The UK may be about to gut one of its most significant post-crisis financial reforms. In a joint move that could reshape how accountability is handled in financial services, HM Treasury (HMT) and the Financial Conduct Authority (FCA) have launched consultations that propose scrapping core elements of SM&CR—including the entire Certification Regime.
What’s being proposed?
HM Treasury wants to cut the regulatory burden of SM&CR by half through the following measures:
- Removing the Certification Regime entirely from legislation (FSMA)
- Scrapping pre-approval for some Senior Management Functions (SMFs)
- Eliminating some SMF roles altogether
- Simplifying Statements of Responsibilities and offering firms more flexibility
These are not tweaks—they are foundational changes that would require legislative amendment to FSMA 2000.
The FCA’s response: two-phased reform
The FCA has published a 131-page consultation paper (CP25/21) that mirrors this reform but takes a more phased, cautious approach:
- Phase 1: Streamline the existing Certification Regime by reducing overlap, cutting red tape, and offering clearer guidance for annual fitness and propriety assessments.
- Phase 2: Explore a new, lighter-touch regime to replace Certification—one that still ensures individuals are fit and proper but is “less complex and burdensome.”
Importantly, Phase 2 won’t begin until HMT’s consultation concludes and legislative changes are confirmed. So, in practice, the FCA is not yet committing to a total removal of Certification—it’s waiting on Parliament.
What does this mean for compliance professionals?
The proposals have sparked concern and confusion. Here are some questions being raised, and answers based on what we know so far.
- Is individual accountability being watered down?
Removing Certification and some SMF approvals seems to point in that direction. The Certification Regime was designed to ensure accountability beyond the boardroom, applying standards to middle managers and risk-facing staff. Scrapping it could undermine that. - What replaces Certification?
That’s unclear. The FCA’s Phase 2 proposes a streamlined replacement, but details are thin—and it won’t move forward unless HMT pushes ahead with legislative change. - What happens to the public register?
No official word yet, but concerns are growing. Without Certification, consumers may lose a way to check whether individuals are authorised or fit to provide financial advice—a key fraud prevention tool.
Will simplification come at a cost?
For compliance teams, some of the proposed reforms will be welcome. Easing documentation requirements and speeding up approvals could help firms focus on actual risk management, rather than procedural box-ticking. This is particularly relevant with incoming rules on non-financial misconduct, which already require significant internal policy overhauls.
But simplification must not dilute accountability. If fewer SMF roles are required, those that remain may find themselves carrying more weight—particularly as the FCA now expects non-financial misconduct (e.g. bullying or harassment) to be treated as seriously as financial crime. The result? Fewer certified individuals with more risk, more scrutiny, and potentially more liability.
And that liability is increasing. The forthcoming Crime and Policing Bill may expand criminal exposure for senior managers. In that context, faster approvals and fewer formal checks could open firms—and individuals—up to significant regulatory or legal risk.
How is the industry reacting to the proposed rollback?
Reactions have ranged from confusion to cynicism. While some welcome the potential for reduced admin and quicker SMF approvals, others worry this could signal a return to the pre-crisis regulatory light-touch model.
The concern is clear: without Certification, how will firms ensure rigorous internal checks? Will the public still be able to verify who is authorised via the Financial Services Register? Could these reforms be a return to light-touch regulation, just as the risk landscape intensifies?
What’s the bottom line?
Yes, efficiency is good. But it can’t come at the expense of rigour. SMCR was introduced in the wake of the 2008 financial crisis to embed personal accountability at every level of financial services. These proposed reforms could mark a step back—just as the risk landscape is becoming more complex and the regulatory bar is being raised on issues like non-financial misconduct.
With rising expectations around culture, misconduct, and individual liability, firms should treat these reforms as an opportunity to modernise their accountability frameworks—not dilute them. The FCA and HMT must ensure that any changes to SM&CR genuinely support high-integrity governance. Otherwise, they risk leaving fewer people accountable for far more risk.
