On July 15, 2025, the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA) have published their long-awaited consultation papers, respectively CP25/21 and CP18/25, on proposed improvements to the Senior Managers & Certification Regime (SM&CR). These were published alongside HM Treasury's own consultation which was announced in the Chancellor’s Mansion House speech on the same day. These consultations follow on Discussion Paper DP1/23 and HM Treasury’s call for evidence, both published in March 2023.
The overall objective of the proposed changes is to radically streamline the SM&CR and reduce the regulatory burden by 50%, while continuing to ensure that standards remain high.
HM Treasury’s consultation paper is focused on a number of structural amendments to the SM&CR requiring legislative change. The most notable of these is the removal of the Certification Regime, enabling the FCA and PRA to use their powers to replace it with a more flexible regime. Furthermore, the paper confirms that the government does not plan to take forward earlier plans to include Financial Market Infrastructure (FMI) firms into the SM&CR at this point in time.
Considering the above, the FCA’s and PRA’s consultations outline a number of changes that can be undertaken using their existing powers without reliance on the legislative changes in the HM Treasury’s paper. These are referred to as Phase 1 proposals, with Phase 2 to follow once the proposed legislative changes in HM Treasury’s consultation have been finalized.
The regulators explain that SM&CR has driven up standards in financial services, and firms who responded to DP1/23 were largely supportive of SM&CR. The latest proposed reforms are part of a broader initiative to boost competitiveness and support growth, by creating a more flexible, proportionate and efficient regime.
Proposals in Phase 1
In the first stage of the reforms, the following key changes are being proposed:
- Improving the efficiency of the 12-week rule, which is currently deemed to be not fit for purpose by firms
The regulators propose a number of clarifications on how to use the 12-week rule, for instance:
- Firms have 12 weeks to submit a Senior Manager Function (SMF) application, rather than 12 weeks to submit an application and receive regulatory approval.
- The 12-week rule should only be used in unforeseen circumstances, as in most cases firms should have succession plans.
- The person performing the SMF role under the 12-week rule would be subject to the SM&CR rules and would be personally accountable for the area covered.
- Prescribed responsibilities should be reallocated to another SMF during the use of the 12-week rule.
- In the case of an unforeseen absence of an SMF manager, an updated SoR will not need to be submitted to the regulator until 12 weeks have elapsed.
- Improving the process around criminal records checks
Most firms thought that criminal records checks (CRCs) were helpful in assessing fitness and propriety. The FCA and PRA propose certain changes, such as increasing the validity of CRCs from three months to six months for SMF applications.
- Streamlining the SMF approval process
The FCA has already amended Form A to make it more user friendly. The FCA additional changes to Form A will be made to reduce the number of supplementary documents required. It has also enhanced the information on its website on the application process. The FCA has also in parallel announced its intention to assess at least half of all new senior manager regime applications within 35 days, together with a proposed statutory deadline of two months (currently three) for all applications.
- Allowing more time for updates to SoR
Firms must always keep Statements of Responsibilities (SoRs) up to date, but rather than requiring firms to submit updated SoRs using Form J every time there is a material change, the FCA is proposing to allow firms to submit changed SoRs periodically on a six monthly basis, with only the most recent versions needing to be submitted. For dual regulated firms, the PRA also proposes that firms would have up to six months to submit updated SoRs, but they would have to submit all updated versions.
- Change guidance on regulatory references and other elements of SM&CR
Following feedback from firms, the FCA proposes to amend its guidance for firms to provide regulatory references within four weeks, enabling the approval process to be accelerated. For dual regulated firms, the PRA does not propose setting similar guidance.
Further guidance is also proposed on areas such as the applicability of key SMF roles, allocation of prescribed responsibilities and the application of the Conduct Rules.
- For dual regulated firms only: Provide additional clarity on the applicability of the Group Entity Senior Manager (SMF7) role
The PRA proposes clarifying the responsibility for identifying individuals who require approval as SMF7, which will extend to include individuals employed outside the regulated firm who are deemed to be controllers by virtue of having significant influence over day-to-day management of the firm.
- Making the certification regime less burdensome on firms in the interim, ahead of legislative changes to the regime
The FCA is proposing to remove duplication within the certification regime, such as where a person performs the following roles at the same firm:
- FCA Material Risk Taker at a dual regulated firm also certified by the PRA at the same firm
- A Significant Management Function holder is also certified as an FCA Material Risk Taker
- Manager of a Certification Employee already certified for another certification function at the same firm
The FCA also proposes providing additional guidance on the certification regime, to clarify certain matters where some firms have gold-plated the regime, such as the assumption that certificates need to be issued in hard copy and obtaining criminal records check when these are not required.
- Allow more time to report updates to the Directory
The FCA proposes to allow firms more time to update the Directory for a new certified person or other updates, increasing this from seven to 20 business days. However, firms will still have to update the Directory about staff departures within seven business days.
- Raise the thresholds for becoming an enhanced SM&CR firm
The FCA proposes to increase the thresholds to ensure that only the largest and most complex firms are captured in the Enhanced Firms category. Currently around 550 firms are categorized as enhanced and the FCA estimates that around 20-30 of those firms will fall below the new thresholds. The proposed new thresholds are:
