Overview

On 22 April 2026, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) published a joint package of reforms to the Senior Managers & Certification Regime (SM&CR) as set out in policy statement PS26/6. The reforms are designed to make the regime more efficient, proportionate, and easier to operate, while preserving its core objective of individual accountability.

The changes respond to industry feedback that, although the SM&CR is broadly effective, aspects of its operation – particularly approvals, certification, and ongoing administrative processes – are unnecessarily burdensome.

Phase 1 introduces targeted improvements that can be implemented without legislative change. A second phase, subject to HM Treasury reforms, is expected to consider more fundamental changes to the structure of the regime. Most phase 1 measures took effect on 24 April 2026, with additional operational changes (including reporting and certification updates) taking effect from 10 July 2026. Certain conduct rule guidance changes will apply from 1 September 2026.

Collectively, these measures are intended to reduce unnecessary administrative friction in the operation of the regime, while preserving its core accountability framework and supporting more efficient firm governance.

Key reforms in detail

1. Relaxation of the application of the 12-week rule

The “12-week rule” has been amended so that firms now have 12 weeks to submit an application for approval of an individual to perform a Senior Management Function (SMF), rather than being required to both submit and receive approval within that period. Once the application has been submitted, the individual may continue to perform the role until the application is determined.

The change provides firms with greater flexibility in managing temporary or unexpected vacancies, while maintaining appropriate oversight through the application of Senior Manager Conduct Rules that will apply even before formal approval has been received. Should any breach of these rules occur before approval is received, the firm must report this as soon as possible to the FCA.

2. Clarifying reporting requirements for Conduct Rule breaches and regulatory references

The FCA has made clear that only breaches of the Conduct Rules resulting in disciplinary action need to be notified. This could still potentially raise difficult questions for firms, as they will also need to consider their reporting obligations under Principle 11. 

As regards the difficult question of whether a firm should disclose potential misconduct in a regulatory reference where an employee departs the firm before an investigation is complete, new guidance has been provided. Before disclosing unproven allegations to the FCA, the firm must take the following four factors into account:

• Materiality: Whether the suspected misconduct would be material enough to warrant disclosure if it were ultimately proven to be true.
• Reasonable grounds: Whether the firm has “good enough grounds” for its belief to reasonably conclude that the information is relevant to the hiring employer’s assessment of the individual’s fitness and propriety.
• Fairness: Whether including the details aligns with the overarching fairness requirements found in the FCA Handbook (specifically SYSC 22.5.4G and SYSC 22.5.5G), meaning the reference must still be fair, accurate, and based on documented facts.
• Legal permissibility: The extent to which disclosing the suspected misconduct is actually permissible under wider privacy, employment, and other relevant legal frameworks.

Importantly, the FCA added a strict verification caveat: A firm should not include information about suspected misconduct unless it has taken sufficient steps to verify the information. It cannot simply pass on mere suspicions or completely unverified allegations. 

Some uncertainty remains, and firms will still be required to exercise judgement as to whether an allegation should be included, but the position is a little clearer than previously.

Going forward, firms will be expected to provide regulatory references within four weeks (reduced from six weeks); however, this is expressed as guidance rather than a binding rule.

3. Changes to criminal record checks

The validity period for criminal record checks has been extended from three to six months. In addition, firms are no longer required to obtain new checks for internal or intra-group SMF appointments. Again, this should make the regime easier to navigate without unduly compromising the original policy purpose.

4. Guidance on prescribed responsibilities

The FCA has provided more clarity on when it might be appropriate to split prescribed responsibilities, which has historically been a difficult question. However, this position is likely to change when phase 2 occurs, so the changes have a limited time horizon.

5. Reduction in certification burden

The reforms remove the requirement to certify individuals performing multiple overlapping certification functions, reducing the number of certification roles by approximately 15%.

Guidance also confirms that:

• certification can be delivered digitally or by email (rather than in paper form); and
• certification assessments can be integrated into existing HR processes such as annual appraisals. Where there have been no changes, a proportionate approach is expressly permitted.

6. More proportionate application of enhanced regime requirements

Thresholds for enhanced SM&CR firms will increase by approximately 30%, with a new mechanism to review thresholds every five years.

This change is intended to ensure that only firms of sufficient size and complexity are subject to enhanced requirements.

7. Clarification of senior management roles

Additional guidance has been introduced to clarify the scope and application of certain SMFs (e.g., SMF7 (Group Entity Senior Manager) and SMF18 (Other Overall Responsibility Function)) to make it easier for firms to identify when an individual might be performing such functions. This is intended to reduce interpretive uncertainty and unnecessary SMF applications.

8. Extended deadlines for regulatory updates

Firms will benefit from extended deadlines, including:

• up to six months to notify changes to Statements of Responsibilities and Management Responsibilities Maps (with submission of only the latest version required); and
• an extension of most Directory update deadlines from 7 to 20 business days (with a shorter deadline retained for leavers).

What’s next?

Phase 1 reforms are intended to deliver incremental improvements ahead of more substantive changes expected under phase 2, which will require legislative changes.

HM Treasury is considering broader legislative changes. Consistent with the approach seen in other areas, the proposal is to remove many of the requirements currently found in legislation and instead provide the regulators with powers to make rules in these areas. This is intended to create greater flexibility to respond to future changes and policy objectives. 

The changes proposed include:

• removing the requirements relating to the Certification Regime from legislation to allow for a more proportionate, dynamic replacement delivered through regulatory rules;
• permitting firms to appoint certain SMFs without requiring regulatory pre-approval;
• repealing the legislative provisions relating to Statements of Responsibilities so that these can be dealt with through more flexible regulatory rules; and
• removing the prescriptive requirements relating to Conduct Rule breaches and training from legislation but retaining the regulators’ ability to make rules in connection with the Conduct Rules.

Subject to the necessary legislative changes being made, the FCA and PRA expect to consult on phase 2 reforms later in 2026, which are likely to introduce more fundamental changes to the structure and scope of the SM&CR.

Conclusion

The phase 1 reforms provide meaningful relief for employers from some of the operational burdens associated with the SM&CR, particularly in relation to certification, reporting, and approvals processes.

Firms should assess how these changes affect their governance frameworks, certification populations, and internal processes. In particular, firms may wish to review:

• SMF role structures and responsibilities;
• certification mapping and processes; and
• internal procedures for approvals, reporting, and record-keeping.

At the same time, firms should closely monitor upcoming legislative and regulatory developments. The anticipated phase 2 reforms have the potential to introduce more substantive changes to the UK’s individual accountability framework.

Client Alert 2026-099