Bite-size: SM&CR reforms - simpler processes, stronger focus on accountability
The FCA has published its latest consultation on phase 2 reforms to the Senior Managers and Certification Regime (SM&CR).
The reforms form part of the FCA's wider programme to make regulation more proportionate and efficient, while maintaining the core objective of individual accountability. The regulator has been clear that this is not a weakening of SM&CR. Instead, it is intended to remove unnecessary administrative burden, simplify processes and allow firms to focus more on delivering good governance and positive customer outcomes.
The changes are aimed at reducing some of the administrative burden firms have faced since SM&CR was introduced while keeping the core principles of accountability, governance and individual responsibility firmly in place.
While the regime has helped improve conduct and embed stronger governance across firms, parts of it remain overly complex and resource-heavy, particularly for smaller and mid-sized firms.
Key areas of proposed reform include:
• simpler and quicker SMF approval processes
• greater flexibility around the 12-week rule for interim appointments
• reduced duplication for criminal record checks on internal appointments
• clearer guidance on “reasonable steps” and Conduct Rules
• streamlining of statements of responsibilities and management responsibility maps
• changes to certification to reduce duplication and administrative burden
• a wider review of the Enhanced firm thresholds to improve proportionality
The FCA also acknowledges that firms have asked for clearer guidance on how the regime should operate in practice. It has committed to providing more practical support, including worked examples and clearer expectations around areas such as reasonable steps, certification, fitness and propriety, regulatory references and conduct rules.
What happens next?
Most of the Phase 1 reforms are already taking effect, with implementation being phased during 2026:
24 April 2026 - most policy changes came into force
10 July 2026 - changes to regulatory reporting and FCA processes
30 July 2026 - updates to the Directory, including removal of overlapping certification functions
1 September 2026 - changes linked to the FCA's non-financial misconduct reforms
The FCA has also confirmed that, subject to the Government's wider legislative reforms, it expects to consult on a second phase of broader SM&CR reforms later in 2026.
Full FCA publication can be found here.
Key takeaway
SM&CR is an important area of compliance but the FCA appears willing to make it more practical. The FCA wants SM&CR to be simpler and more proportionate without reducing accountability. Firms should begin considering how these changes affect their governance arrangements while recognising that further reforms are expected later this year.
How Auxillias can help
SM&CR remains one of the most important governance regimes across consumer credit and motor finance. Even where reforms reduce admin, firms still need to show accountability works in practice.
Auxillias supports firms with:
• SM&CR reviews and governance gap analysis
• Statements of responsibilities and management responsibility maps
• certification and fit and proper frameworks
• Conduct Rules guidance and breach assessments
• board governance and accountability reviews
• senior manager training and practical workshops
The current changes represent only the first stage of the FCA's wider review. As Phase 2 develops and new requirements emerge, firms will need to assess the impact on governance frameworks, senior manager responsibilities, certification processes, policies, procedures and training. Auxillias is supporting firms throughout that journey - from understanding the reforms and carrying out gap analysis through to implementing the final requirements once the new rules are confirmed.
If you would like to discuss how the proposed reforms may affect your governance framework, or would like support preparing for the next phase of SM&CR reform, please contact a member of the Auxillias team.
