Blog
SMCR Reform in 2026: Key Changes and What Lies Ahead
James Alleyne
The King’s Speech on 13 May 2026 signalled a clear intention to reduce the regulatory burden of the Senior Managers & Certification Regime (“SMCR”) by around 50%. Whilst the specifics of this wait to be seen, the objective must be considered in the broader context of the FCA seeking to promote economic growth through more streamlined and proportionate regulation, central to which is a pre-existing two phased set of reforms to the SMCR.
Phase 1 SMCR reforms
Changes imposed through Phase 1 of the SMCR reform package are to come into effect in two distinct stages: some were imposed on 24 April 2026 with additional measures following on 10 July 2026.
The key changes imposed on 24 April 2026 include the following:
- a sensible amendment to the 12-week rule, such that firms will have 12 weeks to submit a senior manager function (“SMF”) application for someone acting up, as opposed to the previous requirement to have the application submitted and approved by the FCA within that timeframe, which left firms and individuals vulnerable to regulatory risk in the event that the FCA was unable to complete its assessment promptly;
- an increase in the time-frame of the validity of criminal records checks for SMF applicants from three to six months, with firms no longer required to undertake such checks where an SMF holder is applying for another SMF role within the same group;
- clarifying that a conduct rule breach by individuals who are not SMF holders but who are performing an SMF role (for instance in reliance upon the 12-week rule) must be notified immediately to the regulator rather than on an annual basis;
- enhancements to the certification regime to allow firms to embed fitness and propriety certification into business-as-usual HR and appraisal processes and providing them greater latitude to conduct this in a proportionate manner when there have been no changes from the previous year;
- reducing the time period for firms to respond to requests for regulatory references, from six weeks to four weeks; and
- allowing firms up to 6 months to notify the regulator of any changes to Statements of Responsibilities and Management Responsibilities maps.
Some of the important changes to come into effect from 10 July 2026 include:
- permitting SMF 18s at solo regulated firms to hold any prescribed responsibility;
- increasing various of the financial thresholds for firms to be categorised as enhanced scope firms; and
- reducing the need for multiple certifications to be conducted in respect of overlapping roles, including where a signification management function holder is also certified as a material risk taker.
Phase 2 SMCR Reforms
The main changes being proposed by HM Treasury as part of its Phase 2 package – which will require primary legislation rather than amendments to rules - include the following:
- the removal of the certification regime entirely, to be replaced by a suite of new rules to avoid any supervisory gaps;
- a reduction in the number of SMFs that require regulatory approval, with certain new appointments being subject to notification to the regulator rather than specific pre-approval;
- repealing legislation relating to Statements of Responsibility, to allow the FCA to impose more flexible and proportionate system under its own rule making powers;
- streamlining existing conduct rules and removing the requirement on firms to notify the regulator of breaches of these;
- decreasing the time available for the FCA to determine SMF applications, from three to two months; and
- giving regulators the power to accept SMF applications subject to time limits or conditions without triggering notice requirements and increasing flexibility for managing interim appointments.
Comment
The changes outlined above in Phase 1 are relatively minor amendments to the FCA Handbook and are, essentially, pragmatic responses to common complaints by regulated firms. These will certainly contribute to a more flexible and proportionate regulatory regime, and are likely to be welcomed by the City of London, as it strives to retain its status as a leading financial centre in an increasingly competitive global environment.
Phase 2 of the reform package, however, will result in a much more significant overhaul of the regime. Given the fundamental purpose of the SMCR, which is to drive high standards of conduct and make individual accountability clearer and easier to enforce, these reforms certainly call into question whether the regulator is pursuing economic growth at the expense of its broader regulatory objectives, particularly when there has been a dearth of enforcement cases against senior individuals by the FCA over the past few years.
About the author
James is a Partner in the firm’s Financial Services Group. He advises clients on the full spectrum of financial services and FCA-related matters, including on authorisation and approval applications, perimeter and supervisory issues, internal and enforcement investigations as well as cases before the Regulatory Decisions Committee and Upper Tribunal.
Share insightLinkedIn X Facebook Email to a friend Print