The Financial Conduct Authority’s Policy Statement PS26/6 confirms the first wave of reforms to the UK’s Senior Managers and Certification Regime (SMCR). The aim of these Phase 1 reforms is to make SMCR more proportionate while preserving the core principle of individual accountability.
SMCR was introduced to embed personal responsibility at senior levels following the 2008 financial crisis. The FCA and PRA assessed that some parts of the framework have become overly administrative, with limited additional value in terms of conduct or governance outcomes. While the Phase 1 reforms do not alter the core architecture of SMCR, they will affect several day-to-day compliance processes and are part of a broader wave of coming reforms.
The government have also announced that further Phase 2 changes will be introduced in the forthcoming Financial Services Bill expected to be announced in the King’s Speech on 13 May 2026. This will likely remove SMRC from the Financial Services and Markets Act and enable more changes via regulation front he FCA and PRA.
Changes from 24 April 2026
From 24 April, most of the practical changes to SMCR come into force. These are aimed at making the regime easier to operate day to day, without changing the core principle that senior managers remain accountable.
One significant change is in criminal record checks. Firms can now rely on checks for up to six months instead of three, and they no longer need to repeat them for internal moves or transfers within a group.
Firms now have 12 weeks to submit an application for a senior management function, rather than needing approval within that period. The individual can stay in the role while the regulator reviews the application. This gives firms more breathing space when dealing with departures or temporary cover, while still keeping the individual within the scope of the Conduct Rules. Firms should also note that individuals performing a senior management function under the 12-week rule are subject to the Senior Manager Conduct Rules, and any breaches must be reported to the regulator promptly.
Alongside this, the FCA has tightened up its guidance on certain Senior Management Functions, particularly SMF7 (group entity senior manager) and SMF18 (other overall responsibility). These roles have historically created uncertainty, with some firms taking a cautious approach and submitting applications that may not have been strictly necessary.
The updated guidance is intended to draw clearer lines around when these functions apply. For SMF7, the aim is to reduce the number of individuals in group structures who are inadvertently captured. For SMF18, the focus is on identifying the most senior individual responsible for a given business area, without forcing firms into overly rigid interpretations of hierarchy.
The practical effect should be fewer approvals being required for borderline roles and less over-classification of individuals as senior managers. That said, the core principle remains unchanged. Where an individual genuinely holds overall responsibility for a business area, the expectation is still that they sit clearly within the SMCR framework and can be held accountable.
There is also a shift in how firms handle Statements of Responsibilities and management responsibility maps. Instead of reporting every change as it happens, firms can now submit updates every six months. If there have been multiple changes, only the latest version needs to be provided. While it reduces the need for more frequent updates, it does mean firms need strong internal controls to keep records accurate between submissions.
Firms are also given more time to update the FCA Directory of certified and assessed persons. Most updates can now be made within 20 business days rather than 7, easing operational pressure while still requiring prompt reporting of key changes such as departures.
However for regulatory references, firms are now expected to provide them within four weeks rather than six. There is also a sharper focus on notification obligations under the Conduct Rules. Senior managers are expected to ensure that issues which should be reported to the regulator are identified and escalated internally. If they fail to take reasonable steps to make that happen, that failure may be treated as a breach of the Senior Manager Conduct Rules.
Changes from 10 July 2026
From July 2026, the financial thresholds that determine whether a firm is classified as an “enhanced” SMCR firm are increasing by around 30%, broadly reflecting inflation, with a mechanism to review and update those thresholds periodically.
In practical terms, this means some firms that were previously caught by the enhanced regime will fall back into the core category. Enhanced firms are subject to more detailed requirements, including full management responsibilities maps, more granular allocation of prescribed responsibilities, and a higher level of regulatory scrutiny. Moving out of that category reduces the volume and complexity of those obligations. This means that some smaller or less complex firms may still sit within the scope of SMCR, but the regime is being applied in a more proportionate way.
From 10 July, further changes reduce duplication within the Certification Regime. Firms will no longer need to certify individuals multiple times for overlapping roles, which should reduce the overall number of certification positions.
There is also a useful change to how prescribed responsibilities can be allocated. SMF18 holders at solo-regulated firms will be able to take on any prescribed responsibility, removing previous restrictions on how these roles could be assigned. In practice, this gives firms more flexibility to align responsibilities with how the business is actually run, rather than forcing allocations to fit within rigid role definitions. It is a small change on paper, though it supports the broader aim of applying SMCR in a more proportionate and practical way.
Taken together, these July changes reinforce the FCA’s move toward a more proportionate regime that focuses detailed requirements on firms where the risk is greatest.
Changes from 1 September 2026: Non-financial misconduct
From 1 September 2026, SMCR is aligned with the FCA’s broader framework on non-financial misconduct. This means the FCA is treating non-financial misconduct as a potential indicator of regulatory risk, particularly where it calls into question an individual’s integrity, judgement, or ability to comply with standards.
That does not mean every instance of poor behaviour becomes a regulatory matter. The key concept introduced by the FCA is “material risk”. Conduct, including outside the workplace, is only relevant where it creates a real and credible risk that the individual may breach regulatory standards. It cannot be remote, speculative, or based on gossip.
This is an important boundary as it gives firms permission not to pursue trivial or purely private matters. At the same time, the rules remove any ambiguity where behaviour does point to a genuine risk. In those cases, firms are expected to act, investigate where appropriate, and consider regulatory implications.
In practice, this reframes how firms assess fitness and propriety. The focus shifts away from abstract questions of personal morality and towards evidence, patterns, and impact. A single incident may not be enough. Repeated behaviour, or conduct that would clearly breach standards if it occurred at work, is far more likely to be relevant.
Firms are not expected to investigate every allegation about an employee’s private life. The FCA is explicit that trivial claims, implausible allegations, or matters better handled by the police do not require a regulatory response. That said, where there is credible information pointing to misconduct that could affect regulatory standards, inaction is no longer defensible.
Social media is one area where firms will need to apply careful judgement. Lawful expression of personal views, even where controversial, does not in itself undermine fitness and propriety. The threshold is again whether there is a material risk. Threats, harassment, or behaviour suggesting a real risk of misconduct in the workplace are likely to cross that line.
For senior managers, the implications are sharper. The expectation to escalate and report issues now extends clearly to non-financial misconduct where it is material. There is also a stronger emphasis on self-reporting. If a senior manager is involved in conduct that could affect their fitness and propriety, delay or silence may itself create regulatory exposure.
From a compliance perspective, firms need clear frameworks for deciding when conduct crosses the regulatory threshold. That means aligning HR investigations, legal input, and compliance decision-making. It also means training managers to exercise judgement rather than escalate every issue by default, and requires clear training on what can constitute a breach
Phase 2 reforms: What’s coming next
The more significant shift will come through Phase 2, which depends on legislative changes proposed by HM Treasury, following its consultation response published alongside the FCA and PRA policy statements. The government has already indicated it intends to amend the statutory framework of SMCR so that fewer elements are fixed in primary legislation and more can be shaped by the regulators.
The government is expected to introduce a new Financial Services Bill in the King’s Speech on 13 May. While the detail of that Bill is not yet confirmed, it is expected to provide the legislative vehicle for at least some of these SMCR reforms, alongside other changes to the UK’s financial regulatory framework.
At the centre of the SMCR proposals is the removal of the Certification Regime from the Financial Services and Markets Act. At present, the regime is embedded in legislation, including the requirement for annual recertification. HM Treasury’s view is that this has created a rigid, process-heavy system that does not always add meaningful oversight. Moving it out of statute would allow the FCA and PRA to design a more targeted regime through their rulebooks, focusing on roles that genuinely pose risk rather than applying a broad, uniform requirement.
Alongside this, there are proposals to reduce the number of roles that require pre-approval as Senior Management Functions. Instead of requiring regulatory approval in every case, firms may in future be able to appoint certain senior individuals based on their own assessment of fitness and propriety, with a notification to the regulator rather than prior sign-off. If implemented, this would change how firms manage senior appointments, shifting more responsibility onto internal governance processes.
There are also plans to remove prescriptive legislative requirements around Statements of Responsibilities and aspects of the Conduct Rules framework. This would give regulators more flexibility to set expectations in a more proportionate and adaptable way.
The exact scope and timing will depend on the content of the Financial Services Bill and its progress through Parliament. If the Treasury’s proposals proceed, the FCA and PRA are expected to consult on Phase 2 later in 2026.
