On 15 July 2025, HM Treasury, the Financial Conduct Authority (FCA), and the Prudential Regulation Authority (PRA) published consultation papers proposing possibly significant reforms to the Senior Managers and Certification Regime (SMCR). The proposals are intended to streamline regulatory processes, reduce administrative burdens, and enhance the proportionality and flexibility of the regime, while maintaining robust standards of accountability in the financial sector.
Key Proposed Changes
HM Treasury
HM Treasury is consulting on legislative amendments to the SMCR framework. The most significant proposal is the potential removal of the Certification Regime from legislation, which would allow the FCA and PRA more flexibility to design a more proportionate replacement using their rule-making powers.
HM Treasury also proposes to reduce the number of senior manager roles requiring regulatory pre-approval by granting the regulators greater flexibility to define which Senior Management Functions (SMFs) are subject to pre-approval. This would enable firms to appoint certain senior managers without prior regulatory approval, subject to notification requirements.
FCA
The FCA’s proposals, in their consultation paper (CP25/21), focus on operational improvements within the current legislative framework. Key changes include:
- Amending the 12-week rule which currently allows firms to appoint an individual to cover for a SMF who is absent, without prior regulatory approval, provided the appointment does not exceed 12 consecutive weeks. The FCA proposes to amend this rule so that firms will instead have 12 weeks to submit an application for SMF approval and, once the application is submitted within that period, the individual can continue in the role until the regulator makes a decision—removing the risk of breaching the rule due to regulatory processing times and providing greater certainty and flexibility during transitions.
- Streamlining the SMF approval process, including revised documentation requirements and improved communication protocols. For example, firms will be permitted to consolidate the skills gap analysis, competency assessment, and learning and development plan into a single document, rather than submitting separate documents for each requirement.
- Extending the validity period for criminal record checks for SMF applications from three to six months and removing the requirement for new checks for internal moves within the same group.
- Allowing more time for firms to report updates to Statements of Responsibilities (SoRs) and to update directory information for certified staff. Firms will be allowed to submit updates to SoRs on a periodic basis (no later than six months after the previous SoR), rather than immediately upon each change.
- Reducing duplication in certification roles, which is expected to decrease the number of certification roles by approximately 15%.
- Providing additional guidance on the allocation of prescribed responsibilities and the application of conduct rules.
- Raising the financial thresholds for firms to be classified as Enhanced SMCR firms, to account for inflation and ensure proportionality.
PRA Consultation
The PRA’s proposals align with the FCA’s operational changes and include:
- Clarifying the application of the 12-week rule and improving the process for onboarding new SMFs.
- Providing further guidance on the definition and applicability of certain SMF roles, including the group entity (SMF7) function.
- Proposing technical amendments to the PRA Rulebook and supervisory statements to ensure consistency and clarity.
- Considering changes to notification requirements for key function holders in insurers and the operation of the conduct rules.
Next Steps
The deadline for responses to the consultation papers is 7 October 2025. The FCA and PRA intend to publish final policy statements and updated rules in mid-2026.
HM Treasury’s legislative proposals will proceed subject to parliamentary time and the outcome of the consultation. If the legislative changes are enacted, the regulators will consult further on additional reforms, including the design of a replacement for the Certification Regime and further streamlining of SMF approvals.
There is no immediate action needed for managers, however the proposals will hopefully lead to a more streamlined process when complying with the SMCR.
Gabriel Olayera, Paralegal, contributed to this article.
