The FCA and PRA’s overhaul of the Senior Managers and Certification Regime is already underway — Phase 1 changes took effect on 24 April 2026, with further reforms landing in July and September. UK financial services executives who have not yet reviewed their accountability frameworks and HR processes are behind the curve.

The SM&CR has governed individual accountability in UK financial services since 2016. A decade in, regulators have concluded the regime had grown unwieldy — too many overlapping certification requirements, slow approval processes, and thresholds that no longer reflected market realities. The 2026 reforms aim to fix this without dismantling the core principle: that senior leaders are personally accountable for what happens on their watch.

What Has Already Changed — and What’s Coming Next?

The first tranche of Phase 1 changes, effective from 24 April 2026, are operational rather than structural. Criminal records checks for Senior Management Function (SMF) candidates are now valid for six months rather than three, and are no longer required for internal or intragroup moves where the individual is already an approved SMF holder. Regulatory references must be provided within four weeks, down from six — a change designed to reduce the delays that often stalled senior appointments at the final stage.

The more substantive Phase 1 changes arrive on 10 July 2026. The financial thresholds that trigger “enhanced scope” firm status will increase by approximately 30%, with a built-in mechanism to adjust for inflation every five years. This means a meaningful number of firms currently classified as enhanced scope will step down to core scope — reducing the volume of SMF pre-approvals they must obtain. Additionally, the same individuals will no longer be required to hold certifications for multiple overlapping functions — a longstanding operational irritant for HR and compliance teams.

From 1 September 2026, changes aligning with the FCA’s updated policy on non-financial misconduct take effect. Boards and HR leads should pay particular attention here: the FCA has made clear that serious non-financial misconduct — including harassment and discrimination — is now explicitly within scope of fitness and propriety assessments.

Executive Action:

• Audit your current enhanced scope classification against the new 30% elevated thresholds — if you sit close to the boundary, reassess before July 10.
• Update criminal records check validity tracking systems to reflect the extended 6-month window.
• Brief your General Counsel and CHRO on the September non-financial misconduct changes — fitness and propriety assessments now require broader behavioural evidence.

Why Is Individual Accountability Still the Core Issue?

The reforms reduce friction, but they do not dilute the fundamental premise of SM&CR: that a named senior manager is personally responsible for each area of a regulated firm’s activities. That principle remains intact — and if anything, recent enforcement action has reinforced it. According to FCA data, enforcement cases involving senior manager accountability have continued to rise year-on-year, even as the regulator has sought to streamline the regime’s administrative requirements.

The distinction matters for executives who might interpret “reform” as “relaxation.” The FCA has been explicit: the goal is to remove unnecessary burden, not to create gaps in accountability coverage. Statements of Responsibility and Responsibilities Maps remain in place. The prescribed responsibilities framework is unchanged. What shifts is the process — not the principle.

Research by Travers Smith published in April 2026 noted that firms most at risk under the reformed regime are those that have allowed their SM&CR documentation to become stale — Statements of Responsibility that no longer reflect actual governance arrangements, or Responsibilities Maps that haven’t kept pace with structural changes since a firm’s last regulatory review. The reform cycle is an opportune moment to close those gaps.

Executive Action:

• Conduct a gap review of your Statements of Responsibility against actual governance structures — particularly if you have made senior hires, restructured teams, or expanded into new business lines in the past 18 months.
• Don’t treat the Phase 1 simplifications as a reason to defer SM&CR housekeeping — use the refresh cycle to get documentation current.
• Ensure Responsibilities Maps are board-reviewed, not just compliance-maintained.

What Does Phase 2 Mean for CEOs and CHROs?

HM Treasury’s consultation response, published in April 2026, confirmed that Phase 2 reforms — requiring primary legislation — will include removing the Certification Regime from FSMA and placing it within the regulators’ rulebooks instead. The intent is to give the FCA and PRA flexibility to calibrate requirements more precisely by firm type and activity, rather than applying a single statutory framework to a market that has diversified enormously since SM&CR was introduced.

For CEOs and CHROs, the practical implication is that the population of certified individuals — and the certification standards applied to them — may shift once Phase 2 is implemented. The FCA has signalled an intention to reduce overlapping certification requirements further, and to allow firms more latitude in how they assess fitness and propriety for roles that do not directly interact with retail clients or critical functions.

The FCA and PRA expect to consult on Phase 2 rules later in 2026. Firms would be wise to engage in that consultation process rather than wait for final rules — the firms that shaped Phase 1 outcomes through proactive engagement with Treasury’s earlier consultation are better positioned for what comes next.

Executive Action:

• Assign a senior sponsor (typically the CHRO or Chief Compliance Officer) to monitor Phase 2 consultation timelines and prepare a response position.
• Model the potential impact of a reduced certified population on your HR and training infrastructure — early planning avoids a reactive scramble when final rules land.
• Brief the NED responsible for remuneration and governance on Phase 2 direction of travel — board-level awareness is increasingly expected by the FCA in supervisory assessments.

How Should Regulated Firms Approach the Rest of 2026?

The cadence of change in 2026 — April, July, September, and then Phase 2 consultation — means SM&CR is not a one-and-done project this year. Firms that manage it as a series of point-in-time compliance exercises will struggle. Those that treat it as a live governance discipline — embedded in board reporting, senior hire processes, and HR policy reviews — will find the transitions manageable.

The FCA’s broader regulatory direction in 2026 is worth holding in mind alongside SMCR. The regulator is streamlining its supervisory approach, replacing sector-wide “Dear CEO” letters with annual market reports and focusing intensive oversight on firms that present the most consumer or market integrity risk. For well-governed firms, this represents a lighter supervisory touch — but it also means there is less external prompting to keep SM&CR documentation current. The discipline has to come from within.

INFORMD has been tracking the SMCR reform cycle since HM Treasury’s initial consultation — and will continue to surface the regulatory developments that matter to UK financial services executives as Phase 2 progresses. Staying across this regime is not optional for anyone in a Senior Management Function.

Executive Action:

• Build a single SM&CR reform calendar for 2026 — April, July, September, and Phase 2 consultation — and assign ownership of each milestone at ExCo level.
• Review your firm’s SM&CR governance framework against the FCA’s updated supervisory expectations — the annual market report approach means less forewarning before supervisory engagement.
• Use the 2026 reform cycle as a prompt for a board-level discussion on individual accountability culture, not just documentation compliance.

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Frequently Asked Questions

When do the SMCR Phase 1 changes take effect in 2026?

The first set of Phase 1 changes took effect on 24 April 2026, covering criminal records check validity and regulatory reference timelines. A second tranche applies from 10 July 2026, including the revised enhanced scope financial thresholds and changes to overlapping certifications. Non-financial misconduct alignment changes apply from 1 September 2026.

Does the SMCR reform reduce personal accountability for senior managers?

No. The reforms are focused on reducing administrative burden and improving process efficiency — not on diluting individual accountability. Statements of Responsibility, Responsibilities Maps, and the core prescribed responsibilities framework remain unchanged. Senior managers retain full personal accountability for their designated areas.

What is changing for enhanced scope firms under SMCR 2026?

From 10 July 2026, the financial thresholds that determine enhanced scope status increase by approximately 30%. Firms close to the current boundary may move to core scope, reducing the number of SMF roles requiring pre-approval from the FCA or PRA. A five-yearly inflation adjustment mechanism is also being introduced to prevent thresholds becoming outdated again over time.

What should CHROs do to prepare for SMCR Phase 2?

Phase 2 reforms — including removing the Certification Regime from primary legislation — will require new FCA and PRA rules, which are expected to be consulted on later in 2026. CHROs should monitor the FCA’s consultation timeline, model potential changes to the certified population, and ensure their firm engages in the consultation process. Early engagement tends to produce better outcomes than reactive implementation of final rules.