The FCA recently published Consultation Paper CP25/21, proposing significant reforms to the Senior Managers and Certification Regime (SM&CR). While the regime has been credited with raising standards across the financial services industry, the UK regulator now seeks to reduce the burden on firms, improve clarity, and enhance proportionality without compromising the regime’s core aspects.
The proposed changes are split into two phases: phase one focuses on initial practical improvements, while phase two will require further legislative input. Here’s our view on what the changes could mean in practice and how regulated firms might respond:
Phase One: Initial Practical Adjustments
This first phase focuses on efficiency, process improvements, and eliminating overlapping requirements, many of which respond directly to industry feedback.
Proposals include:
- Greater flexibility around the “12-week rule” for temporary senior management function (SMF) cover
- Extended validity for criminal record checks in SMF applications
- Streamlined certification processes and reduced certification role duplication
- Simplified SMF application procedures
- More time for directory and statements of responsibilities updates
- Updated guidance on regulatory references, prescribed responsibilities, and conduct rules
Phase Two: Strategic Shifts with Longer-Term Implications
The second phase signals a more fundamental rethink of the regime. Subject to further consultation with HM Treasury, this phase explores:
- Reducing the number of SMF roles requiring FCA approval.
- Simplifying SMF assessments using standardised documentation.
- Potentially replacing the Certification Regime with a more efficient alternative.
- Removing the directory while maintaining public access to key information.
- Streamlining Conduct Rule breach reporting.
While these proposals are still in development, they could significantly reshape how firms manage accountability and oversight.
Feedback
The FCA is inviting feedback on the proposals until 7 October 2025 via its consultation webpage.
Our Guidance
These reforms reflect the FCA’s broader shift toward outcomes-focused regulation. However, governance and individual accountability remain central to regulatory expectations.
Firms should begin assessing how these changes might impact their current SM&CR frameworks and prepare for implementation. Review internal processes for SMF applications and certification to identify where efficiencies can be gained:
- Assess how current governance documentation aligns with current and proposed updates. Maintaining effective governance arrangements is critical, regardless of the consultation outcome.
- Plan for greater flexibility in temporary SMF cover and changes to role assignments.
- Stay engaged with the consultation process. This is a rare opportunity to shape the future of regulatory accountability.
- Begin scenario planning for potential structural changes, such as the removal of the directory or a redesigned certification regime.
- Consider how to maintain high standards of conduct and oversight in a potentially lighter-touch regime.
Looking Ahead
As the regulatory landscape evolves, firms will need to balance agility with accountability. Engaging a trusted third party can provide valuable perspective, reduce internal strain, and help ensure your governance framework remains both compliant and commercially effective.
Take the Next Step
Navigating regulatory change can be complex—especially when balancing compliance with operational efficiency. At ACA, we help firms interpret regulatory developments, assess their impact, and implement proportionate, practical solutions. Whether you’re reviewing your SM&CR framework, updating governance documentation, or preparing a consultation response, our team is here to help.
Contact one of our experts today for a free consultation and find out how we can support your firm through the SM&CR reform.