SMCR Reform 2026: What UK Financial Executives Must Do Now

The FCA and PRA’s first wave of Senior Managers and Certification Regime (SM&CR) reforms took effect on 24 April 2026 — reducing the administrative burden on firms while sharpening the accountability framework around named senior executives. For financial services leaders, this is not a compliance team issue alone: several of the changes directly affect how boards appoint, move, and oversee their most senior people.

The reforms arrive in two phases. Phase 1, now in force, is operational: it removes friction from the application and oversight process. Phase 2 requires primary legislation and will fundamentally reshape the Certification Regime. Both matter, and both require board-level attention now.

What Has Actually Changed Under SMCR Phase 1?

Published in FCA Policy Statement PS26/6 and PRA Policy Statement PS12/26, the Phase 1 changes address operational friction that had built up across the SM&CR since its introduction. The regulators’ explicit goal: increase efficiency without weakening personal accountability. The practical effect is a set of process improvements that compliance functions need to implement now and boards need to understand.

The 12-week window for unexpected or temporary Senior Management Function (SMF) changes has been clarified: firms must now submit an application within 12 weeks, not obtain full approval. This matters for boards managing sudden executive changes — illness, resignation, or interim arrangements — where the previous standard created real operational pressure. Criminal record checks for SMF applicants are now valid for six months, up from three, and where a Senior Manager moves to another SMF role within the same firm or group, a new check is not required. Regulatory references — the documentation firms must provide when a senior employee moves between regulated firms — must now be turned around within four weeks, down from six, removing a recurring bottleneck in senior hire timelines.

At the PRA, the structural improvements are already delivering results: the median determination time for senior manager applications has been reduced from 62 days to 28 days. For boards navigating executive succession or urgent SMF appointments, that difference is material.

Executive Action

• Update your internal SMF application processes to reflect the 12-week submission standard — and ensure your HR and legal teams understand that submission, not approval, is the trigger.
• Revise your criminal record check policy to apply the six-month validity window and document the intra-firm/group exemption for future appointments.
• Brief your compliance function on the four-week regulatory reference obligation — and build that deadline into your senior hire process documentation.

Why Do These Changes Matter at Board Level?

The SM&CR places personal accountability at the centre of UK financial regulation. Senior Management Functions — CEO, CFO, Chief Risk Officer, Chief Compliance Officer, and a range of NED and chair roles — require individual FCA or PRA pre-approval. Any gap in accountability mapping, delayed appointment, or process failure creates direct regulatory exposure for the individuals concerned and reputational exposure for the firm. This is not a back-office consideration.

The FCA has signalled that it will take a less intensive supervisory approach for firms “demonstrably seeking to do the right thing.” That latitude is meaningful — but it is conditional on firms demonstrating competent internal governance. Boards that treat the SM&CR as a compliance filing exercise rather than a live accountability tool are misreading the regulatory environment. According to research cited in the FCA’s review, the previous regime imposed compliance burdens that did not always translate into better supervisory outcomes — the reforms aim to fix that imbalance while retaining the principle of named personal accountability.

For NEDs holding SMFs — typically Chair of the Audit, Risk, or Remuneration Committee — the practical implication is straightforward: your Statement of Responsibilities must accurately reflect what you actually do. Phase 2 may simplify the legislative framework, but the substance of what the regulator expects will not change.

Executive Action

• Confirm that your board accountability map is current — pay particular attention to SMFs held by executives who have changed roles or scope in the past six months.
• If you are a NED holding an SMF, review your Statement of Responsibilities now — ensure it reflects your actual committee roles and oversight activities, not a legacy template.
• Put SM&CR reform on the agenda at your next Audit or Risk Committee — this is a governance update that belongs at board level, not just in a compliance report.

What Is SMCR Phase 2 — and When Does It Land?

Phase 2 is more structurally significant. HM Treasury has confirmed its intention to remove the Certification Regime from the Financial Services and Markets Act 2000 (FSMA), replacing it with a more flexible framework operated directly by the FCA and PRA. The number of Senior Management Functions requiring pre-approval will be reduced. The legislative requirement for Statements of Responsibility will be simplified. HM Treasury has also proposed shortening the statutory deadline for regulators to determine senior manager applications from three months to two months.

There is no confirmed Parliamentary timetable for Phase 2 legislation. The direction of travel, however, is clear: the government wants to reduce the statutory scaffolding around the regime while preserving its core purpose. For firms, that creates a planning horizon now. The Certification Regime currently requires firms to assess the fitness and propriety of a defined population of employees annually — a significant HR and compliance exercise. Understanding who sits within your current certified population, and how your obligations might shift under a regulator-operated alternative, is work that should start before the legislation lands, not after.

For boards overseeing compliance transformation or workforce planning exercises, the SM&CR reform intersects directly with broader questions about how firms manage accountability for AI-driven decisions, operational risk, and third-party oversight — all areas where named senior manager accountability is increasingly relevant. INFORMD’s executive tools and assessments include resources to help senior leaders map accountability frameworks against evolving regulatory requirements. For structured documentation of regulatory change impact, explore the templates library.

Executive Action

• Map your current Certification Regime population — identify who holds certified roles, what your annual fitness and propriety assessment process looks like, and how it would need to adapt under a regulator-operated framework.
• Brief your General Counsel and Company Secretary on the Phase 2 proposals so they can track the bill’s progress and flag when consultation periods open.
• Consider how your SM&CR accountability map intersects with emerging obligations around AI decision-making and operational resilience — named accountability for these domains is likely to become a regulatory expectation, not just good practice.

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Frequently Asked Questions

What is the SM&CR and which firms and individuals does it cover?

The Senior Managers and Certification Regime (SM&CR) applies to FCA and PRA-authorised firms in the UK financial services sector. It requires firms to designate specific Senior Management Functions — including CEO, CFO, Chief Risk Officer, and certain NED roles — which must be individually approved by the FCA or PRA. A broader population of “certified” employees must be assessed annually for fitness and propriety. The regime covers banks, insurers, investment firms, and a range of other authorised entities.

What is the difference between SM&CR Phase 1 and Phase 2 reforms?

Phase 1, which took effect on 24 April 2026, is operational: it streamlines application windows, extends criminal record check validity, reduces regulatory reference turnaround times, and removes duplicate certification roles from the FCA Directory. Phase 2 requires primary legislation and is more structurally significant: it will remove the Certification Regime from FSMA 2000, reduce the number of pre-approval SMFs, and simplify legislative requirements around Statements of Responsibility. HM Treasury has confirmed Phase 2 intent but no Parliamentary timetable has been set.

Do the April 2026 SM&CR changes affect firms outside financial services?

No. The SM&CR applies specifically to FCA and PRA-authorised financial services firms. However, senior executives at non-financial firms who sit on the boards of regulated subsidiaries — as NEDs or in advisory roles — may hold SMFs and are subject to the regime in that capacity. If you are a group-level executive with oversight of a regulated entity, your obligations under the SM&CR are likely more significant than you realise.

When will the Certification Regime be abolished?

HM Treasury has confirmed that it intends to remove the Certification Regime from the Financial Services and Markets Act 2000 as part of Phase 2 of the SM&CR reform. However, no bill has been introduced and no timetable has been confirmed. The Certification Regime remains fully in force. Firms should continue to meet their annual fitness and propriety assessment obligations and use the Phase 2 consultation period — when it opens — to engage with how a regulator-operated alternative framework will work in practice.