The Senior Managers and Certification Regime (SM&CR) was introduced in 2016 to reduce harm to consumers, strengthen market integrity, and improve the safety and soundness of the financial services sector by upholding individual accountability. Last year, the UK government, FCA and PRA consulted on reforming the SM&CR – our earlier article on the proposals is here. Their respective responses have now been published, and we cover each of them in turn below.
UK government response
The government has now issued its response with next steps.
It sought views on:
- removing the Certification Regime from the Financial Services and Markets Act 2000 (FSMA 2000);
- better enabling regulators to reduce the number of senior management functions that require regulatory pre-approval under the Senior Managers Regime; and
- further easing the burden of the SM&CR and examining broader barriers that legislation may impose on a proportionate regulatory approach.
The government intends to make legislative changes to:
- Remove the Certification Regime from primary legislation, including the annual recertification requirement, and enable the regulators to consider a more proportionate and flexible framework in their rulebooks.
- Reduce the number of senior management functions that require regulator pre-approval. Regulators will be given a new power to specify circumstances where it would be suitable for a firm to notify the regulators of the appointment of a senior manager following the firm's assessment of fitness and propriety.
- Repeal the prescriptive legislative provisions relating to Statements of Responsibilities, enabling regulators to consider appropriate requirements in their rulebooks.
- Streamline Conduct Rules by repealing the prescriptive legislative requirements on firms to notify regulators of breaches and to conduct mandatory training, while retaining the regulators' power to make Conduct Rules and set out appropriate requirements in their rulebooks.
- Give regulators the power to specify in rules and guidance the circumstances in which they may accept senior manager applications subject to time-limits or conditions, approval of which would not trigger statutory notice requirements.
- Amend the Financial Markets Infrastructure SM&CR regime legislated for in the Financial Services and Markets Act 2023 in relation to central counterparties, central securities depositories and recognised investment exchanges to ensure it is consistent with the wider SM&CR changes detailed in this consultation response as and when it is brought into force.
What's in and what's out?
| Area | Original consultation proposal (July 2025) | Government's final response (April 2026) |
| Certification Regime | Proposed to repeal sections 63E and 63F of FSMA 2000 to remove the Certification Regime from primary legislation, including the annual recertification requirement, and leave space for regulators to develop a more proportionate replacement regime in their rulebooks. | Confirmed it will proceed with removing the Certification Regime from FSMA 2000. Emphasised that commencement of the legislative changes will be aligned with the regulators' development of any replacement rules to avoid regulatory gaps. |
| Reducing the number of Senior Management Functions | Proposed to amend sections 59ZA and 59 of FSMA to provide regulators with greater flexibility in how they define Senior Management Functions, facilitating an overall reduction in roles falling within the regime. | Following further legal analysis, the government concluded that regulators can already amend the number of senior management functions under existing legislation. It is therefore not planning to take forward legislative changes on designation of roles but is making other changes to allow for fewer senior management function applications. |
| Pre-approval of Senior Managers | Proposed to modify the statutory requirement in FSMA that all senior managers must be subject to prior regulatory approval, enabling regulators to specify certain roles for which pre-approval is no longer required and a notification-based approach could apply instead. | Confirmed it will legislate so that regulatory pre-approval is no longer always required. Regulators will be given a new power to specify in rules where a notification-based approach is suitable. Additionally, regulators will have powers to require specific firms to seek pre-approval even for functions otherwise designated for notification. |
| Statement of Responsibilities | Noted that FSMA includes prescriptive requirements around provision, maintenance and updating of Statements of Responsibilities, and the government intended to make changes to support a more flexible approach. | Confirmed it will repeal the prescriptive provisions relating to Statements of Responsibilities from FSMA 2000, giving regulators flexibility to set appropriate requirements through their rulebooks. |
| Conduct Rules | Noted that FSMA includes prescriptive requirements covering training about Conduct Rules and breach notification to regulators, and asked whether these create a disproportionate burden and could be removed from legislation. | Confirmed it will retain the power for regulators to make Conduct Rules but will repeal the prescriptive legislative requirements on firms to notify regulators of breaches and to conduct mandatory training, allowing regulators to set appropriate requirements in rules instead. |
| Time-limited or conditional approvals | Not specifically proposed in the original consultation. | New proposal identified since the consultation: the government will legislate to give regulators the power to accept senior manager applications subject to time-limits or conditions, where such applications are made voluntarily by firms, without triggering statutory notice requirements. |
| Financial Market Infrastructure (FMI) firms | Stated the government did not plan to take forward secondary legislation to apply the SM&CR to CCPs, CSDs, RIEs and CRAs at that time, and would take the consultation results into account before considering application further. | Confirmed it is not planning to commence the SM&CR for FMIs at this stage. However, as part of the reforms, the government intends to make equivalent legislative changes to the FMI SM&CR provisions to ensure consistency with the wider reforms, so the regime could be applied in a coherent way in the future. |
| Statutory deadline for senior manager applications | Noted that regulators had addressed backlogs and were well-placed to meet a new two-month deadline announced at Mansion House, but the statutory deadline remained at three months. | The government has proposed to legislate to shorten the statutory deadline from three months to two months, aligning it with the emerging regulatory practice. |
| International talent | Acknowledged concerns around recruiting international talent and said the government was "considering whether additional specific measures are needed." | Recognised the importance of reducing barriers but anticipates the proposed reforms will address existing practical barriers. The government remains open to further industry feedback and will continue working with regulators to ensure the reformed SM&CR operates proportionately for international firms and globally mobile senior leaders. |
FCA and PRA statements
The FCA and the PRA have published policy statements on other reforms to the SM&CR regime. The FCA has confirmed that it will implement the Phase One reforms largely as it previously consulted on. Most of the reforms will take effect on 24 April 2026 and include:
- Extending the validity period for criminal records checks from three to six months and removing the requirement for checks for internal or intragroup moves.
- Allowing firms 12 weeks to submit a senior management function (SMF) application. A candidate will be able to act in the role until determination, and will be subject to senior manager conduct rules.
- Providing guidance on the allocation of prescribed responsibilities and the appropriate circumstances for splitting prescribed responsibilities.
- Giving firms up to six months to notify changes relating to statements of responsibilities (SoRs) and management responsibilities maps (MRMs).
- Providing guidance clarifying expectations when recertifying individuals as fit and proper.
- Providing guidance that reduces the period for firms to respond to requests for regulatory references from six to four weeks.
- Providing additional guidance on the applicability of SMF7 and SMF18 roles.
- Extension of time, from 7 to 20 working days, to update Directory information for certified persons in relation to most information (7 working days still applies in relation to staff departures).
- Certain reforms relating to regulatory reporting process will take effect on 10 July 2026 to give firms time to make changes to their processes and procedures. These include:
- Allowing SMF18s at solo‑regulated firms to hold any prescribed responsibility.
- Raising certain financial thresholds for becoming an enhanced SM&CR firm.
- Removing the need to certify the same individuals to perform multiple overlapping functions.
The FCA will also make minor amendments on 1 September 2026 to align with its rules about tackling non-financial misconduct in financial services.
The PRA has confirmed that it will also implement its reforms largely as consulted on from 24 April. The reforms include:
- Allowing firms 12 weeks to submit an SMF application.
- Clarifying which individuals should be within the scope of the Group Entity SMF7.
- Exempting resolution administrators or officials performing similar roles from the senior managers regime.
- Giving firms up to six months to notify changes relating to SoRs and MRMs.
- Extending the period for requiring a criminal record to be undertaken from three to six months before submission.
The FCA and the PRA will publish further consultations about amending their rules regarding the Phase Two reforms after HM Treasury has published the relevant primary legislation. The FCA intends to consult before the end of this year.
Next steps
The government reforms will require primary legislation. The government intends to introduce this as soon as parliamentary time allows. Delivering the Government's and regulators' targeted 50% reduction in regulatory burden is a joint commitment, and the government says that it is confident it can be achieved without undermining the core objectives of the SM&CR.
Once legislation is introduced, and subject to parliamentary passage, the regulators plan to consult on further proposed rule changes as part of the "Phase 2" of SM&CR reform. The regulators will consider how best to use the additional flexibilities created by the legislative changes, such as bringing forward proposals for a more proportionate and risk-sensitive approach following removal of the Certification Regime from FSMA.
The regulators may also consider additional reforms to the regime, including those not dependent on legislative amendments, to further improve efficiency and reduce regulatory burden. The details of the regulators' proposed approaches will be set out separately in their consultations.
Overall, the changes should have a positive impact on firms, streamlining the requirements and providing additional clarity. The significant remaining uncertainty is to what extent the certification regime will be revised following its removal from FSMA – hopefully the changes will be done in a way that is cost-effective for firms to implement.