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SMCR40 min readLast updated January 2025

Complete SMCR Implementation Guide

Everything you need to implement the Senior Managers & Certification Regime, from understanding which tier applies to your firm through to full compliance. Written by ex-FCA regulators with extensive SMCR implementation experience.

ME
MEMA Editorial Team
Ex-FCA Regulators
Expert Reviewed
55+ Pages

At a Glance

  • SMCR applies to virtually all FCA-regulated firms with varying requirements
  • Firms are classified into Enhanced, Core, or Limited scope tiers
  • SMF approval typically takes 8-12 weeks from application
  • Certification staff must be assessed annually for fitness and propriety
  • 5 Individual Conduct Rules apply to nearly all staff
  • MEMA achieves 100% SMF approval success rate with expert guidance

1. Understanding SMCR

What is the Senior Managers & Certification Regime?

The Senior Managers & Certification Regime (SMCR) is the UK regulatory framework that sets out how accountability and responsibility are allocated within financial services firms. Introduced by the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA), SMCR replaced the Approved Persons Regime and represents a fundamental shift in how regulators hold individuals accountable for their actions and decisions.

Three Core Components of SMCR

Senior Managers Regime
Identifies senior individuals with key roles and direct accountability for specific areas
Certification Regime
Requires annual assessment that staff in certain functions are fit and proper
Conduct Rules
Sets standards of behavior applying to nearly all employees with extra rules for senior managers

Key Objectives of SMCR

SMCR aims to reduce harm to consumers and strengthen market integrity by encouraging staff to take personal responsibility for their actions and making firms and senior managers more accountable for their conduct and competence.

Which Firms Does SMCR Apply To?

SMCR applies to virtually all FCA-regulated firms, but the specific requirements depend on the type and size of your firm. Understanding which category your firm falls into is critical, as this determines your obligations under the regime.

The Three SMCR Tiers

SMCR firms are divided into three main tiers, each with different levels of requirements:

TierFirms IncludedKey Requirements
EnhancedBanks, building societies, insurers, PRA-designated firms, firms with £50bn+ AUMFull SMF range, all prescribed responsibilities, Management Responsibilities Maps
CoreMost investment firms, mortgage intermediaries, insurance brokers, consumer credit firmsReduced SMF set, fewer prescribed responsibilities, certification and conduct rules
LimitedLimited permission firms, small payment institutions, appointed representativesConduct rules only - exempt from SMR and Certification Regime

Enhanced Scope Firms

Enhanced scope firms face the most comprehensive SMCR requirements. This category includes:

UK banks and building societies (and their parent companies)
Credit unions with assets over £10 million
PRA-designated investment firms
Insurers (UK Solvency II firms and large non-directive insurers)
UK branches of overseas banks
Firms with over £50 billion in assets under management

Core SMCR Firms

Core firms represent the majority of FCA-regulated firms and face a streamlined version of SMCR:

Most FCA solo-regulated investment firms
Mortgage intermediaries and administrators
Insurance intermediaries
Consumer credit firms
Benchmark administrators
Crypto-asset firms
Funeral plan providers

Limited Scope Firms

Limited scope firms face the lightest touch under SMCR:

Firms with limited permissions that pose lower risks to consumers
Appointed representatives in certain circumstances
Small authorised payment institutions and electronic money institutions (below £3 million threshold)

SMCR Tier Assessment Tool

Correctly identifying which SMCR tier your firm falls into is crucial for compliance. MEMA's regulatory experts can assess your firm's status and provide a complete gap analysis of your current compliance position.

Book SMCR Assessment

Solo-Regulated vs. Dual-Regulated Firms

In addition to the three tiers, firms are categorized as either solo-regulated (by the FCA only) or dual-regulated (by both the FCA and PRA):

  • Solo-regulated firms: Most investment firms, consumer credit firms, payment services firms, and insurance intermediaries regulated only by the FCA
  • Dual-regulated firms: Banks, building societies, credit unions (over £10m), PRA-designated investment firms, and insurers regulated by both the FCA and PRA

2. Senior Manager Functions (SMFs)

Senior Manager Functions (SMFs) are specific roles within a firm that carry significant influence or responsibility. Individuals performing these functions must be pre-approved by the FCA (and PRA where applicable) before they can start in their role.

Core Senior Manager Functions

The following SMFs apply to most SMCR firms (with some variations depending on firm type and tier):

SMF1Chief Executive

Ultimate responsibility for regulated activities, strategic direction and governance

SMF3Executive Director

Executive function in relation to regulated activities at board level

SMF16Compliance Oversight

Overseeing compliance function, monitoring regulatory changes

SMF17MLRO

Anti-money laundering oversight, filing SARs, AML/CTF systems

SMF18Other Overall Responsibility

Catch-all for significant areas not covered by other SMFs

SMF27Partner (Partnerships)

Partners with responsibility for regulated activities

Enhanced Scope Senior Manager Functions

Enhanced scope firms must allocate additional, more granular SMFs that reflect the greater complexity and systemic importance of their operations:

SMF2Chief Finance

Financial resources, regulatory capital, treasury management

SMF4Chief Risk

Overall risk management, identification, assessment, mitigation

SMF5Head of Internal Audit

Managing internal audit function with appropriate independence

SMF9Chair of Board

Leading board, setting agenda, effective governance

SMF10Chair of Risk Committee

Oversight of risk management framework

SMF11Chair of Audit Committee

Financial reporting, internal controls, auditor relationships

SMF12Chair of Remuneration Committee

Remuneration policies aligned with risk management

SMF14Senior Independent Director

Sounding board for Chair, alternative stakeholder channel

Sector-Specific Senior Manager Functions

Certain SMFs apply only to firms in specific sectors:

SMF20Chief Actuary (Insurers)

Actuarial oversight for pricing, reserving, capital

SMF21With-Profits Actuary (Insurers)

Actuarial oversight of with-profits business

SMF23Chief Underwriting Officer

Underwriting strategy and risk management

SMF24Chief Operations

Operational resilience, IT systems, business continuity

Critical: SMF Approval Timing

Individuals cannot start performing their SMF role until they receive FCA approval. The approval process typically takes 8-12 weeks for straightforward applications but can take significantly longer for complex cases or individuals with regulatory history. Plan your recruitment and succession planning accordingly.

3. Prescribed Responsibilities

What Are Prescribed Responsibilities?

Prescribed responsibilities are specific regulatory obligations that firms must formally allocate to their Senior Managers. These responsibilities cannot be left unallocated and must be clearly assigned in each Senior Manager's Statement of Responsibilities.

Key FCA-Prescribed Responsibilities

(a)
Senior Managers Regime

Firm's performance of SMR obligations, SoR accuracy, regulatory references

Typically held by: CEO, COO, or Head of HR

(b)
Certification Regime

Identifying certification functions, annual assessments, maintaining records

Typically held by: CEO, Head of HR, or Compliance

(b-1)
Conduct Rules

Training on conduct rules, notifying FCA of disciplinary action

Typically held by: Head of HR or Compliance

(c)
Management Responsibilities Map

Maintaining and updating MRM (enhanced firms only)

Typically held by: CEO, COO, or Company Secretary

(d)
Financial Crime

Policies and procedures for countering financial crime

Typically held by: MLRO or Executive Director

(z)
CASS Compliance

Client money and custody asset arrangements (if applicable)

Typically held by: CFO, COO, or Finance Director

Additional Prescribed Responsibilities for Enhanced Firms

(f)Training Governing Body
Non-exec director
(g)Training SMFs & Key Functions
Non-exec or Head of HR
(j)Internal Audit Oversight
Chair of Audit Committee
(k)Compliance Oversight
Non-exec director
(l)Risk Oversight
Chair of Risk Committee
(m)Remuneration
Chair of Remuneration Committee
(n)Whistleblowers' Champion
SID or non-exec director

Allocation Rules: Who Should Hold Which Responsibilities

The FCA has clear expectations about how prescribed responsibilities should be allocated:

1
Seniority and Authority

The person must be sufficiently senior with resources and authority to exercise responsibilities effectively

2
Executive vs Non-Executive

Certain responsibilities (f, j, k, l, m, n) must be allocated to non-executive directors

3
Avoid Overconcentration

Don't assign such a wide range that one individual cannot carry them out effectively

4
No Splitting

Don't split a prescribed responsibility between several SMF managers with each having only part

5
Small Firm Exception

Small non-complex firms have more flexibility in how they allocate responsibilities

Statements of Responsibilities

Every Senior Manager must have a Statement of Responsibilities (SoR) that clearly documents:

  • The specific aspects of the firm's affairs they are responsible for
  • Which prescribed responsibilities have been allocated to them
  • Reporting lines and accountability structures
  • Any specific limits or conditions on their responsibilities

Statement of Responsibilities Templates

MEMA provides professional SoR templates tailored to different SMF roles and firm types. Our templates ensure you capture all required information while meeting FCA expectations.

Access SoR Templates

4. The Certification Regime

What is the Certification Regime?

The Certification Regime requires firms to assess and certify annually that employees performing certain functions are fit and proper to carry out their roles. Unlike the Senior Managers Regime (which requires FCA pre-approval), certification is an internal firm process.

Who Needs to Be Certified?

The specific certification functions vary by firm type. Common examples include:

Firm TypeCertification Functions
Investment Firms & BanksClient-dealing, proprietary traders, material risk takers, algorithmic trading, CASS functions, benchmark functions
Consumer CreditCredit advice, debt counselling/adjusting, debt collection, customer account operations
Insurance DistributorsAdvising on insurance, dealing as agent, arranging insurance contracts
Mortgage FirmsMortgage advice, arranging mortgages, mortgage administration operations

The Annual Certification Process

Firms must certify employees performing certification functions at least annually:

5-Step Certification Process

  1. 1
    Identification

    Identify all roles that fall within certification functions against SYSC 27 definitions

  2. 2
    Assessment

    Conduct fit and proper assessment considering competence, honesty/integrity, and financial soundness

  3. 3
    Evidence Gathering

    Collect qualifications, performance reviews, conduct breaches, complaints, criminal checks, regulatory references

  4. 4
    Certification Decision

    Appropriate senior person makes the decision with sufficient seniority and independence

  5. 5
    Record Keeping

    Maintain records for at least 6 years including decisions, dates, decision-makers, and evidence

When Certification Must Be Withdrawn

If a firm determines an individual is no longer fit and proper, certification must be immediately withdrawn:

  • Serious conduct rules breaches
  • Loss of competence or relevant qualifications
  • Integrity concerns or criminal convictions
  • Serious customer complaints or poor conduct
  • Disciplinary matters

Common Certification Pitfall

Many firms fail to maintain adequate evidence to support their certification decisions. If the FCA reviews your certification process and finds inadequate evidence, your firm could face enforcement action even if the certification decisions themselves were correct. Always document your rationale and retain supporting evidence.

5. Conduct Rules

The Conduct Rules set out fundamental standards of behavior that apply to nearly all employees at SMCR firms. There are two tiers: Individual Conduct Rules (for all staff) and Senior Manager Conduct Rules (additional rules for SMF holders).

The Individual Conduct Rules

1
Act with integrity

Honesty, truthfulness, and ethical behavior in all professional dealings

Breach examples: Falsifying records, misleading customers, dishonest expense claims

2
Act with due skill, care, and diligence

Perform role to appropriate standard, maintain competence

Breach examples: Advising on products you don't understand, consistent poor performance

3
Be open and cooperative with regulators

Deal openly with FCA/PRA, respond promptly to requests

Breach examples: Withholding information, providing misleading information

4
Pay due regard to customer interests

Consider customer interests, ensure fair treatment

Breach examples: Mis-selling products, prioritizing sales targets over needs

5
Observe proper market conduct

Don't engage in market abuse or manipulation (where applicable)

Breach examples: Insider dealing, benchmark manipulation, front-running

The Senior Manager Conduct Rules

In addition to the five Individual Conduct Rules, Senior Managers are subject to four additional rules:

SC1
Ensure effective business control

Take reasonable steps to ensure the business for which you are responsible is controlled effectively

SC2
Ensure regulatory compliance

Take reasonable steps to ensure compliance with regulatory requirements in your areas

SC3
Proper delegation

Ensure any delegation is to an appropriate person and that you oversee the delegated responsibility effectively

SC4
Disclose information to regulators

Disclose appropriately any information the FCA/PRA would reasonably expect notice of

The "Reasonable Steps" Defense

Senior Manager Conduct Rules require "reasonable steps" rather than guaranteeing outcomes. Document key decisions and rationale, establish clear governance, ensure appropriate MI, take prompt action on issues, and maintain oversight records to demonstrate reasonable steps.

Conduct Rules Training Requirements

Firms have a statutory duty under section 64B of FSMA to ensure all staff receive appropriate training:

1
Provide training as soon as practicable after an individual becomes subject to the rules
2
Cover the Conduct Rules that apply to them
3
Explain what each rule means in practice for their role
4
Provide relevant examples and scenarios
5
Refresh training regularly (good practice is annual)
6
Maintain records of training provided

6. Fit and Proper Assessments

The Fit and Proper Standard

Both the Senior Managers Regime and Certification Regime are underpinned by the concept of "fit and proper." Firms must ensure individuals have:

Honesty, Integrity & Reputation

  • Regulatory history
  • Employment history
  • Criminal record
  • Civil proceedings

Competence & Capability

  • Qualifications & training
  • Relevant experience
  • Performance record
  • Knowledge & understanding

Financial Soundness

  • Bankruptcy/IVA history
  • County Court Judgments
  • Significant debts
  • Conflicts of interest

Due Diligence Requirements

To conduct effective fit and proper assessments, firms should:

4-Step Due Diligence Process

  1. 1
    Obtain Comprehensive Information

    Application forms, CV, regulatory references (last 6 years), criminal/credit checks, qualification verification

  2. 2
    Verify Information

    Confirm employment dates, verify qualifications with awarding institutions, follow up on gaps, investigate inconsistencies

  3. 3
    Conduct Interviews

    Assess competence and knowledge, explore concerns, test understanding of responsibilities, evaluate judgment

  4. 4
    Document the Assessment

    Record all information gathered, verification methods, decision rationale, who made the decision, any conditions

Regulatory References (SYSC 22)

SYSC 22 requires firms to provide and obtain regulatory references when individuals move between regulated firms. These references must include:

Reference Content Requirements
All Conduct Rules breaches by the individual
Any disciplinary action taken due to Conduct Rules breaches
Whether the individual was found not fit and proper or investigated for that reason
Whether approval was withdrawn or refused
Other information relevant to fitness and propriety

Ongoing Monitoring

Fit and proper assessment is not a one-time exercise. Firms must continuously monitor through:

1
Annual certification

For certification employees

2
Ongoing performance management

Regular reviews and feedback

3
Conduct monitoring

Tracking breaches, complaints, errors

4
Training and competence

Ensuring CPD requirements are met

5
Material changes

Reassessing when circumstances change

7. Implementation Roadmap

Step 1: Conduct a Gap Analysis

Before implementing SMCR, thoroughly assess your current position:

Determine your SMCR tier (Enhanced/Core/Limited)
Identify current vs. required Senior Managers
Map prescribed responsibilities to individuals
Identify all certification staff
Review governance documentation
Assess current fit and proper processes
Evaluate training and competence framework
Review conduct rules awareness

Step 2: Implementation Timeline

12-Month Implementation Timeline

1
Months 1-2: Foundation8 weeks

Appoint project lead, establish steering committee, design governance structure, draft SMF role profiles

2
Months 3-4: Documentation8 weeks

Prepare Statements of Responsibilities, create MRM, develop policies and procedures

3
Months 5-6: SMF Approval8 weeks

Conduct fit and proper assessments, submit FCA applications, prepare for interviews

4
Months 7-8: Certification8 weeks

Assess all certification staff, complete first certification exercise, establish annual calendar

5
Months 9-10: Training8 weeks

Deliver conduct rules training, SMCR awareness training for management

6
Months 11-12: Embedding8 weeks

Implement ongoing monitoring, test governance arrangements, refine procedures

Step 3: Essential Documentation Checklist

Organizational charts with reporting lines
Management Responsibilities Map (if required)
Terms of reference for board committees
Delegation of authority frameworks
Job descriptions for SMF and certification roles
Statements of Responsibilities
SMCR governance policy
Conduct rules policy
Certification policy and procedures
Fit and proper assessment procedure
Regulatory references policy
Training and competence policy
Breach reporting and disciplinary procedures
FCA SMF application forms (Form A)
Certification assessment templates
Regulatory reference templates

SMCR Template Library

Access MEMA's comprehensive template library with ready-to-use policies, procedures, and forms tailored to SMCR requirements. Save weeks of documentation work.

Browse SMCR Templates

8. Common Pitfalls

1

Pitfall 1: Incorrect Prescribed Responsibility Allocation

The Problem

Many firms allocate responsibilities to inappropriate individuals, split responsibilities incorrectly, or leave responsibilities unallocated.

How to avoid it:

  • Carefully review SYSC 24 and Annex 1 to understand which responsibilities apply
  • Ensure executive/non-executive allocation follows FCA expectations
  • Allocate to individuals with genuine authority and resources
  • Avoid overloading individuals with too many responsibilities
  • Document your allocation rationale
2

Pitfall 2: Inadequate Documentation

Vague Statements of Responsibilities

SoRs that copy regulatory language without specifying actual responsibilities

Inadequate Fit and Proper Evidence

Insufficient evidence to support certification decisions

Failure to Identify All Certification Functions

Not identifying all roles that fall within certification functions

Poor Record-Keeping

Inability to demonstrate compliance because decisions weren't properly documented

3

Pitfall 3: Ongoing Compliance Failures

Treating SMCR as a One-Time Project

Significant effort on initial implementation but allowing compliance to decay over time

Insufficient Conduct Rules Training

Generic training that doesn't help staff understand what rules mean for their work

Inadequate Response to Breaches

Failing to investigate promptly, inadequate disciplinary action, or failure to notify FCA

Failure to Update After Changes

SMCR documentation becoming out of date when the organization changes

Learn from Others' Mistakes

The FCA has taken enforcement action against numerous firms and individuals for SMCR failures. MEMA's ex-regulator team can help you understand what the FCA focuses on in its supervision and enforcement, helping you avoid the common pitfalls that lead to regulatory action.

Get Expert Review

Key Takeaways

Implementing and maintaining SMCR compliance is complex, but getting it right is essential for avoiding regulatory action and building a culture of accountability:

1
Understand which SMCR tier your firm falls into and the specific requirements that apply
2
Allocate prescribed responsibilities carefully, ensuring clear accountability
3
Conduct thorough fit and proper assessments with robust supporting evidence
4
Implement annual certification processes that assess actual fitness and propriety
5
Deliver meaningful conduct rules training tailored to different roles
6
Maintain comprehensive documentation of all SMCR decisions and activities
7
Embed SMCR into business-as-usual processes rather than treating it as a project
8
Monitor and update your arrangements as your organization evolves

Need Expert SMCR Implementation Support?

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