Context
The PRA and the FCA have announced the publication of the FCA’s awaited Consultation Paper setting out ‘Phase 2’ of the reforms to the Senior Managers and Certification Regime (SM&CR). The Consultation runs to 429 pages, of which 350 pages are the proposed Handbook text amendments.
The regulators propose to streamline the regime while maintaining high standards of individual accountability and conduct. The proposals build on the first phase of reforms set out in Policy Statement PS26/6, and on legislative changes proposed by the Government in the Financial Services and Markets (FSM) Bill 2026.
Key points to note and next actions
There is significant detail in the Consultation in relation to the proposals In brief, the proposals include:
- Reducing senior manager roles and streamlining those requiring FCA approval by removing certain SMFs and making other roles notified, including Chief Actuaries and Chairs of Risk and Audit Committees. (Firms will instead notify regulators of these appointments directly, gaining speed and flexibility while remaining responsible for ensuring candidates are fit and proper).
- Streamlining the SMF application process.
- Streamlining the Prescribed Responsibilities.
- Reducing the number of firms subject to the Enhanced regime thresholds.
- Refocusing Statements of Responsibilities and Management Responsibilities Maps and reducing the frequency of submissions.
- Removing the Certification Regime in its entirety. This will remove the associated administrative requirements for around 139,000 individuals below senior manager level to be subject to annual certification checks and to appear on the Financial Services Register.
- Retiring the Directory of Certified and Assessed persons.
- Simplifying Conduct Rule training and breach reporting thresholds.
A summary of all the key changes the FCA is proposing is set out in Table 1, paragraphs 1.7 to 1.8 of the Consultation. Many of the proposed changes may not impact Core SM&CR firms.
The FCA is asking for all CP responses to be made using the online survey tool, and the Consultation closes on 22nd January 2027. The FCA will publish final rules in H1 2027 and implement them around six months later, in H2 2027.
