FCA Introduces Changes to SMCR, Along with Comments and Analysis
Streamlining the Senior Manager Certification Regime: A New Era for UK Financial Firms
The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) have proposed reforms to the Senior Manager Certification Regime (SM&CR), aiming to reduce regulatory burdens and make the regime more efficient while maintaining high standards of accountability.
Imogen Makin, counsel at WilmerHale, comments that these reforms align with the FCA's 2025-2030 strategy, which focuses on enhancing the competitiveness of the UK's financial services sector. The proposed changes aim to cut the regulatory burden of SM&CR by about 50%, making the regime less onerous for firms while maintaining high standards of accountability and protecting markets and consumers.
One of the key proposals is the removal of the Certification Regime from legislation, allowing regulators to create a more flexible and proportionate approach to the certification of staff. This change could reduce the administrative demands on firms and provide a more streamlined process for senior management approvals.
The reforms also aim to reduce the number of senior management functions (SMFs) requiring pre-approval from regulators, thereby decreasing administrative demands on firms. Additionally, firms will be given more time to submit applications for approval of new senior managers during unexpected or temporary changes.
Eliminating duplication where the same individuals are certified across multiple functions could reduce certification roles by about 15%. Providing updated guidance on streamlining annual fitness and propriety checks for certified individuals aims to simplify compliance procedures. Lengthening the validity period for criminal records checks before application submission is another proposal designed to make the process more efficient.
The consultation, which closes on 7 October 2025, includes proposals to give firms more time to update the directory, which lists certified staff, and to help firms understand the definition of certain SMF roles.
Jill Lorimer, Head of the Financial Services Regulatory team at Kingsley Napley LLP, comments that the proposals are an important step in the right direction. Firms, she says, will welcome the changes, particularly the proposed improvements to the process of applying to the regulator for senior management approval.
John Pauley, Financial Services Partner at law firm Harper James, emphasizes the importance of effective implementation and ongoing engagement with all stakeholders. Maintaining investor confidence, market integrity, and consumer trust will depend on the successful implementation of these reforms.
The UK government's reforms, unveiled in Leeds, aim to encourage investment and support growth in the financial services sector. The proposals include streamlining regimes such as the Senior Managers and Certification Regime and reconsidering the reach of Consumer Duty in wholesale markets.
The FCA and PRA acknowledge that while the majority may benefit from these reforms, a minority may not get the outcome for which they hoped. The coming months will be crucial in determining whether the intended benefits of growth and simplification are realized, while preserving the high standards that underpin the financial sector.
The success of any reforms will hinge on achieving the right balance between encouraging competitiveness and maintaining reputable, robust oversight. The reforms reflect an effort to remain mindful of standards safeguarding consumers and the stability of the financial system.
In summary, the changes aim to ease the administrative and compliance loads on financial firms and their senior management, without undermining the regime’s core objective of ensuring senior individuals are accountable for their conduct and decisions within regulated firms.
- The reforms in the Senior Manager Certification Regime (SM&CR) could lead to a significant innovation in the UK's financial sector, as they aim to cut regulatory burdens by about 50%, making the regime less onerous for firms while maintaining high standards of accountability.
- With the removal of the Certification Regime from legislation, insurtech companies might find it easier to comply with regulatory requirements, as the regulators will have a more flexible and proportionate approach to certifying staff.
- The proposed changes in the SM&CR regime, such as simplifying compliance procedures and providing more time for senior management approvals, could drive growth and competitiveness in the finance business, in line with the UK government's strategy to encourage investment and support growth in the financial services sector.
