SMCR 2026: What the FCA’s Senior Managers Regime Review Means for Boards

The FCA and PRA published a joint Discussion Paper (DP23/1) on the Senior Managers and Certification Regime in 2023, with formal Consultation Papers (CP25/21 and CP18/25) published in July 2025 outlining proposed changes. As the regime enters a period of significant reform in 2025–2026, the regulators’ expectations of boards, NEDs, and senior function holders have crystallised. This briefing distils what has changed, what enforcement has taught us, and what senior managers need to do now.

Where the regime stands in 2026

SMCR was extended to all FCA-regulated firms in December 2019. Since then, the regime has generated hundreds of enforcement cases, several high-profile individual accountability decisions, and a formal joint review by the FCA and PRA completed in 2023. The review concluded that SMCR’s core architecture — individual accountability via Senior Manager Functions (SMFs), the Certification Regime, and the Conduct Rules — remains fit for purpose, but identified areas where firms have been treating compliance as a paper exercise rather than embedding genuine accountability.

The regulators’ 2025–2026 supervisory focus reflects this conclusion: the FCA is moving from checking that firms have SMCR documentation to interrogating whether the accountability it creates is real and operative.

What the 2023 review changed

1. Strengthened expectations on Statement of Responsibilities

The FCA identified widespread practice of Statements of Responsibilities (SoRs) being too vague to enable genuine accountability. The guidance that followed makes clear that SoRs must describe responsibilities in enough specificity that a regulator could, in an enforcement context, determine whether a Senior Manager fulfilled them or not. Boards should ask management to review SoRs against this standard if they have not been updated since 2023.

2. Governance Maps and Responsibilities Maps under scrutiny

Responsibilities Maps have been identified as a specific area of weakness — in particular, firms where the Map and the SoRs were inconsistent with actual decision-making. The FCA has been asking, in supervisory visits, to trace a specific decision (e.g., a product launch, a risk limit breach) from operational level up to the Senior Manager accountable under the Map. Firms where the documentation does not reflect reality are being asked to remediate.

3. The Certification Regime remains a persistent weakness

The review found that many firms have not embedded the Certification Regime as effectively as SMCR. Specifically: annual fitness and propriety assessments are being treated as tick-box exercises rather than genuine evaluations, and the process for identifying and removing certificates from individuals who no longer meet the standard is often inadequate. Boards should be receiving a report from HR/Compliance on the results of the last annual certification cycle.

4. Conduct Rules training and embedding

All employees (subject to limited exceptions) must receive Conduct Rules training. The FCA has found that at many firms, training is completed but the Conduct Rules are not genuinely embedded in performance management, conduct risk frameworks, or disciplinary processes. The expectation is that Conduct Rule breaches feed into HR processes and, where reportable, are notified to the regulator correctly and promptly.

Enforcement trends: what the cases tell us

SMCR enforcement cases in 2023–2025 show a consistent pattern. The FCA has not been primarily pursuing individuals for single acts of misconduct. It has been pursuing individuals — including NEDs and chairs — for failures of oversight: situations where a Senior Manager either knew of a problem and failed to act, or should have known given the information available to them, and failed to act.

The “reasonable steps” defence under SMCR requires Senior Managers to demonstrate positive action: that they identified a risk, escalated it, challenged management on it, and followed up. A NED who raised a concern at a board meeting but did not follow up has a weaker defence than one who can evidence a documented escalation chain.

The NED and Chair position in 2026

Non-executive directors hold Senior Manager Functions (SMF9/SMF10/SMF12 depending on the firm type and committee role). This places them squarely within individual accountability. The question boards should be asking in 2026 is not “are we SMCR compliant?” but “could each of our Senior Managers demonstrate, in a regulatory interview, that they genuinely exercised the oversight their SoR describes?”

Specific pressure points for NEDs:

• Audit Committee Chairs (SMF11) — expected to demonstrate active oversight of financial reporting integrity, internal audit independence, and external auditor challenge. Cases where audit committees simply approved management’s accounting judgements without documented challenge are in scope.
• Risk Committee Chairs — expected to demonstrate that the board-level risk appetite was genuinely translated into operational limits, and that breaches were escalated and resolved.
• Remuneration Committee Chairs — expected to demonstrate that remuneration decisions considered risk outcomes, not just financial performance metrics.
• Chair of the Board (SMF9) — accountable for overall board effectiveness, including whether challenge is genuine and whether management information is of sufficient quality for the board to exercise oversight.

Senior Manager Functions: quick reference

What good SMCR governance looks like in 2026

The FCA’s supervisory expectations, distilled from inspection findings and enforcement outcomes, point to a consistent definition of “good”:

1. SoRs are specific, up to date, and reflect actual responsibilities (not aspirational descriptions)
2. Responsibilities Maps are consistent with SoRs and with how decisions are actually made
3. Board minutes evidence genuine challenge — not just approval
4. Certification cycle is completed annually with documented fitness assessments, not just sign-offs
5. Conduct Rule breaches are tracked, reported where required, and feed into HR processes
6. Senior Managers have a documented record of escalation and follow-up on material concerns
7. Management information given to the board is interrogated for quality and completeness — boards that passively receive MI are not exercising oversight