The FCA and PRA’s Phase 1 SM&CR reforms introduce a range of changes designed to reduce administrative burden while maintaining individual accountability. For regulated firms, the challenge is understanding what has changed, identifying where governance and compliance frameworks need updating, and preparing for potential future reforms. Our governance, risk and control specialists explain the key changes and the practical actions that firms should consider now.
On 22 April 2026, the Financial Conduct Authority (FCA) published Policy Statement PS26/6 and the Prudential Regulation Authority(PRA) published PS12/26, introducing Phase 1 reforms to the Senior Managers and Certification Regime (SM&CR). The changes apply across solo-regulated firms, dual-regulated firms and relevant third-country branches. The regulators’ objective is to improve efficiency and proportionality while maintaining strong individual accountability.
Whilst the Phase 1 reforms represent limited rather than transformational change, they provide opportunities for firms to review and streamline their current SM&CR processes.
SM&CR reforms: Changes to the Senior Managers Regime and 12-week rule
Firms now have 12 weeks to submit a Senior Management Function (SMF) application where an individual is covering a vacancy. The individual may remain in role while the application is being determined. Senior Manager Conduct Rules also apply to individuals acting under the 12‑week rule. This is a positive change and provides firms with more practical options when managing unexpected vacancies and succession arrangements.
SMF7 and SMF18 changes: What firms need to know
SMF 7 (Group Entity Senior Manager) captures individuals in a parent or group entity who are not employed by the UK regulated firm, but exercise significant influence over the firm’s regulated activities. In determining significant influence, the PRA takes a broader substance-over-form approach while the FCA focuses more closely on direct accountability within the UK firm’s governance structure. The identification of SMF7s appears to be an area of confusion or inconsistent practice across firms. Firms operating in groups should look at this closely to ensure all relevant individuals have been correctly identified.
For FCA-regulated firms, guidance on SMF18 (Other Overall Responsibility) provides greater flexibility. The requirement for SMF18 holders to have status equivalent to executive directors has been removed and Prescribed Responsibilities may be allocated more flexibly. This should allow firms to align accountability more closely with real management structures and responsibilities.
Prescribed Responsibilities (PRs) under SM&CR: Key FCA guidance
The FCA has provided additional guidance on the allocation and sharing of PRs. Firms should take the opportunity to review existing allocations, address overlaps or gaps and ensure Statements of Responsibilities accurately reflect governance arrangements.
SM&CR reporting changes: Statements of Responsibilities and Management Responsibilities Maps
Firms now have up to six months to notify regulators of changes to Statements of Responsibilities and Management Responsibilities Maps, and only the latest version must be submitted where multiple changes occur within the period. This should reduce the volume of regulatory submissions, although firms will need controls to ensure updates are provided at least every six months.
Certification Regime reforms: Reducing the compliance burden
Certification can be integrated into existing processes such as annual performance reviews; electronic confirmation can replace paper certificates, and firms may take a streamlined approach where there have been no material changes from the previous year. The PRA has also clarified that prior approvals and experience in comparable regimes may be relevant when assessing fitness and propriety.
The FCA has also removed the requirement to certify the same individual separately for multiple overlapping certification functions.
Changes to regulatory references and response timeframes
Regulatory reference requirements have also changed, with response times reduced from six weeks to four weeks. Firms may need to review processes to ensure references are produced more quickly, taking care in cases involving ongoing investigations or misconduct concerns.
Enhanced SM&CR firms: New FCA financial thresholds
Further FCA-specific reforms affect Enhanced firms. Financial thresholds have increased by around 30% which will be a welcome change for Core firms that have experienced recent growth. Growing firms may therefore remain within the Core regime for longer and have additional time to prepare for Enhanced firm status.
What should firms do next following the SM&CR reforms?
HM Treasury has consulted on reforms to the SM&CR and intends to make various legislative changes to remove unnecessary burdens and deliver a more “proportionate and risk sensitive” SM&CR framework. Once legislation is introduced and passed, the FCA and PRA will consult on more substantial Phase 2 reforms. Firms should therefore treat Phase 1 as an opportunity not only to implement immediate changes but also to prepare for further simplification and reform in the future.
How our SM&CR specialists can help
The SM&CR has been in place since 2016 so, with the current changes from Phase 1 and further Phase 2 changes in the pipeline, it’s a good time to revisit your SM&CR arrangements – to assess whether they align to regulatory requirements and are appropriately applied to your firm – and identify opportunities to streamline them.
PKF’s Governance, Risk & Control Assurance team is well placed to help you through
- A review and gap analysis of your current SM&CR arrangements to identify any improvements and opportunities to streamline – this can take the form of a “health check” or deep dive review.
- A wider review of your governance framework and how your SM&CR arrangements align and support it.
- Briefings or training sessions to your board or senior management team on the SM&CR.
- Provision of SM&CR subject matter expertise (SME) support to in-house internal audit teams.
Contact our SM&CR specialists today to discuss how the reforms could affect your organisation and identify opportunities to streamline your compliance framework.
