FCA CP26/37: What the proposed SM&CR changes mean for your firm

The FCA’s latest consultation, CP26/37, proposes significant changes to the Senior Managers and Certification Regime as part of the phased package of reforms (phase 1 changes are already in place). Its aim is to simplify compliance processes while maintaining individual accountability and standards of conduct.

For compliance teams, this could mean substantial changes to how they manage staff assessments, responsibilities, appointments and regulatory reporting.

Certification and staff assessments

The big news is that the FCA proposes abolishing the Certification Regime and closing the Directory of certified and assessed persons, this is a slightly different position to that previously stated. When the reforms were initially announced, the regulator expressed a desire to remove the regime but it would be replaced by a more proportionate replacement, it appears this has now been dropped.

This means the need to complete annual certification would end, with existing competence and suitability obligations providing safeguards instead. Regulatory references would cease being mandatory for formerly certified roles but remain required for SMFs. Applicable qualifications, Training and Competence requirements and annual Statements of Professional Standing would continue.

Our recommendation is to examine which parts of your assessment process provide useful information. Recruitment checks, supervision records and performance reviews can help identify concerns before they affect customers so we recommend retaining these elements where possible. Of course you may have to consider how those sources work together if certification disappears, including who would investigate concerns and decide whether someone remains suitable for their role.

Statements of Responsibilities

Routine submission of updated statements would stop. Firms would still submit them with SMF applications or notifications, maintain current internal versions and retain previous statements—normally for six years. An exemption would apply where one person holds all SMF roles; appointing a second SMF holder would trigger statements for both.

For firms considering a restructure, we recommend checking that job descriptions, delegated authorities and responsibility statements tell a consistent story. A practical review should identify who makes decisions, who oversees delivery and how issues reach the appropriate senior manager.

Senior-manager appointments and responsibilities

The FCA proposes pack package of reforms to reduce the burden on firms operating the Senior Managers Regime - this includes removing certain SMFs, making selected appointments subject to notification, simplifying the application process and reducing prescribed responsibilities. Higher thresholds would also reduce the number of firms within the Enhanced regime.

Specifically:

• SMF5 and SMF10–15 would become notified functions; FCA-only SMF18 and SMF22 would disappear.

• Nine prescribed responsibilities would be removed.

• The temporary-cover application or notification deadline would increase from 12 to 18 weeks.

Conduct Rules and reporting

Mandatory Conduct Rules training would become an obligation to notify staff of applicable rules and breach consequences. For most non-SMF staff, reporting would focus on final written warnings or dismissal, with up to 14 months to report final outcomes.

In our view, firms should assess training by its usefulness. Someone handling arrears, vulnerable customers or investment advice may benefit from practical examples and discussion. A notification alone may do little to help them recognise a difficult situation or choose an appropriate response.

HR and Compliance should also review how disciplinary cases are escalated. Clear ownership, consistent records and agreed decision points can reduce the risk of a case being overlooked during any transition.

What should firms do now?

Start with a proportionate impact assessment covering people, policies, systems and reporting. Record the current requirement, the proposed change, the likely operational impact and the person responsible for reviewing it once final rules are published.

Brief senior management so that proposed savings are understood alongside the work needed to deliver them. But a word of warning, avoid cancelling certification exercises, stopping submissions or withdrawing training prematurely. Consider gathering evidence about processes that are particularly burdensome—or particularly useful—to inform a consultation response.

Responses close on 22 January 2027, with final FCA rules expected in the first half of 2027. Dual-regulated firms should also review PRA CP14/26. Implementation is proposed for the second half of 2027, subject to legislation.

RB Compliance Consultancy can help you assess the proposals, review your existing arrangements and prepare practical changes to your policies, governance and training.