FCA Enacts Changes to SMCR with Commentary and Insightful Examination
Streamlined Senior Manager Certification Regime Proposed by FCA, PRA, and HM Treasury
The Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA), and HM Treasury have unveiled proposed reforms to the Senior Manager Certification Regime (SM&CR), aiming to streamline the regime, reduce administrative burdens, and enhance proportionality and flexibility while maintaining strong accountability standards in the financial sector [1][2][4].
The key proposals include legislative changes by HM Treasury, such as the potential removal of the Certification Regime from legislation, allowing the FCA and PRA more flexibility to develop a proportionate replacement via rule-making powers [1][3]. Additionally, there is a proposal to reduce the number of Senior Management Functions (SMFs) requiring regulatory pre-approval, enabling firms to appoint certain senior managers without prior regulatory approval but with notification requirements [1][3].
The FCA is also proposing operational reforms within the current law, such as providing more time and flexibility for firms to submit senior manager approval applications after unexpected or temporary changes [2][4]. Other operational reforms include removing duplication, providing clearer guidance to firms on structuring annual ‘fit and proper’ certification checks, extending the validity period of criminal record checks, allowing firms more time to update the FCA’s directory of certified staff, and clarifying the definitions of certain senior management function roles [2][4].
The PRA is working closely with the FCA and HM Treasury, pursuing similar reforms in parallel [2][4]. These changes are structured in phases, with the FCA and PRA consultations outlining phase 1 operational improvements that do not require legislative amendment, and HM Treasury consultations focusing on legislative reforms that would enable further flexibility and simplification [2][4].
The reforms are expected to ease administrative burdens following mergers and acquisitions, making it simpler to manage senior manager appointments in such scenarios [3]. The consultation papers were published in mid-July 2025, marking the first major overhaul of SM&CR since its introduction post-2008 financial crisis [1][4]. Further phases of reform are expected after legislative changes are considered [2].
Jill Lorimer, Head of the Financial Services Regulatory team at Kingsley Napley LLP, comments that the proposed changes are an important step in the right direction, particularly notable is the suite of proposed improvements to the process of applying to the regulator for senior management approval [5]. However, Lorimer also notes that firms may be disappointed that little in the way of substantial change is proposed in respect of the certification process more generally [5].
Effective implementation and ongoing engagement with all stakeholders are crucial for maintaining investor confidence, market integrity, and consumer trust. The success of the reforms will hinge on achieving the right balance between encouraging competitiveness and maintaining reputable, robust oversight.
[1] https://www.fca.org.uk/news/press-releases/fca-pras-proposals-smcr-reforms [2] https://www.fca.org.uk/publication/consultation/cp25-10.pdf [3] https://www.fca.org.uk/news/press-releases/fca-proposes-simplifying-senior-managers-regime [4] https://www.bankofengland.co.uk/pra/publications/2025/july/proposals-to-streamline-the-senior-managers-and-certification-regime [5] https://www.kingsleynapley.co.uk/news/articles/fca-consults-on-senior-managers-and-certification-regime-reforms/
Compliance with the proposed reforms of the Senior Manager Certification Regime (SM&CR) could lead to increased innovation within insurtech and finance businesses, as a result of reduced administrative burdens and enhanced flexibility. The events outlined in the consultations published in mid-July 2025 aim to facilitate business growth by making it easier to manage senior manager appointments following mergers and acquisitions. To ensure successful implementation of these reforms, it is essential to strike a balance between encouraging business growth and maintaining robust regulation, providing strong accountability standards and fostering market integrity, investor confidence, and consumer trust. In the context of the insurtech sector, clear regulation will foster innovation and help attract investors.
