The UK's plans to simplify the Senior Managers and Certification Regime (SM&CR) have taken a significant step forward. On 22 October 2026, the Financial Conduct Authority (FCA) published CP26/37: Senior Managers and Certification Regime (SM&CR) Review: Phase 2, setting out detailed proposals that would substantially reduce the administrative burden associated with the regime while retaining its core focus on individual accountability.
The consultation follows the UK government's broader commitment to reform the SM&CR and builds on the first phase of changes implemented earlier this year. It represents perhaps the most significant proposed reshaping of the regime since it was rolled out across the financial services sector.
A shift towards a more proportionate regime
The FCA says its objective is to maintain high standards of accountability and conduct while making the regime easier and less costly to operate. The consultation is driven in part by proposed changes in the Financial Services and Markets Bill, which would move many detailed SM&CR requirements out of legislation and into regulator-made rules, giving the FCA and PRA greater flexibility to tailor the regime over time.
The proposals will be of interest to all firms currently subject to the SM&CR, as well as firms expected to enter the regime in the future, including cryptoasset firms.
What is changing?
The headline proposal is the abolition of the Certification Regime. The FCA proposes removing the requirement for firms to certify annually that certain individuals are fit and proper to perform certified functions. As part of this change, the FCA would also retire its Directory of certified and assessed persons. In addition, firms would no longer need to obtain regulatory references for individuals who were previously certified.
The consultation also proposes a significant reduction in regulatory approvals and documentation requirements, including:
- removing certain Senior Management Functions (SMFs) and replacing others with notification requirements;
- streamlining the SMF application process;
- raising thresholds for the Enhanced SM&CR regime, reducing the number of firms caught by its most onerous requirements;
- ending the requirement to submit updated Statements of Responsibilities and Management Responsibilities Maps on an ongoing basis; and
- simplifying the existing framework of Prescribed Responsibilities.
The FCA is also proposing changes to conduct rule requirements, including simplification of training obligations and higher thresholds for reporting conduct rule breaches.
What remains unchanged?
Despite the scale of the proposals, the FCA is not seeking to dismantle the accountability framework altogether. The regulator emphasises that the reforms are intended to preserve the core principles underpinning the SM&CR, namely clear individual responsibility for key business areas and conduct standards designed to support market integrity and reduce consumer harm.
The consultation therefore reflects a recalibration rather than a retreat from individual accountability. Senior managers will remain accountable for their areas of responsibility, but firms may face fewer prescriptive procedural requirements and less regulatory paperwork.
What does this mean for firms?
If implemented, the reforms could deliver a meaningful reduction in compliance costs and administrative effort, particularly for firms currently subject to the Enhanced regime and those managing large certified populations. The proposed removal of the Certification Regime alone would eliminate one of the most resource-intensive aspects of the framework for many firms.
However, firms should be cautious about viewing the proposals as a wholesale relaxation of accountability requirements. Regulators continue to regard governance, responsibility mapping and individual accountability as critical supervisory priorities. In practice, many firms may choose to retain elements of their existing certification and governance processes as part of their wider risk management and fitness and propriety frameworks.
Next steps
The consultation closes on 22 January 2027. The FCA says it will review feedback and aims to publish final rules in the first half of 2027. Firms regulated by both the FCA and PRA should also consider the PRA's parallel consultation proposals.
Why this matters
The FCA's latest proposals provide the clearest indication yet that the UK government's SM&CR review is likely to result in a materially lighter-touch framework. While the foundations of individual accountability appear set to remain, many of the procedural and documentation requirements that firms have grappled with over the last decade could soon be substantially reduced. For regulated firms, the consultation offers the prospect of a more proportionate regime, but one that still expects clear ownership, effective governance and accountability at senior management level.
