SM&CR Reform Begins: FCA Confirms Phase 1 Changes from April 2026
On 22 April 2026, the FCA published its Policy Statement confirming the first phase of reforms to the Senior Managers and Certification Regime. These changes are intended to reduce unnecessary complexity while preserving the regime’s core principles of individual accountability and conduct.
The reforms follow CP25/21 and sit alongside the PRA’s changes for dual regulated firms. Most updates take effect from 24 April 2026, with further operational changes scheduled for July and September.
While the proposals are framed as simplification, firms should not interpret this as a reduction in expectations. The emphasis remains on clear accountability, effective governance, and evidence that responsibilities are properly discharged in practice.
Key Changes and Timelines
Criminal Record Checks and Disclosures
Requirements have been streamlined to reduce duplication, particularly for individuals moving within groups or between firms. This reflects a more proportionate approach to internal mobility, but firms still need to ensure appropriate checks are carried out.
12 Week Rule Clarified
Additional guidance clarifies how firms should apply the 12 week rule for temporary cover. This is particularly relevant during recruitment delays or unplanned absences. Firms should ensure that temporary arrangements remain controlled, documented, and time limited.
SMF7 and SMF18 Adjustments
Changes to SMF7 and SMF18 are intended to reduce unnecessary allocations where these roles do not align with how firms are structured. This allows for more practical and accurate governance arrangements and offers flexibility for firms to avoid assigning functions that do not align with their structure, though accountability and responsibilities must still be clearly defined.
Statements of Responsibility and Responsibilities Maps
Expectations have been simplified, particularly for smaller and non enhanced firms. The focus is now on clarity and accuracy rather than format. Firms should take the opportunity to remove duplication while ensuring responsibilities are properly captured.
Certification Regime and Directory
Clarifications have been introduced to simplify certification assessments and Directory submissions. While processes may become more efficient, firms remain responsible for ensuring that individuals are fit and proper and that records are accurate. Updated Directory rules and FCA systems go live on 10 July 2026.
Regulatory References and Conduct Rules
Guidance has been refined, particularly for firms operating across multiple entities. This should improve consistency in how references are requested and provided, but firms should continue to apply appropriate judgement. Regulatory references must now be provided within 4 weeks (reduced from 6), reflecting an emphasis on timeliness.
Prescribed Responsibilities and Enhanced Firm Thresholds
Threshold changes reduce the number of firms classified as enhanced, and prescribed responsibilities have been updated to better reflect different firm structures. Firms should review whether their classification and allocations remain appropriate
Implementation Timeline
24 April 2026
The majority of rule changes take effect. Firms should have updated documentation, governance arrangements, and internal processes in place.
10 July 2026
Updates to FCA systems and Directory processes go live. Firms should review reporting workflows and ensure systems are aligned.
1 September 2026
Changes linked to non financial misconduct come into force. Dual regulated firms should ensure alignment between FCA and PRA expectations.
Later in 2026
Further consultation on broader SM&CR reform is expected, subject to Treasury proposals.
FCA Expectations for Firms
Embed Changes Promptly
Firms are expected to update internal processes, templates, and governance frameworks in line with the new requirements.
Clarify Internal Roles
SMF allocations should reflect how the firm operates in practice. Firms should review roles such as SMF7, SMF18, and prescribed responsibilities
Streamline Certification and Directory Reporting
Processes should align with the updated requirements while maintaining accuracy and oversight.
Prepare for Further Reform
This is the first phase of change. Firms should expect additional reform and ensure flexibility in their approach.
What Firms Should Do Now
Review the Policy Statement
Ensure compliance, HR, and governance teams understand the changes and their impact. Dual regulated firms should also consider PRA updates.
Update Templates and Procedures
Revise Statements of Responsibility, responsibilities maps, onboarding processes, and Directory inputs. Ensure fitness and propriety assessment templates include consideration of serious non-financial misconduct, in line with updated guidance.
Engage Senior Managers and HR
Ensure Senior Managers and certification staff understand how the changes affect their roles.
Plan for Phase 2
Maintain capacity to respond to further reform expected later in 2026 and beyond.
These reforms move the regime towards a more workable framework, but they do not change the underlying expectation that firms can demonstrate clear accountability.
For many firms, this is an opportunity to simplify documentation and remove duplication. The more important task is ensuring that governance structures remain effective and that responsibilities are clearly understood and evidenced.
