Emma RadmoreHM Treasury, the PRA and FCA have published updates on SMCR reform.
Treasury has published its response to its 2025 consultation on the reforms, which confirms that it will:
- remove the statutory requirements for certification, instead letting the PRA and FCA decide what is best and implement that through their rules;
- simplify the approval process for SMFs, including reducing the number of functions that will require pre-approval and again give power to the PRA and FCA to decide when it would be appropriate for firms to assess the fitness of would-be SMF holders and just notify them of the appointment once the firm was satisfied;
- reduce some of the administrative requirements that are currently set in legislation, including those on Statements of Responsibility, the statutory requirement to tell regulators of breaches of Conduct Rules and conduct mandatory training;
- give regulators the power to specify when they may accept SMF applications subject to time limits or conditions; and
- amend the FMI SMCR regime in line with the main changes.
Once these changes have been legislated for, the regulators can then consult on further rule changes.
The FCA and PRA issued separate, identical, press releases, confirming their intentions to now:
- from 24 April
- extend the 12 week rule so firms have more time to submit applications in cases of temporary or unexpected changes – firms must now merely apply within the 12 weeks, not have obtained approval within it;
- streamline annual fit and proper checks by allowing firms to incorporate the recertification into the annual appraisal cycle and confirm it by email;
- clarify what is meant by some SMFs, specifically the SMF7 and 18 function;
- give firms more time to report updates to senior manager responsibilities – now they will have 6 months to do this;
- increase how long criminal record checks are valid for, for the purposes of use in SMF applications – from 3 to 6 months;
- give firms more time to update the certified staff directory – up to 20 days from the current 7 (but 7 days will remain the limit for advising of departures); and
- clarify guidance on notification requirements, regulatory references without disciplinary action and application of Senior Manager Conduct Rules. Firms will be encouraged to provide references within 4 weeks of a request rather than 6, and the FCA has given guidance on what to disclose when an employee leaves before investigations into conduct have concluded;
- from 10 July
- removing the need for individuals to hold multiple overlapping functions – and the FCA will remove duplicate roles from the Directory to save firms from having to do so;
- raising many of the current thresholds that make firms “enhanced” SMCR firms by 30%, and to introduce a mechanism to increase them every 6 years in line with inflation;
- allowing SMF18s at solo-regulated firms to hold any Prescribed Responsibility.
- from 1 September, changes that align with the extension of the non-financial misconduct rules.
Both regulators have published the form of their new rules and, in the PRA’s case also a set of new supervisory statement, for each of banks, insurers and international banks.
In terms of further changes, the regulators plan to consult on these later in 2026, assuming the legislation to allow them to do so has been made.