UK regulators and HM Treasury announce reforms to the Senior Managers and Certification Regime

On 22 April 2026, the Financial Conduct Authority (FCA) published a policy statement (PS26/6) setting out changes to the Senior Managers and Certification Regime (SM&CR). These reforms have been developed jointly with the Prudential Regulation Authority (PRA), which has also published a policy statement (PS12/26) setting out changes that will affect dual-regulated firms. Both policy statements have been published following a consultation process initiated by the FCA and the PRA in July 2025 (and discussed in an earlier blog post). The purpose of the changes, which largely reflect the position set out in the consultation papers, is to increase the efficiency and effectiveness of the SM&CR rules and reduce unnecessary regulatory and compliance burden.      

The policy statements contain a number of initial targeted changes, referred to as Phase 1 reforms. As they can be implemented without the need for legislation, most of the Phase 1 changes have been implemented with effect from 24 April 2026, although some have been deferred until later in the summer. 

Also on 22 April 2026, HM Treasury issued a consultation response, setting out its proposals for the second stage of intended SM&CR reforms, known as Phase 2. Unlike the Phase 1 changes, the implementation of Phase 2 reforms will require further legislation. 

What changes have come into effect on 24 April 2026?

These changes provide some further flexibility to firms but focus on specific aspects of the regime and will not significantly lighten the overall SM&CR burden. 

The changes include the following:

Submission of senior manager applications

Firms now have more time to submit a senior manager application where there has been an unexpected or temporary change. Until now, firms have had 12 weeks for the application to be submitted and for approval to be obtained. Going forward, it will only be necessary to submit the relevant application within the 12-week period. Candidates are permitted to perform the relevant senior manager role until a determination has been made and will be subject to senior manager Conduct Rules during this time. Breaches of these rules will need to be reported to the FCA as soon as practicable (rather than annually).

Streamlining annual checks to certify individuals as “fit and proper”

The process for certification has been simplified in various respects. There will no longer be a requirement for a paper-based certificate – although certification must be in writing, there is no need for a physical document (for example, an email will now be sufficient). The re-certification process can be built into existing appraisal reviews. The process can be conducted proportionately when there are no changes from the previous year: this means that it can be less detailed than for a new certification employee.    

Prescribed responsibilities

Further guidance is now provided on the allocation of prescribed responsibilities. This includes guidance on when it is appropriate for prescribed responsibilities to be split as well as on the allocation of prescribed senior management responsibilities (with further changes relating to the allocation of responsibilities to SMF18s in a solo-regulated firm being implemented in July 2026, as described below). A number of these additional flexibilities may be superseded by the proposed Phase 2 reforms described below.     

Guidance on senior manager functions

Both the FCA and the PRA have provided further guidance on when someone may be performing the SMF7 (group entity senior manager) role. The PRA has extended this role to controllers with significant influence over the day-to-day management of a PRA-authorised firm (but has confirmed that its intention is not otherwise to extend the scope of SMF7). 

Further guidance has also been provided by the FCA on what a firm should consider when determining if the SMF18 (other overall responsibility) function applies. The FCA has not followed through on its suggestion that SMF18 holders should have “equal status” to executive directors but has reiterated its expectation that the individual holding the SMF18 function should be the most senior individual reporting into the governing body.     

More time to report updates to senior management responsibilities

Firms (whether solo or dual-regulated) will have 6 months to report changes to statements of responsibilities and management responsibilities maps rather than having to do so whenever changes take place. Firms only need to submit a single updated version, showing all changes within the six-month period rather than submitting a separate version for each change. 

Increased flexibility for criminal record checks

Criminal record checks for senior manager applicants will now be valid for longer (increasing from 3 months to 6 months). There is also a relaxation from the requirement for a criminal record check if an existing senior manager is moving to another senior manager role within the same firm or group. Note that updated forms will not be published until 10 July 2026, so the existing forms will need to continue to be used until then. 

Responding to requests for regulatory references

Firms must now deal with a request for a regulatory reference within 4 weeks (reduced from 6 weeks). The purpose of this change is to seek to speed up the approval process.

The FCA has also provided additional guidance on what should be included in a reference where a firm believes that the employee has committed misconduct but leaves the firm before an investigation has been completed. The firm will need to consider the seriousness of the misconduct, the grounds for the firm’s belief, SYSC duties of fairness and other legal considerations (such as privacy and employment law rules). A firm should not include information about suspected misconduct unless it has taken sufficient steps to verify the information, but the fact that employee leaves prior to completion of the investigation does not necessarily mean that the suspected misconduct should be excluded (for example, because the investigation is completed subsequently or because it has sufficiently advanced to allow the firm to conclude that misconduct has taken place).   

It is also confirmed that there is no need to refer to a breach of Conduct Rules in a regulatory reference where the firm providing the reference reasonably considers that the breach is not relevant to fitness and propriety and disciplinary action has not been taken against the individual. 

More time to update the directory of certified and assessed persons 

The directory of certified and assessed persons lists certified staff. In most cases (for example, where an individual commences a certification function or there is a change to existing information), firms will now have 20 business days to update the directory. However, the requirement to update the directory for leavers within 7 working days remains in place. 

Reporting Conduct Rule breaches

Further clarification has been provided regarding the relationship between Conduct Rules and disciplinary processes, including when a breach needs to be reported. SUP 15.11 reaffirms that only breaches that lead to disciplinary action will need to be reported to the FCA as a breach of Conduct Rules (unless a separate notification obligation arises, for example under Principle 11 or SUP 15.3). 

Further clarification is also provided regarding when cases involving a suspension or reduction in remuneration need to be reported. Suspension by itself is not notifiable when the reason for the suspension is not a breach of the Conduct Rules but instead because there is a need to investigate whether misconduct has taken place (even if the misconduct under investigation would be a breach of the Conduct Rules). Likewise, SUP 15.11 confirms that there is no need to notify the FCA whenever there is a reduction or recovery of remuneration (for example, as the result of the application of malus or clawback) where there has been no breach of the Conduct Rules and no personal culpability on the part of the individual.   

What changes come into effect on 10 July 2026?    

A second set of Phase 1 reforms, improving regulatory reporting and processes, will come into effect on 10 July 2026. These include the following changes:

Only larger, more complex firms will need to meet enhanced standards

A firm categorised as an Enhanced SM&CR firm is subject to additional requirements (including the need for more roles to be approved as senior manager roles and requirements relating to responsibilities maps). Many of the financial thresholds above which a firm will become an enhanced scope firm will be increased by approximately 30%. A further mechanism will be introduced to enable the thresholds to be further adjusted every 5 years for inflation.   

Removal of the need to certify people to hold multiple overlapping functions

To streamline the burden on firms, the same individuals will not be required to be certified to perform multiple functions. An example of where this is currently the case is where an individual working for a dual-regulated firm is an FCA material risk-taker and also certified by the PRA in one of its certification functions at the same firm. It is expected that this will reduce the total number of certification roles required by around 15%. The duplicate roles will be removed from the directory.

SMF18 holders can be allocated any prescribed responsibilities 

The restriction on SMF18s in solo-regulated firms from having certain prescribed responsibilities will be withdrawn. 

What changes come into effect on 1 September 2026

Changes made to align with the FCA's policy statement on non-financial misconduct (PS25/23) will apply from 1 September 2026. Our earlier blog post summarises these changes.

Phase 2 reforms

HM Treasury’s consultation response, published on 22 April 2026, supports a further phase of changes, following its consultation in 2025. The changes would be more significant than the Phase 1 adjustments described above and would require implementing legislation. 

HM Treasury has indicated that the following principal changes will be made as part of the Phase 2 reforms:  

• Removing the Certification Regime from primary legislation, including the annual recertification requirement. Requirements relating to the certification process would instead be contained in the regulators’ rulebooks, the intention being that this would enable a more proportionate and flexible framework. It is difficult at this stage to judge how much more flexible such a framework might be as the regulators have not yet given any indication of what the rules might look like.
• Reducing the number of senior management functions that require regulator pre-approval.  Although this suggests a more flexible approach, further detail is awaited. Regulators would also be given a new power to specify circumstances where it would be suitable for a firm to notify the regulators of the appointment of a senior manager following the firm’s assessment of fitness and propriety.
• Repealing the prescriptive legislative provisions relating to statements of responsibilities, enabling regulators to consider appropriate requirements in their rulebooks. Again, further detail is awaited.
• Streamlining Conduct Rules by repealing the prescriptive legislative requirements on firms to notify regulators of breaches and to conduct mandatory training, while retaining the regulators’ power to make Conduct Rules and set out appropriate requirements in their rulebooks.
• Giving regulators the power to specify in rules and guidance the circumstances in which they may accept senior manager applications subject to time limits or conditions, approval of which would not trigger statutory notice requirements.
• Amending the Financial Markets Infrastructure SM&CR regime legislated for in FSMA 2023 in relation to central counterparties, central securities depositories and recognised investment exchanges to ensure it is consistent with the wider SM&CR changes described above once they are brought into force.  

The government intends to introduce legislation to effect Phase 2 reforms as soon as parliamentary time allows. Assuming the changes proposed by HM Treasury proceed, the FCA and PRA expect to consult on a second phase of broader reforms later in 2026. The regulators may also consider additional reforms to the regime, including those not dependent on legislative amendments, to further improve efficiency and reduce regulatory burden. The details of the regulators’ proposed approaches will be set out separately in their consultations.  

However, until we see those consultations, and have a clearer idea of what the regulators are proposing in place of the current rules, it is difficult to judge how extensive or effective any Phase 2 reforms will be. Although the overall approach signalled by the consultation paper is likely to be welcomed by many, we still need to see the detail of what the regulators are proposing.   

For more information on this topic, please speak to the authors of this blog post or your usual Freshfields contact.