CP26/37: Senior Managers and Certification Regime (SM&CR) Review: Phase 2
AI Analysis
The FCA is consulting on the second and more substantial phase of its SM&CR review, proposing to remove the Certification Regime, retire the Directory, reduce the number of pre-approved Senior Management Functions and narrow the Enhanced-firm population. The proposals are intended to preserve senior-manager accountability while reducing an estimated £229.9 million of annual compliance costs, but firms would retain responsibility for fitness, competence, conduct, internal Statements of Responsibilities and management-responsibility mapping.
Key dates
- 2026-10-22
- FCA published CP26/37 and opened the consultation.
- 2027-01-22 Deadline
- Deadline for consultation responses.
- 2027-06-30
- End of the first half of 2027, during which the FCA expects to publish final regulatory requirements; the exact publication date is not specified.
Suggested considerations
- Firms should assess the consultation proposals against their current SMF population, including whether SMF18, SMF22 or the existing SMF7 definition is used and how responsibilities would be reallocated.
- Dual-regulated and Enhanced firms should review whether SMF5 and SMF10 to SMF15 appointments would move from prior approval to notification, while considering the continuing need for documented fitness and propriety assessments.
- Compliance teams may wish to model whether the proposed £200 million, £100 billion, £75 million and £750 million Enhanced thresholds would change the firm's classification, including group-level and three-year rolling-average calculations.
- Firms should plan to preserve accurate internal Statements of Responsibilities and Management Responsibilities Maps even if routine FCA submissions are removed.
- Firms should review Prescribed Responsibility allocations and identify the impact of removing nine responsibilities, including the proposed retention of A, D, Z and J-3.
- Certification-function inventories, annual certification processes, regulatory-reference procedures and Directory reporting should be mapped so that transition arrangements can be implemented if the proposals are finalised; firms should not discontinue current obligations before final rules and commencement.
- Conduct and HR teams should assess changes to training, staff notifications, disciplinary classifications, appeal processes and breach-reporting workflows, distinguishing staff subject only to Individual Conduct Rules from those also subject to Senior Manager Conduct Rules.
- Firms should retain processes for prompt notification of matters of regulatory significance under Principle 11, SUP 15 and SUP 10C, because the consultation does not remove those obligations.
What changed
The FCA proposes to make SMF5 (Head of Internal Audit) and SMF10 to SMF15 functions notified rather than subject to prior approval at specified dual-regulated and Enhanced firms. It proposes to remove SMF18 (Other Overall Responsibility) and SMF22 (Local Responsibility), narrow SMF7 (Group Entity Senior Manager), and retain SMF24 (Chief Operations Function) as a pre-approved function. The FCA also proposes to permit time-limited or conditional approvals for dual-regulated firms, solo-regulated firms in dual-regulated groups and Enhanced firms, subject to the proposed rules. The temporary cover period would increase from 12 to 18 weeks, with the current reasonably unforeseen test replaced by a reasonable use test. Firms would no longer submit revised Statements of Responsibilities or Manag
Compliance impact
This is a broad, high-significance consultation rather than binding law or final rules, and existing SM&CR, Certification Regime, Directory and Conduct Rules obligations continue unless and until amended requirements commence. If adopted, the package would materially reduce recurring administrative work but create substantial transition activity around role mapping, firm classification, competence
Who is affected
Related regulations
References
AI-generated analysis. May contain errors or omissions — verify with the original FCA source before acting. Full disclaimer.
What the FCA said
We’re consulting on changes to streamline and improve the Senior Managers and Certification Regime (SM&CR) as part of the second phase of our reforms. ... Read CP26/37 (PDF)Why we are consultingChanges proposed in the Financial Services and Markets (FSM) Bill remove many prescriptive SM&CR requirements from…
Extract from FCA . Read the full notice at the source for the authoritative text.