The Financial Conduct Authority (FCA) has published its second-phase consultation on the Senior Managers & Certification Regime (SM&CR), outlining what could be the most sweeping changes to the framework since it was introduced.
According to compliance consultancy ACA Group, CP26/37 would scrap the Certification Regime and Directory, reduce the number of roles needing FCA approval, streamline responsibility records and overhaul how Conduct Rules training and breaches are handled.
The regulator also plans to simplify senior management function (SMF) applications and notifications, move Approved Persons forms out of the Handbook and remove a range of supporting-document and duplicate reporting obligations.
Crucially, this is not a retreat from individual accountability. Instead, the FCA is moving away from prescribed regulatory processes and placing greater reliance on firms’ own governance, competence and record-keeping arrangements.
Fewer routine submissions may follow, but firms will need sharper judgement on how responsibilities are allocated, how fitness and propriety is assessed and how conduct standards are upheld.
For dual-regulated and Enhanced firms, SMF5 and SMF10 to 15 would become notified rather than approved functions. Firms would carry out their own checks and inform the FCA, cutting lead times but placing more weight on internal appointment processes. These individuals would still be subject to the Duty of Responsibility and the Senior Manager Conduct Rules. The FCA-only SMF18 and SMF22 functions would be removed, while solo-regulated firms would need to reassess SMF7 holders against a new two-limb test.
Enhanced regime thresholds would also rise. Consumer credit lenders would move from £130m to £200m revenue, asset managers from £65bn to £100bn AUM, and intermediaries from £45m to £75m revenue, meaning some firms could exit the Enhanced category altogether. The temporary cover window would extend from 12 to 18 weeks.
Firms would no longer need to submit updated Statements of Responsibilities and Management Responsibilities Maps whenever responsibilities change, though they must keep current records and retain older versions for six years, or 10 years for certain dual-regulated firms. Nine Prescribed Responsibilities would be removed.
Ending certification would eliminate a heavy annual process, but competence and suitability obligations would remain under SYSC and related rules. Conduct Rules training would be replaced by a duty to notify staff of applicable rules, and for non-SMF staff only final written warnings or dismissals would be reportable.
The proposals are not yet in force, so firms should continue applying the current regime. Responses are due by 22 January 2027, with final rules expected in the first half of 2027 and implementation around six months later.
The bigger question for compliance, HR, risk and operations leaders is which existing controls genuinely deliver accountability and which survive only because a process demanded them.
Read the full ACA Group post here.
Copyright © 2026 RegTech Analyst
Copyright © 2026 RegTech Analyst
