The Financial Conduct Authority and Prudential Regulation Authority have launched a joint consultation on changes to the Senior Managers and Certification Regime (SM&CR), outlining measures aimed at reducing regulatory burden while maintaining core standards of accountability.
The proposals mark the first phase of reform to the SM&CR and follow a wider government consultation on potential legislative changes, including the removal of the Certification Regime and increased flexibility around the number of senior management functions (SMFs) requiring pre-approval.
Regulators said their aim is to make the regime more proportionate and less onerous, in support of the government’s ambition to foster growth and innovation within the UK’s financial services sector.
The proposed changes include allowing firms more time and flexibility to submit applications for senior manager approval in the event of temporary or unforeseen leadership changes, as well as reducing duplication for individuals certified for multiple functions.
A 15% reduction in certification roles is expected as a result of efforts to eliminate overlap and streamline reporting requirements.
Other proposals include revised guidance on the annual ‘fit and proper’ checks firms must conduct, an extension to the validity period of criminal record checks, and clearer definitions for certain SMF roles.
Additional changes would allow more time for firms to report changes to senior manager responsibilities and update entries in the public directory of certified staff.
The SM&CR, introduced in 2016, was designed to strengthen individual accountability in financial firms following the 2008 financial crisis. While it has gained broad support across the industry, concerns have mounted that aspects of the regime may be excessively bureaucratic and out of step with the pace of business, particularly for smaller firms.
Nikhil Rathi, chief executive of the FCA, said: “Integrity and accountability at the top matter, which is why there is widespread support for the Senior Managers and Certification Regime.
“We are proposing streamlining the rules, so they work better for industry and support competitiveness and our approach to outcomes-based regulation, while maintaining the high standards the regime has set.”
Sam Woods, chief executive of the PRA and deputy governor for prudential regulation at the Bank of England, added: “High standards of accountability are important for maintaining confidence in our financial services industry.
“Today’s changes will reduce the burden of the Senior Managers and Certification Regime without diluting accountability, and we will work with the government on further reforms.”
The consultation follows a 2023 discussion paper in which the regulators invited feedback from industry stakeholders on the practical challenges posed by the SM&CR. Responses to the current proposals are invited until 7 October 2025.
