UK Regulators Consult on SM&CR Reforms

Last week, the UK Prudential Regulation Authority and Financial Conduct Authority (FCA) launched parallel consultations proposing significant reforms to the Senior Managers and Certification Regime (SM&CR), seeking to reduce the number of roles subject to regulatory approval and certification while retaining high standards of individual accountability and conduct.

The proposals would remove regulatory pre-approval for a number of functions, including Chief Actuaries and Chairs of Risk and Audit Committees, with firms instead notifying regulators of appointments while remaining responsible for assessing whether individuals are fit and proper. CEOs, CFOs, and Chairs would still require approval, and regulators could require approval for roles that typically require notification when they identify heightened risk.

The Certification Regime would also be removed for around 139,000 individuals below senior manager level, eliminating annual certification checks and their inclusion on the Financial Services Register. The regulators are also proposing to raise the threshold for reporting Conduct Rule breaches involving most staff below senior manager level and streamline related training requirements, allowing firms to focus reporting on more serious misconduct. Firms would remain responsible for ensuring that employees are competent, suitable, and meet applicable standards of conduct.

The PRA estimates that the changes would reduce its SM&CR pre-approvals by 43% and halve the overall administrative burden of its regime. The regulators also estimate that the reforms could save financial services firms around £2 billion over ten years. They argue that reducing administrative requirements should allow firms to devote more resources to customer and market outcomes, recruitment, innovation, and investment, while maintaining the accountability and governance improvements established under the regime.

The consultations represent the second and more substantial phase of SM&CR reform, following changes introduced in April 2026 to application timelines, overlapping certification requirements, and thresholds for larger firms. Some of the latest proposals require legislative change, with the regulators aiming to implement reforms once legislation is passed. The consultations close on January 22, 2027, with final policy expected later in 2027.