SM&CR reforms: What the government’s consultation response means for your firm

The government has now published its consultation response on reforming the Senior Managers and Certification Regime (SM&CR), setting out a clear plan to streamline the regime while maintaining robust individual accountability. Through these reforms, the government aims to reduce legislative prescription and give the regulators more latitude to adopt proportionate, risk‑based rules.

Introduction

The SM&CR, introduced in 2016, was designed to reduce consumer harm, strengthen market integrity and improve safety and soundness by embedding individual accountability. After a decade of experience and a 2025 Call for Evidence, the government has concluded that several statutory requirements add burden without improving governance or conduct, constraining proportionate oversight. In line with the Financial Services Growth & Competitiveness Strategy and following consultation between 15 July and 8 October 2025, the government is moving to streamline the regime while preserving accountability and enabling more risk‑sensitive regulator rules.

The FCA and PRA have already published policy statements on near‑term SM&CR rule changes (22 April 2026), addressing items within their existing powers. The government also proposes to shorten statutory deadlines for senior manager application decisions from three months to two, aligning law with the regulators’ timing in practice. There is a shared ambition between government and regulators to reduce the SM&CR regulatory burden by 50% without undermining core objectives.

The reform package at a glance

The government intends to move key mechanics of SM&CR out of primary legislation and into regulators’ respective rulebooks, giving the FCA and PRA the flexibility to calibrate requirements by risk and firm type, for example.

• The Certification Regime is intended to be removed from primary legislation, including the annual recertification requirement, so regulators may design a more proportionate and flexible framework in rules;
• Fewer roles will require pre‑approval. Regulators will gain power to specify when notification post firm fitness and propriety assessment is sufficient;
• Prescriptive statutory provisions on Statements of Responsibilities will be repealed, with details to be set in regulator rules;
• Conduct Rules will be streamlined by repealing statutory requirements for breach notifications and mandatory training, while retaining regulators’ power to set rules and requirements;
• Regulators will be empowered to specify when they may accept senior manager applications subject to time‑limits or conditions, without triggering statutory notice requirements where approved; and
• The Financial Markets Infrastructure SM&CR regime (for central counterparties, central securities depositories and recognised investment exchanges) legislated in FSMA 2023 will be amended to keep it consistent with these wider changes if and when it is commenced.

Why this matters and what to expect next

For firms, the reforms are a shift towards outcomes‑focused supervision, but that also means engaging early with the regulators’ Phase 2 consultations once primary legislation lands.

Primary legislation will be introduced as soon as parliamentary time allows, with regulators then consulting on Phase 2 rule changes to use the added flexibilities, particularly following removal of Certification from FSMA. The government and regulators remain committed to a coordinated approach that delivers the targeted 50% burden reduction while maintaining accountability.

How we can assist

Navigating this transition will require careful sequencing to avoid compliance gaps between statutory changes and evolving rulebooks. Our team can:

• Conduct a gap analysis of your SM&CR framework against the reform package and anticipated Phase 2 rulemaking;
• Redesign certification, competence and conduct processes to align with new rules, once available, minimising duplication and embedding risk‑based controls;
• Streamline Senior Managers workflows, including notification processes, conditional or time‑limited approvals and refreshed governance mapping for responsibilities and documentation; and
• Advise boards and executive committees on accountability, delegation and evidencing fitness and propriety in line with the new regime.

If you would like to discuss what the reforms mean for your firm and plan an efficient transition, please contact one of our partners. We are ready to help you interpret the changes, engage with consultations, and implement proportionate, resilient controls.