Global Regulation Tomorrow

On 22 April 2026, the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) issued policy statements (PSs) setting out changes for the Senior Managers and Certification Regime (SM&CR) as part of Phase 1 of the reforms. HM Treasury (HMT) has also published its consultation response to support Phase 2 in which the regulators would be able to make additional changes if legislation is made.

Background

In December 2022, the government announced that HMT, the FCA and the PRA would work together to undertake a review of the SM&CR. On 30 March 2023, HMT published a Call for Evidence on the legislative framework of the SM&CR. This publication was accompanied by a joint Discussion Paper by the FCA and the PRA.

On 15 July 2025, HMT, the FCA and the PRA each published consultation papers (CPs) setting out reforms to the SM&CR.

In the HMT CP, the government sought to deliver on the Chancellor’s commitment, as part of the 2024 Mansion House speech, to consult on removing the Certification Regime from legislation entirely. In addition, the consultation proposed major changes to the legislation that sets the framework for the Senior Managers Regime. In particular, HMT proposed to reduce the overall number of senior managers within the regime which would require a modification to the statutory requirement in the Financial Services and Markets Act (FSMA) 2000 that currently requires firms to ensure that all senior managers are subject to prior approval by a regulator. HMT also proposed to remove prescriptive legislative requirements relating to the provision, maintenance and updating of Statement of Responsibilities (SoRs), with the aim of allowing the regulators to adopt a more proportionate approach.

In their respective CPs, the PRA (CP18/25) and FCA (CP25/21) set out initial proposed changes to their SM&CR rules and expectations within the context of the current legislative framework. Such proposed changes included those concerning the regulatory determination of senior management function (SMF) applications, centring on changes to the ‘12-week rule’, increasing the validity period of criminal record checks (CRCs) for SMF applications and streamlining the SMF approval process. Both regulators would consider consulting as part of a Phase 2 of reforms on proposals to take advantage of any additional flexibility arising from HMT’s proposals.

The deadline for comments on the CPs was 7 October 2025.

HMT consultation response

In its consultation response HMT confirms that the government intends to make legislative changes to:

• Remove the Certification Regime from primary legislation, including the annual recertification requirement, and enable the FCA and PRA to consider a more proportionate and flexible framework in their rulebooks.
• Reduce the number of SMFs that require regulator pre-approval. Regulators will be given a new power to specify circumstances where it would be suitable for a firm to notify the regulators of the appointment of a senior manager following the firm’s assessment of fitness and propriety.
• Repeal the prescriptive legislative provisions relating to SoRs, enabling regulators to consider appropriate requirements in their rulebooks.
• Streamline Conduct Rules by repealing the prescriptive legislative requirements on firms to notify regulators of breaches and to conduct mandatory training, while retaining the regulators’ power to make Conduct Rules and set out appropriate requirements in their rulebooks.
• Give regulators the power to specify in rules and guidance the circumstances in which they may accept senior manager applications subject to time-limits or conditions, approval of which would not trigger statutory notice requirements.
• Amend the financial markets infrastructure (FMI) SM&CR regime legislated for in FSMA 2023 in relation to central counterparties, central securities depositories and recognised investment exchanges to ensure it is consistent with the wider SM&CR changes detailed in the consultation response as and when it is brought into force.

Delivering these reforms will require primary legislation and the government intends to introduce this as soon as parliamentary time allows.

The government will ensure that any commencement of the legislative changes to remove the Certification Regime is aligned with the regulators’ development of any replacement rules, in order to smooth the transition and avoid leaving regulatory gaps. Also, HMT states in the consultation response that the government is not planning to commence the SM&CR for FMIs at this stage and a decision to do so would be subject to further consultation. However, as part of these reforms, the government intends to make the equivalent legislative changes to the SM&CR for FMIs to those that will apply to FCA and PRA authorised firms, to ensure consistency and so that the regime could be applied in a coherent and aligned way in the future.

FCA

The FCA has set out its final rules and guidance for Phase 1 of the reforms in PS26/6: Senior Managers and Certification Regime review.

The FCA notes that it received strong support for the proposals set out in CP25/21 and is implementing its proposals largely as consulted on. Some minor adjustments have been made to take into account the feedback received and these are set out in PS26/6.

On page 8 of PS26/6 the FCA sets out two tables which summarise the changes and when they come into effect. Most changes take effect on 24 April 2026, so firms can benefit from them straight away. Improvements to regulatory reporting and processes will apply from 10 July 2026. This gives firms and the FCA time to make changes to processes and procedures. Changes made to align with PS25/23: ‘Tackling non-financial misconduct in financial services’, apply from 1 September 2026.

The FCA states that it expects to consult on Phase 2 proposals later this year.

PRA

The PRA has set out its final rules and guidance for Phase 1 of the reforms in PS12/26: Review of the Senior Managers and Certification Regime (SM&CR) − Phase 1.

Like the FCA, the PRA comments that overall, respondents were strongly supportive of its proposals and welcomed most of the proposed changes. In terms of specific proposals, the PRA reports that the main points raised by respondents were in relation to the 12-week rule, where there were calls to relax the policy further. There were also comments on the Group Entity SMF7 proposals, which some respondents interpreted as expanding the scope of the function.

The PRA notes in PS12/26 that it has made additional consequential changes to its rules in its final policy to operationalise two of the proposals in CP18/25:

• The Notifications Part of the PRA Rulebook has been amended to require any breaches of the Senior Manager and Individual Conduct Rules by individuals operating under the 12-week rule to be submitted to the PRA using the Form L notification form, where any such breaches occur. There are also consequential amendments to Form L. The PRA does not consider this enabling measure to be a significant change.
• The CRR Firms Fitness and Propriety, Insurance – Fitness and Propriety, Large Non-Solvency II Firms Fitness and Propriety, and Non-Solvency II Firms Fitness and Propriety Parts of the PRA Rulebook have been amended so that firms are no longer required to undertake CRCs where an existing SMF holder is applying for an SMF role in the same group, and allowing for a one-month gap between roles. Previously this exemption only applied to roles in the same firm. Again, the PRA does not consider this enabling measure to be a significant change.

The PRA has made additional changes to its supervisory statements (SS) following responses to CP18/25 and one correction that it has self-identified:

• A further example of where use of the 12-week rule is appropriate has been added to SS28/15 and SS35/15 to improve clarity.
• The tables of examples that indicate where SMF7 designation may be more or less likely have been amended to clarify wording that led some respondents to conclude that the changes were more significant than intended.
• Clarification has been provided in SS28/15 and SS35/15 that only the latest version of SoRs and Management Responsibility Maps need be submitted within the new six-month submission window.
• A cross-reference to the relevant rule(s) has been added in a new footnote to the guidance on criminal background checks in paragraph 4.19 of SS28/15 and paragraph 4.12 of SS35/15; and
• Text deleted in error in paragraph 5.19 of SS35/15 will be reintroduced.

The PRA confirms that amendments to its rules and supervisory statements will take effect on 24 April 2026.

It adds that firms should note that system changes to amend long and short Form A (application to perform an SMF) and Form E (internal transfer of an SMF) will not be implemented until 10 July 2026. This means that the new validity period for CRCs will not be recognised in systems until then. Also, the PRA states that changes to Form L, which is only available via the PRA’s external website, will be implemented on 24 April 2026 when the rule change becomes effective. This will permit the reporting of breaches of Senior Manager and Individual Conduct Rules by individuals operating under the 12-week rule.

The PRA confirms that it plans to consult on its proposals for more extensive Phase 2 reforms. It notes that many of the comments received in response to CP18/25 anticipated Phase 2 of the reforms and will take those into account in the next stage of its work.