On 30 March 2023, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) jointly published Discussion Paper 1/23: Review of the Senior Managers and Certification Regime (DP23/3). DP23/3 follows the Government’s announcement in December 2022, as part of the Edinburgh Reforms, that HM Treasury, the FCA and the PRA would commence separate reviews of the Senior Managers and Certification Regime (SMCR).

The FCA and PRA are reviewing the effectiveness, scope and proportionality of the SMCR, which is the basis for DP23/3. HM Treasury has in parallel launched a Call for Evidence (CfE) to look at the legislative aspects of the regime. The reviews aim to understand stakeholders’ views on the functioning of the SMCR and to identify ways to improve the regime to help it work better for firms and regulators, while preserving its underlying aims.

DP23/3, together with HM Treasury’s CfE, is the first full review of the SMCR. While there have been other evaluations in the past, these were more limited in scope. DP23/3 seeks high-level responses on the extent to which the current SMCR is effective in meeting its objectives, as well as asking questions on the scope and proportionality of the regime and on its component parts with a view to identifying potential specific enhancements.

Responses to DP23/3 will inform whether there is a case for the regulators to propose specific changes to the rules and guidance that implement the SMCR, which if taken forward would be subject to the usual consultation process. Since the SMCR is set in legislation as well as in rules made by the regulators, some of the areas of potential change covered by DP23/3 may require legislative change, and stakeholders should consider this in the context of HMT’s CfE.

The deadline for responses to this DP23/3 is 1 June 2023.