Is this the end of the Certification Regime?
As part of the UK government's growth agenda set out in the Chancellor of the Exchequer's Mansion House speech on 15 July 2025, the Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA) and HM Treasury each published a consultation paper on proposed changes to the UK Senior Managers and Certification Regime (SMCR).
These proposals follow discussion papers issued in 2023 and therefore come as no surprise. There have long been concerns that the UK SMCR can be excessively slow and burdensome, particularly compared to other international regimes, and is starting to be a drag on the UK's competitiveness. The proposals in the consultation papers therefore aim to address this.
However, some of the outcomes will require changes to legislation which is a lengthy process. As a result, the proposals are in two phases:
- Phase 1: Smaller scale changes to FCA and PRA rules aimed at reducing the regulatory burden for firms which can be implemented more quickly (although, in practice, these are not likely to take effect until mid-2026 at the earliest). These are set out in the FCA consultation: CP25/21: Senior Managers & Certification Regime review and the PRA consultation: CP18/25 – Review of the Senior Managers and Certification Regime.
- Phase 2: More fundamental changes, potentially including the removal of the Certification Regime from legislation (to be replaced by regulatory rules) and reducing the number of senior manager roles. These are set out in in HM Treasury's paper: Reforming the Senior Managers Certification Regime. These would require changes to legislation and therefore will take longer to implement. The FCA and PRA would then also need to make further changes to their rules which, in turn, will need to be consulted on.
The changes will be relevant to all firms which are subject to the SMCR which includes FCA authorised firms as well as firms regulated by the PRA and third country branches. It will also affect certain persons working with or for those firms which, in some cases, will include persons based outside the UK. HM Treasury has also confirmed that, for now, it is not planning to extend the regime to financial market infrastructure operators.
The closing date for comments on the proposals is 7 October 2025.
We discuss the proposals in more detail below.
PHASE 1: Initial changes to rules
The first phase is the proposed changes to the FCA and PRA rules. These are changes which could be made within the scope of the existing statutory regime to simplify the current process for firms. For the main part, they are relatively minor tweaks intended to bring operational efficiencies rather than a significant relaxation of the requirements. The rules are not expected to be finalised until mid-2026.
As part of this process the FCA has also been updating certain of its SMCR forms and webpages.
PHASE 1: KEY PROPOSALS
- Criminal records checks: Checks to be valid for six months and no requirement for additional checks for certain existing Senior Management Functions (SMFs).
- 12-week rule to cover absences: Firms to have 12 weeks to submit applications for replacement SMFs (rather than obtain approval for the replacement within the 12-week period).
- Enhanced scope SMCR firms: Certain thresholds for being an enhanced scope SMCR firm to be increased by c.30% - including an increase in the AUM threshold to £65bn.
- Statements of responsibilities: More time to report updates to Statements of Responsibilities (SoRs).
- Certification Regime: Removal of requirement for separate certification for certain overlapping roles.
- Directory: More time to update specified Directory information.
- Regulatory references: Updated FCA guidance including that regulatory references should be provided within four weeks.
- Conduct Rules: Additional Conduct Rule guidance including on the treatment of breaches.
Criminal records checks
The validity period for criminal records checks for a new SMF candidate would be increased to six months (from three months) prior to submission of the application under changes to both the FCA and the PRA rules.
Under the FCA rules, firms would also not be required to obtain a criminal record check for existing SMF holders which are applying for a new Senior Management Function (or to be a non-SMF board director) in the same firm or group. Existing requirements to disclose information would, however, still apply. This should make it easier for firms to carry out internal reorganisations.
Firms have previously raised concerns about the ability to carry out criminal records checks in overseas jurisdictions. The FCA acknowledges that this can be difficult but does not propose to relax the rules.
12-week rule to cover absences
Some adjustments to the operation of the 12-week rule have also been proposed. This applies in the case of a temporary or reasonably unforeseen absence of an SMF and allows firms to appoint an individual to cover that role, without being approved, for up to 12 weeks.
This was generally felt to be too short a period to allow firms to appoint, and obtain approval for, a replacement SMF. The FCA has therefore proposed changing the rule so that firms have 12 weeks to submit an application rather than get a decision on an application (effectively extending the period for which a role could be performed without approval). The applicant could continue to perform the role until the application is determined (including temporarily from abroad if necessary). The FCA has also clarified that any person providing such coverage will be a member of the conduct rules staff of the firm.
However, the FCA expects that firms use the 12-week rule on a limited basis and only when appropriate. Firms should also submit a good quality application as soon as possible and make sure that the relevant individual is fit and proper. The relevant individual would also be subject to the Senior Manager Conduct Rules during the 12-week period and until the SMF application is determined.
Finally, firms would also not need to submit updated SoRs to the FCA until (and if) the absence reaches 12 weeks.
The PRA is also proposing similar rule changes.
Enhanced scope SMCR firms
To reflect the impact of inflation, the FCA also proposes increasing certain of the thresholds for being an enhanced scope SMCR firm by around 30%. This would mean that fewer firms (estimated by the FCA to be around 20 to 30 firms) would be subject to the additional requirements for enhanced scope SMCR firms such as the additional SMF of Other Overall Responsibility and the requirement for a Management Responsibilities Map. The concept of enhanced scope SMCR firm is also relevant for the FCA's operational resilience requirements.
If adopted, the new thresholds would be:
- Assets under management: £65bn (currently £50bn)
- Total intermediary regulated business revenue: £45m (currently £35m)
- Annual revenue generated by regulated consumer credit lending: £130m (currently £100m)
There would also be a mechanism to adjust the thresholds every five years in line with inflation.
Irrespective of these changes, if a firm has chosen to opt up to enhanced scope status, it will remain an enhanced scope firm unless it chooses to opt down.
Statements of responsibilities – reporting updates
In an effort to streamline the reporting requirements, firms would be able to submit updated SoRs on a bulk basis periodically provided that this is no later than six months after the last submission.
The FCA would also allow solo-regulated firms to gather all SoRs that had changed across the previous six months and submit only the latest version of each. Dual regulated firms, however, would still have to submit all the relevant versions.
Further changes to SoRs and also Management Responsibilities Maps may be considered in Phase 2.
Certification Regime
As discussed in Phase 2 below, HM Treasury is considering far-reaching changes to the Certification Regime. However, even if taken forward, any such changes will not take place in the short term. Therefore, as an interim measure, the FCA is proposing to simplify certain (relatively minor) aspects of the Certification Regime including:
- The ability to provide a certificate digitally (e.g. by email) rather than in hard copy.
- The ability to carry out re-certification as part of existing processes such as annual appraisals (which may reflect existing practice) and to conduct a less detailed certification process when there are no changes from the previous year.
- Removal of the requirement for separate certification in
certain cases of duplication, including:
- as a senior manager where the individual is already a certified FCA Material Risk Taker at the same firm; and
- as the manager of a certification employee where the individual is already certified for another certification function at the same firm.
- New (largely confirmatory) guidance that senior managers may need to be separately certified for a certification function if this is distinct from their SMF role e.g. certain roles which involve advising customers.
The PRA has also proposed some simplification measures for the process under the PRA Certification Regime.
Directory
The FCA also proposes some changes to the deadlines for submitting information to it including allowing firms 20 business days (rather than seven) to update information except in the case of staff departures which will remain seven working days.
In Phase 2, the FCA will explore further changes which could potentially include replacing the Directory in its entirety with an alternative source of information.
Regulatory references
The feedback on the regulatory reference process was mixed but a majority of respondents thought that it took too long to obtain regulatory references and delayed recruitment of key personnel. However, some firms considered that the current six-week period for providing a reference can be difficult to meet.
The FCA is planning to amend its guidance so that firms are expected to provide regulatory references within four weeks of request. This should allow firms to receive regulatory references more quickly but will also require an individual's previous firm to ensure it can meet the shorter deadline.
The PRA does not intend to make a similar change to its rules.
The FCA has also suggested some additional guidance including on:
- when a firm may need to disclose suspected misconduct where the employee leaves before the firm completes its investigations; and
- obtaining references from an overseas employer where there are difficulties in doing so – this could include providing the FCA with evidence of legal constraints such as correspondence with the employer or a legal opinion.
Conduct Rules
The FCA has included, in the consultation, some additional examples of behaviour which could be a breach of senior manager conduct rules such as:
- Failing to take reasonable steps to ensure that the firm complies with its notification obligations to the FCA, including under Principle 11, for the relevant business area.
- Failing to take reasonable steps to ensure that all staff (including agents and contractors) in the relevant business area report internally matters requiring notification to the FCA.
The FCA also proposes additional guidance on the treatment of Conduct Rule breaches limiting the circumstances in which these would need to be disclosed.
This includes clarification that only Conduct Rule breaches resulting in disciplinary action would need to be notified to the FCA as a breach of COCON (although other, separate, notification obligations may continue to apply). Similarly, a breach of the Conduct Rules would not be required to be included in a regulatory reference if the firm decides not to take disciplinary action and believes that the breach is not relevant to any assessment of fitness and propriety.
Where an individual's remuneration is reduced or adjusted, this would only need to be notified to the FCA where this is done as a sanction for a Conduct Rule breach.
Finally, the FCA proposes extending one of the factors under the Fit and Proper test relevant to honesty, integrity and reputation to include whether the relevant person has been the subject of adverse findings in an official investigation or public inquiry.
Other changes
The FCA has already made some changes to streamline the application process, including updating Form A and providing more guidance.
The FCA also proposes to issue guidance on when SMF7 (Group entity senior manager) and SMF18 (Other overall responsibility) would apply.
It has also drafted additional guidance on sharing a particular prescribed senior management responsibility between more than one person as well as the combinations of prescribed senior management responsibilities that the FCA would (and would not) find it appropriate for a particular SMF to hold (although firms are not expected to reconsider their existing allocations)
The PRA is consulting on whether its own version of SMF7 for dual-regulated firms should also be extended to include certain controllers with significant involvement in the day-to-day management of a PRA-authorised firm.
PHASE 2: More fundamental changes
The second phase includes more significant changes to the SMCR and will therefore inevitably take longer. If the proposals go ahead, this will involve changes to the Financial Services and Markets Act 2000 (FSMA) followed by changes to the FCA and PRA rules. No indication of the likely timings has been provided.
PHASE 2: KEY PROPOSALS
- Certification Regime: Removal of the Certification Regime from FSMA (and its replacement by more flexible regulatory rules).
- Senior managers: Reduction in the number of senior manager roles and roles for which approval is required.
Certification Regime
The most eye-catching proposal is probably the suggestion to remove the Certification Regime from FSMA.
The Certification Regime broadly requires firms to carry out a fit and proper assessment in respect of staff whose activities could cause significant harm to the firm or its customers. This includes material risk takers and heads of significant business units.
If the proposals are adopted then some of the requirements that would be removed from FSMA include:
- The obligation to certify all employees performing Certification Functions as being "fit and proper".
- The requirement for annual certificates and related record keeping requirements.
- The mandatory designation of any role that involves (or might involve) a risk of significant harm to the firm or its customers as a Certification Function.
However, this would not necessarily mean the end of all of the existing requirements and it is unlikely that the regime will be abolished completely. The FCA states in its consultation paper that it is considering how to design "a streamlined replacement regime" in the event that the Certification Regime is removed from FSMA. The FCA and/or the PRA could choose to retain some of the existing concepts but, given that the rationale for the changes is to reduce regulatory burdens and to allow for a more flexible and proportionate regime, it seems likely that any successor regime will involve lighter and more limited obligations for firms.
Senior manager roles and pre-approval
HM Treasury proposes amendments to the definition of SMF in FSMA which would allow the FCA and PRA greater flexibility in specifying what should be treated as an SMF. Ultimately this is aimed at reducing the number of senior manager roles and the FCA has said that it is open to removing SMF roles, reducing pre-approvals and streamlining the SMF assessment process further.
In addition, HM Treasury has proposed reducing the requirement for pre-approval for some roles. The FCA and PRA would then be able to specify that an individual performing certain SMFs no longer requires regulatory pre-approval. However, any appointments would continue to need to be notified to the regulators and the fitness and propriety requirements would continue to apply.
Other proposed changes
Other proposed changes include removing certain measures from legislation in order to allow the FCA and/or the PRA the ability to adopt a more proportionate approach in their own rules, potentially reducing obligations on firms.
Measures which could be removed include:
- The requirements relating to the provision, maintenance and updating of SoRs.
- The requirements on what should be included in the Conduct Rules e.g. the training and reporting obligations.
Views are also sought on other potential changes which would allow a more proportionate approach.
We have extensive experience on advising on SMCR and its practical implications for firms. If you would like further information or assistance in understanding the proposals, please speak to your usual Travers Smith contact or any of the individuals below.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
