The FCA and PRA Policy Statements published on 22 April deliver the most significant reform of the Senior Managers & Certification Regime (SM&CR) since its inception.
It is not merely a streamlining exercise.
New Guidance and examples from the FCA and PRA will help Firms with the application of certain functions and rules (SMFs 7 and 18; the 12-week Rule), but subtle changes to COCON Guidance for Senior Managers also extend responsibilities and liabilities regarding regulatory notifications.
Key Reforms and Immediate Implications
Phase 1 of the reforms is effective from 24 April 2026. Among the most notable changes:
12-Week Rule: Firms now have 12 weeks to submit a Senior Management Function (SMF) application, rather than to obtain approval. The candidate may act in the role until determination, with Senior Manager Conduct Rules applying throughout. The PRA has added a table of examples (Table D in SS28/15) illustrating where the 12-week Rule may apply.
SMF/7 and SMF/18: FCA Handbook Guidance is introduced to narrow the scope of these functions with the intended effect of reducing the number of applications for these functions going forward. The PRA has proceeded with proposals to extend the SMF/7 function to “controllers” and added a table of examples (in Table H SS28/15) showing where SMF/7 may be applicable.
Senior Manager Conduct Rule Guidance: matters requiring notification by Senior Managers under Senior Manager Conduct Rule 4 will now include matters concerning Senior Managers themselves, not only about the Firm. Additions to the Guidance state that Senior Managers may also breach Senior Manager Conduct Rule 2 by failing to take reasonable steps to ensure the Firm complies with its obligations to notify the FCA (under Principle 11 and SUP 15).
Prescribed Responsibilities and Statements of Responsibilities: Firms are permitted up to 6 months to notify changes and need only submit the latest version if multiple changes occur within that period.
Certification Regime: Guidance clarifies expectations for re-certification, allowing digital certificates and integration with annual appraisal cycles.
Directory Updates: Most Directory information updates can now be made within 20 working days, with departures still requiring notification within 7 days.
Criminal Records Checks: The validity period for checks is extended from 3 to 6 months, and checks are no longer required for internal or intragroup moves.
Further changes, including increased thresholds for Enhanced Firm status, removal of overlapping multiple Certifications (approximately 15% of roles), and allowing SMF/18 holders (at solo-regulated firms) to hold any prescribed responsibility, take effect from 10 July 2026.
Strategic Considerations for Senior Managers and Compliance Leaders
While these reforms are intended to streamline compliance, they also demand renewed attention to governance frameworks. The FCA’s approach is clear: efficiency gains must not come at the expense of accountability or market integrity. Firms should review their internal processes, succession plans, and reporting mechanisms to ensure alignment with the new requirements.
In practice, firms might now ask:
Does the amendment to the 12-week Rule and new PRA Guidance affect any imminent SMF departures or succession planning?
Do all current (and possible future) SMF/7 and SMF/18 holders need to retain those functions, considering new Guidance on the scope of those roles?
Are Senior Managers aware of the new Guidance on the Senior Manager Conduct Rules (notably Senior Manager Conduct Rules 2 and 4)?
After 10 July: what Prescribed Responsibilities might be re-allocated or split in accordance with new Guidance?
After 10 July: can Certification processes be streamlined, and will Certification Functions be reduced based on new Guidance?
Notably, the Regulators have signalled that Phase 2 reforms, which require legislative change, may bring broader reforms, including potential changes to SMF roles, Certification, and regulatory reporting. Early engagement and proactive review will be critical as the regime continues to evolve.
A consultation on Phase 2 is expected later this year.
