Senior Managers & Certification Regime (SM&CR)

The Senior Managers and Certification Regime (SM&CR) is the FCA's accountability framework that replaced the Approved Persons Regime. It has three core components: the Senior Managers Regime (requiring FCA pre-approval of individuals in key roles), the Certification Regime (requiring firms to annually certify the fitness and propriety of staff in significant-harm functions), and Conduct Rules (minimum standards of behaviour for almost all employees). SM&CR aims to reduce harm to consumers and strengthen market integrity by making individuals more accountable.

All FCA solo-regulated firms have been subject to SM&CR since 9 December 2019. This includes banks, insurers, investment firms, consumer credit firms, mortgage brokers, payment services firms, and all other firms authorised under FSMA. Firms are classified into three tiers -- Limited Scope, Core, and Enhanced -- with increasing levels of obligation. Dual-regulated firms (regulated by both the FCA and PRA) were brought into the regime earlier, in December 2018.

Senior Management Functions (SMFs) are key roles requiring FCA pre-approval before an individual can perform them. Common SMFs include SMF1 (Chief Executive), SMF3 (Executive Director), SMF16 (Compliance Oversight), SMF17 (Money Laundering Reporting Officer), and SMF27 (Partner). Each Senior Manager must have a Statement of Responsibilities clearly setting out what they are responsible and accountable for. Core and Enhanced firms must also allocate Prescribed Responsibilities among their Senior Managers.

Non-compliance with SM&CR can result in significant consequences including FCA enforcement action against the firm and individuals, financial penalties, public censure, and restrictions on the firm's permissions. Senior Managers can be held personally accountable under the Duty of Responsibility if a breach occurs in their area of responsibility and they cannot demonstrate they took reasonable steps to prevent it. The FCA has actively used SM&CR to pursue individuals, making proper implementation essential for personal and corporate protection.