Government and regulators consult on SMCR reforms

HM Treasury is consulting on SMCR reform. Specifically, it seeks views on:

• the removal of the Certification regime from the legislation that created the SMCR, something that was promised in the Mansion House speech in November 2024. The changes would remove from FSMA the need for firms to carry out fit and proper assessments on certification function staff, and the requirement on them to specify functions for certification. Removing this from legislation would allow more flexibility to the FCA and PRA in making changes to the SMCR regime, including giving them the ability to develop a more proportionate replacement for the Certification Regime;
• reducing the number of SMFs and removing the pre-approval requirement for some roles;
• taking away the prescriptive rules requiring updates to senior manager SoRs to be provided to the regulator within short time frames;
• whether it is disproportionate to mandate training on the Conduct Rules;
• any other burdensome elements of the legislation that could be removed without impacting on the primary objectives of the regime; and
• whether anything else could be done to attract international talent – HM Treasury thinks the reforms suggested will already help.

The FCA and PRA are in turn consulting on simplifying their rules governing the SMCR regime (some of it assuming the Treasury reforms happen). They propose to:

• In the first phase;
  • give more time and flexibility to firms when there is an unexpected or temporary change at senior manager level, or where they are reporting updates to Senior Manager responsibilities;
  • strip out duplication where individuals are certified for separate functions and give firms more time to update the Directory (if the certification regime remains at all);
  • give guidance to firms to make annual fit and proper assessments easier and to clarify what is comprised in certain SMF roles;
  • increase the validity period of criminal record checks for senior managers.
• In the second phase, depending on the outcome of the Treasury consultation:
  • reduce the number of SMFs and/or the need for pre-approvals;
  • expand the 12 week rule;
  • further streamline the assessment process;
  • simplify the PRs and the SoR and responsibilities map process;
  • replace the certification regime in a way that minimises burden while continuing to ensure fitness and propriety;
  • remove the Directory; and
  • streamline Conduct Rule breach reporting

Consultation closes on all papers on 7 October.