Reform of the SMCR: the first changes take effect

What has the FCA announced regarding the SMCR?

The FCA has confirmed it will proceed with some limited changes to the UK Senior Managers and Certification Regime (SMCR), as set out in PS26/6: Senior Managers & Certification Regime review. These represent the first phase of a planned overhaul of the regime.

The proposals were first discussed in July 2025 and, for the most part, are being implemented as originally consulted on. See our briefing for further information on this: Management review: proposed overhaul of the SMCR | Travers Smith

How significant are these changes?

The changes are relatively minor tweaks to the existing rules, largely intended to reduce the regulatory burden on firms in the short term. While they are mainly expected to be helpful for firms, they do not represent any significant relaxation of the requirements.

However, there are a few areas where the rules have been tightened. These include:

Regulatory references to be provided within four (rather than six) weeks.
Failing to take reasonable steps to ensure that the firm complies with its FCA notification obligations or to take reasonable steps to ensure that all staff in the relevant business area report internally matters requiring notification to the FCA could potentially be a breach of Senior Manager Conduct Rules.

Will there be more fundamental changes to the SMCR in the future?

A second phase of more fundamental changes is planned, including changes to legislation. The exact timing is not yet confirmed, although the FCA has suggested a further consultation may take place later this year. HM Treasury has also published its response to its consultation, setting out proposed legislative changes: Reforming the Senior Managers Certification Regime Consultation Response

When do the changes come into effect?

24 April 2026 – The majority of the FCA's changes take effect
10 July 2026 – Some further changes take effect
1 September 2026 – Changes relating to non-financial misconduct take effect, along with a few final changes set out in the Policy Statement

Which firms and individuals will be affected by these changes?

The changes will be relevant to all firms subject to the SMCR, including FCA authorised firms as well as firms regulated by the PRA and third country branches. Certain individuals working with or for those firms will also be affected, including, in some cases, persons based outside the UK.

The PRA has also issued Policy Statement with its own additional changes: PS12/26 – Review of the Senior Managers and Certification Regime (SM&CR) − Phase 1

We discuss the changes to the FCA rules and HM Treasury's proposals in more detail below.

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Changes to the FCA rules

Key changes applying from 24 April 2026

Criminal records checks: Checks for a new SMF will be valid for six months (from three months) and will no longer be required for certain existing SMF holders applying to be an SMF in the same firm or group. The corresponding forms, however, will not be updated until 10 July 2026 but the firm should fill out the existing forms on the basis of the revised rules until then.
12-week rule to cover absences: Firms will have 12 weeks to submit applications for replacement SMFs (rather than to submit and receive approval). The applicant will be able to perform the role until the application is determined. The FCA has also clarified that any person providing such coverage will be subject to the Senior Manager Conduct Rules and that breaches of those rules should be reported to the FCA as soon as practicable rather than annually. Firms are also expected only to make use of the 12-week rule on a limited basis.
Statements of Responsibilities: Firms will be able to submit updated Statements of Responsibilities periodically on a bulk basis using the latest version provided that this is no later than six months after the last submission.
Directory: There is an extension of the deadlines to submit information on starting to perform a certification function and changes to existing information to 20 business days but staff departures will still need to be notified within seven business days.
Regulatory references: Regulatory references are to be provided within four (rather than six) weeks. The FCA has also provided some guidance on disclosing suspected misconduct where the employee leaves before the firm completes its investigations and obtaining references from an overseas employer where there are difficulties in doing so.

The FCA has also confirmed that a breach of the Conduct Rules would not be required to be included in a regulatory reference if the firm decides not to take disciplinary action and believes that the breach is not relevant to any assessment of fitness and propriety.
Certification Regime: The FCA confirms that firms may provide digital certificates and can carry out re-certification as part of existing processes such as annual appraisals (with a less detailed certification process permitted when there are no changes from the previous year). The FCA also confirms that senior managers may need to be separately certified for a certification function if this is distinct from their SMF role e.g. certain roles which involve dealing with customers.
Conduct Rules: There is new guidance on the Conduct Rules including that failing to take reasonable steps to ensure that the firm complies with its notification obligations to the FCA or to take reasonable steps to ensure that all staff in the relevant business area report internally matters requiring notification to the FCA could be a breach of Senior Manager Conduct Rules.

There is also new guidance limiting the circumstances in which Conduct Rule breaches may need to be disclosed to the FCA. In particular, only Conduct Rule breaches resulting in disciplinary action would need to be notified to the FCA as a breach of COCON and an adjustment to an individual's remuneration would only need to be notified where this is done as a sanction for a Conduct Rule breach.

The assessment of honesty, integrity and reputation under the Fit and Proper test will include whether the relevant person has been the subject of adverse findings in an official investigation or public inquiry.
Other guidance: There is new guidance on guidance on when SMF7 (Group entity senior manager) and SMF18 (Other overall responsibility) would apply as well as sharing a particular prescribed senior management responsibility between more than one person. There is also new guidance on the combinations of prescribed senior management responsibilities that the FCA would (and would not) find it appropriate for a particular SMF to hold.

Key changes applying from 10 July 2026

Enhanced scope SMCR firms: Certain thresholds for being an enhanced scope SMCR firm will be increased by around 30% as follows:
- Assets under management: £65bn (from £50bn)
- Total intermediary regulated business revenue: £45m (from £35m)
- Annual revenue generated by regulated consumer credit lending: £130m (from £100m)

There is also a mechanism to adjust the thresholds every five years in line with inflation.

Certification Regime: The requirement for separate certification for certain overlapping roles will be removed with the FCA removing the duplicate roles from the Directory itself. These include as a senior manager where the individual is already a certified FCA Material Risk Taker at the same firm and as the manager of a certification employee where the individual is already certified for another certification function at the same firm.
Prescribed responsibilities: Holders of SMF18 (Other overall responsibility) at solo-regulated firms will be able to hold any other prescribed responsibility.

Further changes to the SMCR Regime

HM Treasury has also confirmed its intention to proceed with more fundamental changes to the SCMR. No firm indication of timing has been given for this but, as this will involve changes to the Financial Services and Markets Act 2000 followed by changes to the FCA (and PRA) rules, this is not expected to take effect for some time.

The proposed changes will largely remove certain measures from legislation and, instead, allow the FCA and/or the PRA more flexibility to adopt their own rules. This is aimed at allowing for a more proportionate and risk-sensitive approach and is therefore expected to be a positive move for firms.

Key changes that HM Treasury has said that it intends to make include:

Removal of the Certification Regime from legislation.
Reduction in the number of SMFs that require regulator pre-approval.
Removal of the legislative requirements for Statements of Responsibilities.
Removal of requirements to notify breaches to the Conduct Rules and mandatory training.

The real impact of these changes will depend on the approach taken by the FCA (and PRA) in their own rules. However, the direction of travel is clearly towards less regulation and less administrative burden for firms.

We have extensive experience on advising on SMCR and its practical implications for firms. If you would like further information or assistance in understanding the proposals, please speak to your usual Travers Smith contact or any of the individuals below.

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