage, but intends to make equivalent changes to the FMI SM&CR to ensure consistency with the wider reforms.
Commentary
The FCA and PRA’s Phase 1 reforms are clearly welcome, but they are not the main event. On their own, they will make only a modest dent in the administrative burden of the SM&CR and will not come close to delivering anything like the targeted 50% reduction. The real turning point sits with HMT’s reform programme.
If HMT’s consultation results in scrapping the Certification Regime altogether and materially reducing the population of SMFs requiring regulatory pre‑approval, then we begin to see genuinely meaningful change. That is where the regime could shift from incremental adjustment to structural reform.
But the scale and shape of that change will ultimately depend on how the FCA and PRA respond in their anticipated Phase 2 consultations later this year, assuming HMT progress is made. Early and active engagement with Phase 2 will therefore be critical. Done well, it could produce a more workable and proportionate regime for firms.
There is also an unavoidable harder question. If the reforms go too far, do they begin to dilute not only individual accountability, but the cultural discipline that SM&CR was designed to embed - within a framework the regulators themselves have consistently presented as working well? How that tension is resolved will define whether SM&CR reform delivers simplification without undermining the regime’s core objectives.
