Regulators propose reform to the UK senior managers and certification regime
Published on 8th October 2025
Three consultations on phased reform for the SMCR regime, with the bigger changes reserved for the second phase
On 15 July 2025, the UK's Financial Conduct Authority (FCA) issued a consultation paper (CP25/21) on reform of the senior managers and certification regime for financial services firms (SMCR). The Prudential Regulation Authority (PRA) and HM Treasury published related consultation papers on the same date.
Together, these documents propose a reform of the current regime in the two phases. In the first, the FCA and PRA will make fairly modest changes, within the constraints of current legislation. In the second, the Treasury will make the underlying legislation more flexible, enabling the regulators to make bolder changes later.
The aim of the reforms is to streamline SMCR and address some practical challenges, while at the same time maintaining a regime of individual accountability that has generally worked well and been a blueprint for other international regulators.
The FCA and Treasury papers are relevant to both solo- and dual-regulated firms; the PRA paper only to the latter.
Phase 1 changes
The more modest changes planned for Phase 1 are meant to smooth the current system's rough edges rather than trigger any overhaul, and are summarised below.
Criminal record checks for new senior managers will be "valid" for six months rather than three for applications for approval, making them easier to prepare. No new checks will be needed when a senior manager moves roles within the same firm or group.
The "12-week rule", which allows firms to provide temporary cover for senior managers who become absent unexpectedly, will be amended so firms have 12 weeks to apply for a new senior manager to be approved, rather than 12 weeks to get a decision. This should make transitions easier. At the same time, new guidance emphasises that the 12-week rule does not apply when a senior manager's departure is reasonably foreseen and that firms should have effective succession plans in place. Staff providing cover will also be subject to the senior manager conduct rules.
The FCA and PRA will add guidance on certain senior management functions (SMFs) which firms have sometimes struggled to allocate correctly, specifically SMF7 (group entity senior management), SMF18 (other overall responsibility) and SMF22 (other local responsibility). The guidance will emphasise that these must be allocated to sufficiently senior people.
New guidance will stress that prescribed responsibilities (PRs) should only be split where this can be justified, which the FCA thinks is likelier in larger, more complex firms. Solo-regulated firms will be allowed to allocate certain PRs to SMF18 (other overall responsibility), which they currently cannot. The FCA will also introduce new guidance to help firms allocate PRs, though it does not expect firms to rearrange existing allocations.
The numerical thresholds for becoming an "enhanced" SMCR firm, which have not been updated since 2019, will be increased by 30% (in line with inflation), and reviewed every five years.
Updated statements of responsibilities (SoRs) for senior managers will need to be submitted within six months of significant changes, rather than immediately (though dual-regulated firms would still need to submit all updated versions created during the six-month period).
Firms making several SMF applications at once will be able to submit a single management responsibilities map showing the impact of all proposed changes.
On the certification regime, new guidance will clarify the requirements for re-certification, which the FCA believes firms have been "gold-plating". The FCA will also clarify which senior managers also need certification and, more substantively, remove the requirement for separate certification for different roles in certain circumstances to avoid duplication. Firms will have 20 days rather than seven to update the "directory" (the register) regarding changes to certified staff, except when a person leaves (where seven days will still apply).
The FCA will shorten the required response time for regulatory reference requests from six weeks to four, so firms do not have to wait as long for the references they seek. Of course, this will not help "receiving" firms seeking references from abroad.
Regarding the code of conduct, the FCA will clarify that only breaches leading to disciplinary action need to be reported as such – but notes that other breaches may still need to be reported under different rules, such as Principle 11. New guidance will clarify how these rules interact, and previous non-Handbook clarifications on the interaction of this area with legal privilege will be incorporated into the Handbook.
Phase 2 changes
The regulators have not set out in detail what changes they might make in Phase 2. Instead, the FCA says it will explore how it can make use of the flexibility granted by legislative changes when these are actually brought forward (parliamentary time must be found first).
In summary, the Treasury is proposing to: (1) amend the definition of "senior management function" to allow the FCA/PRA to reduce the number of roles; (2) allow some senior managers to be appointed without prior approval, provided firms assess their fitness and propriety and notify the regulators; (3) relax requirements regarding SoRs, so the FCA and PRA can adopt more flexible rules; and (4) repeal the certification regime altogether, so the FCA and PRA can develop a more flexible, proportionate regime.
Once these changes are made, the FCA and PRA are likely to reduce or rework requirements much more substantially in Phase 1. In the meantime, the FCA has invited views on what changes could be made to reduce the burden of SMCR on firms while maintaining its benefits.
Osborne Clarke comment
Following the consultation, the FCA and PRA do not expect to publish final Phase 1 rules until mid-2026.
Even with that long lead in time, the proposed changes for Phase 1 are rather modest and unlikely to significantly ease the burden for firms or bolster the FCA's growth objective. Although it is clear from the various papers that SMCR is here to stay, the real reform will come in Phase 2 which has yet to take shape.
This Insight was written with the assistance of Kiki Jackson, solicitor apprentice at Osborne Clarke.
