The Financial Conduct Authority (FCA) has started rolling out the first phase of reforms to the Senior Managers and Certification Regime (SMCR), following the Government's review of UK financial services regulation.

Some of the more significant changes will need legislation to be implemented and remain some way off, but firms are already seeing a series of amendments designed to reduce administrative burden and provide greater flexibility.

The direction of travel is clear: regulators want to preserve accountability while making the regime easier to operate in practice. For most firms, the changes are unlikely to require wholesale changes to governance frameworks, but they do create an opportunity to streamline existing processes and cut unnecessary administration.

Changes already in force

A number of reforms took effect in April 2026, many of them focused on simplifying operational requirements.

One notable change is the extension of the 12-week rule. Firms now have 12 weeks to apply for emergency cover of a Senior Management Function (SMF), rather than needing regulatory approval within that period. Some firms had asked for a longer timeframe, but the change still gives greater flexibility when dealing with unexpected vacancies.

The FCA has also introduced a series of practical measures to reduce day-to-day administration, particularly around certification, reporting, and recruitment.

The areas and key changes include:

Certification - Greater flexibility on recertification processes and record keeping.

Directory reporting - Most updates now due within 20 business days rather than seven.

Criminal record checks - No longer required for certain internal and intragroup moves.

Regulatory references - Response period reduced from six weeks to four weeks.

Statements of responsibility - Changes can generally be reported within six months.

These changes should make it easier for firms to build SMCR requirements into existing HR, governance, and compliance processes.

Regulators have also issued extra guidance on SMFs, Prescribed Responsibilities, and Conduct Rules. Firms now have more clarity on how to allocate responsibilities and when responsibilities can be shared between senior managers. Updated Conduct Rule guidance also gives further direction on regulatory references and how to treat employees who leave during misconduct investigations.

Recent changes

Alongside the April reforms, further changes have now come into effect. Most notably, the thresholds that determine whether a firm falls within the Enhanced SMCR regime have increased by 30%, meaning some firms may move into the ‘Core’ category and benefit from a less onerous governance framework than they had previously. Regulators have also committed to reviewing these thresholds periodically to ensure they remain accurate and fair.

The FCA has also removed certain overlapping certification requirements where individuals perform multiple certified functions. This should simplify certification and reduce duplication for firms, without changing the standards expected of individuals.

Further conduct-related changes, linked to the FCA's wider work on non-financial misconduct, will follow later this year.

The bigger opportunity: Phase 2 reforms

The changes made so far have mostly focused on improving processes and removing administration burden. The proposed Phase 2 reforms have the potential to be far more significant:

Removing SMCR from legislation

The headline proposal is the removal of the Certification Regime from legislation. This does not mean certification will disappear, instead, responsibility for designing and maintaining the regime would move fully into the regulators' rulebooks. This gives the regulators greater flexibility to build a more proportionate framework over time. For firms, the hope is that this will reduce duplication and better align requirements with risk.

Changes to Senior Manager approval processes

Currently, firms must obtain FCA approval before someone can perform most SMFs, which can cause delays when hiring or restructuring. Under the proposed reforms, regulators would be able to designate certain SMF appointments as notification-only roles, removing the need for formal pre-approval. If this goes ahead, it could meaningfully reduce recruitment timescales and ease succession planning.

Limited of conditional approvals

The Government has also proposed allowing firms to apply for limited or conditional SMF approvals. This could help where someone is suitable for a role, but their responsibilities are expected to change over time or interim arrangements may be required while recruitment is underway.

Simplification of Statements of Responsibility and Conduct Rules requirements

Further proposals aim to remove some of the legislative detail around Statements of Responsibility and Conduct Rules requirements. This would let regulators take a more flexible and proportionate approach across different types of firms, rather than applying a largely uniform framework. This could mean less frequent documentation updates, fewer reporting obligations, and more scope to tailor governance arrangements to individual firm size and complexity.

Taken together, these proposals suggest that Phase 2 is unlikely to weaken individual accountability. Instead, the focus appears to be on keeping the core principles of SMCR while removing the elements that firms have long seen as overly complex, duplicative, or operationally burdensome.

What should firms do now?

Most firms won’t need to make significant structural changes. However, it is a good time to review your certification processes, reporting procedures, and governance documentation, to make sure the flexibilities that are already available are being utilised.

It is advisable that firms also keep a close eye on how Phase 2 develops. The changes so far are welcome, but the next phase has the potential to deliver the most meaningful benefits: reducing administrative burden, supporting recruitment, and creating a more proportionate SMCR framework.

If you would like more information on the new regime, how it could affect your business, or need support reviewing your current position, our team of experts would be happy to hear from you. Whether you are navigating new or existing SMF rules, our team of specialists bring subject matter expertise to guide you through the process every step of the way.