The FCA and PRA’s first wave of Senior Managers and Certification Regime reforms took effect on 24 April 2026 — and the consequences extend well beyond the headline administrative simplifications. For senior managers, HR directors, and General Counsel at UK-regulated firms, this is not a procedural update to process quietly. It marks the start of a structural overhaul of how individual accountability is defined, evidenced, and enforced across UK financial services.

INFORMD has been tracking SM&CR reform since the joint FCA, PRA, and HM Treasury consultation launched in 2023. What follows is the briefing your compliance team should already be working through — and the questions your board needs to answer before Phase 2 arrives.

What Has Actually Changed Under SM&CR Phase 1 — and Who Is Affected?

On 22 April 2026, the FCA published Policy Statement PS26/6, with the PRA’s complementary PS12/26 issued the same day. Most Phase 1 changes took legal effect 48 hours later on 24 April. The FCA and PRA’s stated ambition is to reduce the overall administrative burden of the SM&CR by 50% while preserving the core principle of individual accountability that underpins the UK’s regulatory framework.

The key operational changes are targeted but substantive. Criminal records checks now carry a six-month validity window, extended from three months — removing a friction point for firms making multiple senior appointments in short succession. Firms can now submit updated Statements of Responsibilities in bulk, periodically, rather than individually after each change. The 12-week rule for unexpected senior management changes has also been clarified: firms must submit the application within the 12-week window, not have it approved within it, giving compliance teams a more workable deadline.

The FCA has additionally confirmed it will eliminate the requirement for individuals to hold multiple overlapping certification functions — a change estimated to reduce the total number of certification roles across the sector by approximately 15%. Separately, enhanced firm thresholds have been raised by 30%, which may shift some firms’ regulatory categorisation and the obligations that follow from it.

From 1 September 2026, non-financial misconduct — specifically bullying, harassment, and violence — formally enters the SM&CR Code of Conduct for all FCA-regulated firms. This is enforceable rule, not guidance.

Executive Action:

• Review your current Statements of Responsibilities against the April 2026 changes and establish a schedule for your first bulk submission cycle.
• Identify all individuals holding overlapping certification functions — the 15% reduction in roles requires deliberate governance, not passive deletion from a register.
• Confirm HR and compliance leads have updated training frameworks and disciplinary procedures to reflect the September 2026 Code of Conduct extension on non-financial misconduct.

Why Is the Certification Regime Being Restructured — and What Problem Does This Solve?

The Certification Regime, introduced in 2016, required firms to certify annually that individuals in “certification functions” — roles with significant harm potential if performed without fitness and propriety — were genuinely fit to hold those positions. In practice, it generated duplicative effort, boundary uncertainty, and burden disproportionate to actual risk. According to the FCA’s own figures, approximately 150,000 individuals are currently subject to certification across the UK financial sector.

The Phase 2 reforms, for which HM Treasury has now confirmed legislative intent, will remove the Certification Regime from the Financial Services and Markets Act 2000 entirely. This gives the FCA and PRA the authority to design a replacement framework in their own rulebooks — one that can be updated without primary legislation and calibrated to actual risk profiles. The goal is not weaker individual accountability. It is accountability that is proportionate, consistently applied, and credibly enforced.

For boards and remuneration committees, the distinction matters: Phase 1 reduces administrative friction while Phase 2 will alter the structural architecture of how senior accountability is documented and regulated. Conflating the two creates planning risk for firms that need to model the impact on their SMF structures.

Executive Action:

• Brief your board risk and remuneration committees on the Phase 1 vs Phase 2 distinction — early clarity prevents scope confusion when Phase 2 consultation is published.
• Do not wait for Phase 2 legislation before auditing certification lists for accuracy — the FCA expects firms to act on Phase 1 changes immediately.
• If your firm is near the boundary of enhanced status, assess whether the 30% threshold increase changes your categorisation and what obligations would fall away or be added as a result.

What Should HR and General Counsel Be Doing Right Now?

SMCR reform is being driven at the regulatory level but landed inside HR, legal, and compliance functions. The September 2026 extension of the Code of Conduct to cover bullying, harassment, and violence is particularly significant: it creates a direct link between workplace conduct findings and regulatory fitness determinations. How your firm investigates, documents, and resolves misconduct at senior levels will increasingly be a matter of regulatory record, not just employment law.

Research from the Chartered Institute of Personnel and Development indicates that fewer than a third of UK-regulated firms had conducted a formal SMCR readiness audit in the twelve months to March 2026. That gap is a governance exposure. Firms that are caught with inaccurate certification registers, outdated Statements of Responsibilities, or under-prepared conduct frameworks will face enforcement risk that Phase 1 simplifications do nothing to reduce.

For CHROs specifically, the overlap between HR process and regulatory obligation is becoming harder to manage without cross-functional governance. Employment contracts that reference specific certification functions, performance frameworks built around SM&CR role descriptions, and disciplinary procedures touching Code of Conduct violations all require review against the April 2026 changes and the September deadline.

Executive Action:

• Commission a formal SMCR readiness audit if your firm has not completed one since April 2026 — prioritise certification list accuracy, conduct framework alignment, and contract references to superseded regulatory requirements.
• Ensure HR investigative processes for senior misconduct are documented, consistent, and capable of withstanding FCA scrutiny — particularly for bullying and harassment cases from 1 September 2026 onward.
• Establish a board-level owner for SMCR reform readiness rather than treating it as a compliance project to be managed below executive level.

How Should Boards Prepare for Phase 2 Reform Before the Consultation Lands?

The FCA and PRA have indicated they expect to consult on Phase 2 rule changes before the end of 2026. HM Treasury’s legislative changes — removing the Certification Regime from FSMA 2000 — will require parliamentary time, and most analysts expect Phase 2 rules to take effect in 2027 at the earliest. But the direction of reform is already clear enough to plan against.

Phase 2 will reduce the number of SMFs requiring full regulatory pre-approval, replacing some with notification-only status. It will remove statutory requirements around Statements of Responsibility, replacing them with regulator-designed rules. And it will give the FCA and PRA discretion to create a more granular, risk-proportionate successor to the Certification Regime. For enhanced-status firms — those with significant assets or complex group structures — this may mean restructuring existing SMF assignments and accountability maps.

The firms best positioned for Phase 2 will be those that have used Phase 1 to build accurate baselines: clean certification registers, clear SMF documentation, and conduct frameworks that are already aligned with FCA expectations. Firms that treat the current reforms as an administrative exercise rather than a strategic opportunity will face compressed timelines and higher remediation costs when Phase 2 rules arrive.

Executive Action:

• Map current SMF allocations against the expected Phase 2 shift toward notification-only status — identify which roles are likely candidates and model the governance implications.
• Calendar the FCA’s Phase 2 consultation, expected in H2 2026, and ensure board-level review is planned within 30 days of publication.
• Use Phase 1 implementation as a forcing function to build a clean, audited baseline of all SM&CR obligations — this will materially reduce Phase 2 transition costs.

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Frequently Asked Questions

Who does the SM&CR apply to?

The SM&CR applies to all firms authorised by the FCA, and to PRA-regulated firms including banks, building societies, and insurers. The regime is structured in tiers — core, limited, and enhanced — based on each firm’s size, complexity, and systemic importance. The April 2026 Phase 1 changes apply across all tiers, though the impact of enhanced-firm threshold adjustments is most significant for firms near the boundary between standard and enhanced status.

What is the difference between a Senior Management Function and a Certification Function?

Senior Management Functions (SMFs) are roles that require pre-approval from the FCA and/or PRA before an individual can perform them. Certification Functions are roles the firm itself must certify as fit and proper on an annual basis — they do not require regulatory pre-approval. Under Phase 2 reform, the boundary between these categories will be redrawn, with some pre-approval requirements expected to move to notification-only status.

Does SM&CR reform reduce enforcement risk for firms or individuals?

No. The April 2026 reforms reduce administrative burden, not accountability standards. Non-compliance with SM&CR obligations — including inaccurate certification registers, incorrect Statements of Responsibilities, or conduct framework failures — can still result in FCA enforcement action against both the firm and the responsible senior manager, including financial penalties, public censure, and prohibition from regulated activities. The September 2026 inclusion of bullying and harassment in the Code of Conduct actively extends the scope of enforceable individual conduct obligations.

When will Phase 2 SM&CR rules take effect?

The FCA and PRA expect to consult on Phase 2 rule changes before the end of 2026. HM Treasury’s legislative changes — removing the Certification Regime from the Financial Services and Markets Act 2000 — will require parliamentary time. Firms should plan for Phase 2 rules to take practical effect no earlier than 2027, but should begin scenario planning now based on the confirmed legislative direction. Waiting for final rules before initiating internal review will leave insufficient time to restructure SMF allocations and certification frameworks at scale.

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