The Financial Conduct Authority (FCA) has proposed scrapping the Certification Regime and cutting the number of senior manager approvals, in the second phase of its reforms to the SM&CR.
The consultation follows changes in the Financial Services and Markets Bill, which remove many prescriptive SM&CR requirements from legislation and leave regulators to decide how they apply through their own rules. The FCA said its proposals aim to maintain high standards of individual accountability and conduct while reducing unnecessary burden.
The biggest change is the removal of the Certification Regime, under which firms must assess and certify each year that staff in certain roles are fit and proper. The FCA also plans to retire its Directory of certified and assessed persons.
It proposes to reduce the number of Senior Management Function (SMF) applications, by removing some SMFs altogether and making others notified rather than approved roles, and to streamline the application process. Fewer firms would fall into the Enhanced regime, because the thresholds would rise.
Firms would no longer need to submit updated Statements of Responsibilities and Management Responsibilities Maps on an ongoing basis. The FCA also plans to streamline the Prescribed Responsibilities, simplify Conduct Rule training and raise the threshold for reporting Conduct Rule breaches.
The proposals build on the first phase of reforms, set out in PS26/6 in April. Dual-regulated firms should also read the Prudential Regulation Authority’s parallel consultation, CP14/26.
The Lloyd’s Market Association (LMA) welcomed the proposals, saying both regulators had taken on board many of its comments from 2025.
“We are happy with the proposal to remove the requirement and burden for certification of senior staff who are already subject to the Code of Conduct,” said John Levett, head of regulatory affairs at the LMA.
Levett said limiting the application process to key SMFs would reduce the cost and friction of onboarding staff. Because the changes are deregulatory, he said the LMA hoped they could be implemented faster than the proposed timeline of the end of 2027.
The consultation did not go as far as the LMA had hoped on interim appointments. Levett said the current 18-week limit on interim appointments was not enough time for a proper executive search, and the LMA wanted it extended to 26 weeks.
Comments are due by January 22, 2027. The FCA expects to publish final rules in a policy statement in the first half of 2027.
For insurers, MGAs and brokers, removing the Certification Regime would end a significant annual compliance exercise. Firms currently have to assess and certify staff in certification functions every year, keep records and update the FCA’s directory. That work falls hardest on smaller firms with limited compliance resources.
Higher thresholds for the Enhanced regime should also move some larger brokers and insurers into a lighter tier, and ending ongoing submissions of responsibilities maps will reduce paperwork.
Accountability doesn’t disappear, though. Senior managers remain personally accountable for their areas, and the Conduct Rules still apply to staff. Firms will need to keep strong internal governance, so the savings come from process rather than lower standards. With final rules not expected before mid-2027, firms should keep complying with the current regime and respond to the consultation if they want to shape it, including on the length of interim appointments.
