The SM&CR was originally introduced to improve accountability and culture in financial services. It applied to thousands of firms across banking insurance, and financial markets, requiring clear designation of responsibilities for senior managers, certification of certain staff for their fitness and propriety, and conduct rules applicable to nearly all employees.
However, since its extension across the industry in 2019, stakeholders, including firms, industry bodies and governance, have raised concerns about is complexity, cost and administrative burden, particularly for smaller and midsized firms.
|
Phases:
|
Timelines:
|
|
Phase 1:
|
Rules are expected around early to mid-2026
|
|
Phase 2:
|
Precise details to be confirmed as they’re dependent upon legislative amendments.
|
Figure 1: Phased timeframes
In response, the FCA and HM Treasury have initiated a two-phased reform process:
- Phase 1: (now out for consultation) Covers FCA handbook changes that do not require legislation.
- Phase 2: (legislation changes) Will follow in partnership with the Treasury and be subject to future consultation.
Key proposals in CP25/21
The consultation includes several important reforms aimed at simplifying and compliance, improving efficiency, and reducing regulatory burden while maintaining high standards of governance and accountability.
1. Improved approval and notification process
The FCA proposes to streamline and digitise the senior manager approval process, reduce unnecessary paperwork, and make it easier for firms to navigate the application pipeline.
2. Extended certification and notification deadlines
Firms will be given more flexibility and time to certify staff, notify the regulator of changes, and make internal governance updates, reducing the pressure to act within short deadlines and allowing better planning.
3. Higher thresholds for enhanced regime
The FCA suggests raising the criteria for firms to fall within the “Enhanced” SM&CR regime, meaning fewer mid-sized firms would face the additional responsibilities such as maintaining responsibilities maps or handover procedures.
4. Clarifying conduct rule breach reporting
Proposals include simplifying how firms report breaches of Conduct Rules, focusing on materiality and consistency, and avoiding unnecessary duplication or over-reporting.
5. Preparation for phase 2 legislative reforms
Although not part of the current consultation, the FCA outlines potential future legislative changes including:
- Abolishing the Certification Regime
- Reducing the number of approved roles
- Simplifying responsibilities maps
- Removing the Directory of certified staff
Benefits for Firms
The proposed reforms could deliver tangible benefits for regulated firms, especially in areas that have become resource-intensive under the current regime.
Figure 2: Envisaged benefits of SM&CR reforms
Reduced administrative burden
By extending deadlines and simplifying processes, firms will likely spend less time managing SM&CR documentation, recordkeeping, and back-and-forth communication with the regulator
Proportionality for smaller firms
Many firms currently subject to the Enhanced regime may be reclassified, which could significantly reduce compliance obligations, saving time and cost, particularly for HR, compliance and legal teams
Better clarity and focus
Streamlining breach reporting and reducing unnecessary approval requirements may allow compliance teams to focus on higher-risk areas, improving outcomes for both firms and regulators.
Smoother talent management
Simplifying the Certification Regime could also make it easier for firms to hire, certify and onboard staff without excessive regulatory delays, which has been a growing friction point in talent-constrained markets.
Challenges for Firms
Despite the positive direction of reform, there will be short- and medium-term challenges for firms must proactively manage.
Transitional Complexity
Reforms may temporarily increase complexity as firms will need to run dual processes, manage SM&CR under the current framework, and prepare for changes expected in 2026 and beyond.
Governance Gaps during Transition
Simplification doesn’t mean lower expectations. the FA has reiterate that governance and individual accountability remain core principles. If firms misinterpret the reforms as a relaxation of standards, they risk supervisory scrutiny or enforcement.
Resource constraints
Smaller firms, in particular, may lack the internal capacity to revised governance frameworks, update policies, and retain staff on new SM&CR processes whilst continuing business as usual.
How RegTech can Help?
In this landscape of reform and transition, Regulatory Technology can play a transformative role. Let’s consider the following aspects:
1. Digital Responsibilities mapping
RegTech platforms can dynamically create and update responsibility maps as roles change. With potential simplifications coming, these platforms can automate responsibilities allocation, reducing risk of omissions or duplications.
2. Workflow Automation for approval and certification
Automated workflow tools can streamline internal approval changes, reminders and signoffs, related to senior manager appointment and certifications. This becomes even more powerful as deadlines are extended, firms can build compliance into HR systems rather than relying on spreadsheets or ad hoc processes.
3. Breach reporting and conduct rule monitoring
RegTech solutions with built-in conduct rule libraries and breach logging workflows can help firms respond to the new, clearer reporting standards. With integrations to case management or whistleblowing systems, firms can create a full audit trail and reduce manual error.
4. Compliance dashboards
With responsibilities, breaches, deadlines, and certifications spread across multiple functions, RegTech can centralise all key SM&CR indicators on real-time dashboards, helping senior managers and compliance officers monitor compliance health at a glance.
5. Training and attestations
RegTech tools can automate the delivery, tracking, and renewal of conduct rules training, certification attestations, and fit-and proper tests, ensuring firms stay on top of obligations with minimal overhead.
Looking ahead: Preparing for the next Phase
Firms should not adopt a ‘wait and see’ approach. The Phase 1 changes are likely to be implemented in mind-2026, and Phae 2 reforms may arrive soon after. Proactive firms should:
- Engage with the consultation before 7 October 2025
- Map their current SM&CR framework and identify inefficiencies
- Asses their technology slack and explore RegTech that can automate key processes
- Train senior managers and certification staff on anticipated changes
Figure 3: Key Dates
Next Steps
The SM&CR forms in CP25/21 signal a pragmatic shift in UK financial regulation, retaining accountability whilst reducing burdens that can hinder operational effectiveness. For firms, the key will be to embrace simplification without diluting governance, and to use technology to scale their compliance in a smarter, more agile way.
As RegTech solutions mature and regulatory expectations evolve, the future of individual accountability in financial services may become not just more manageable, but more strategic.
The SM&CR reforms in CP25/21 signal a pragmatic shift in UK financial regulation, retaining accountability whilst reducing burdens that can hinder operational effectiveness. For firms, the key will be to embrace simplification without diluting governance, and to use technology to scale their compliance in a smarter, more agile way.
As RegTech solutions mature and regulatory expectations evolve, the future of individual accountability in financial services may become not just more manageable, but more strategic.
How Ruleguard helps the Financial Sector
Ruleguard is an industry-leading GRC software platform designed to help regulated firms manage the burden of evidencing and monitoring compliance. It has a range of tools to help firms fulfil their obligations across the UK, Europe, N America, and APAC regions.
Transform the way your firm manages accountability and compliance.
Ruleguard's Accountability Regime Solution is designed to simplify compliance with various international accountability frameworks, including the UK’s SM&CR, Ireland’s SEAR, Singapore’s IAC, Hong Kong’s MIC, and Australia’s FAR. It supports key requirements like fitness and propriety assessments, certification, MRMs, SORs, and individual conduct breaches.
Ruleguard is a comprehensive solution that lets you protect and propel your business forward through the complex regulatory landscape.
Contact the author
If you’d like to learn more, please contact us for further information on: Tel: 0800 408 3845 or hello@ruleguard.com.
Related Webinars, White Papers and Blogs
Ruleguard hosts regular events on various regulatory topics. You can watch our webinars on-demand at your convenience, or read our blogs, white papers and tune in to our podcasts.
