Recruiting a CEO for an FCA-Authorised Firm: What Makes the Brief Different

Recruiting a CEO for an FCA-Authorised Firm: What Makes the Brief Different

Appointing a Chief Executive at an FCA-authorised firm sits within a regulatory framework that shapes the search from the first day of the brief. The role itself is the SMF1 — a designated Senior Manager Function under the Senior Managers and Certification Regime. The candidate cannot start in the role until the FCA has approved the appointment through the Form A process. The Statement of Responsibility for the role allocates personal regulatory accountability to the individual that did not exist in the same way before SMCR took effect. A CEO search at an FCA-authorised firm is not the same exercise as a CEO search at a commercial business — the candidate pool is narrower, the assessment criteria are different, and the appointment timeline is longer.

This article sets out what makes the SMF1 CEO brief different from a generic CEO search, and what boards should think through before commissioning the work.

The SMF1 Designation and What It Carries

The SMF1 is the Chief Executive Officer designation under SMCR. The designation applies to the senior individual who has overall responsibility for the day-to-day management of an FCA-authorised firm. For most firms with a designated CEO role, the SMF1 sits with the holder of that title. The Statement of Responsibility typically covers strategy execution, operational leadership, customer outcomes, regulatory compliance and the firm’s overall risk profile.

Three things follow from SMF1 designation that materially shape the recruitment brief. The candidate must be capable of passing FCA fitness and propriety assessment covering honesty, competence and financial soundness. The candidate must understand and be willing to accept the personal accountability framework that SMF status carries. And the candidate must have either prior SMF experience or sufficient relevant senior experience that the FCA is likely to grant approval during the Form A assessment.

None of these is a tick-box exercise. The fitness and propriety assessment looks at the candidate’s full professional history, regulatory engagement history and personal financial position. Candidates with adverse regulatory history, prior firm enforcement actions, or material financial difficulty can face challenges through the approval process even where the core experience is strong. A recruiter who has not been through the Form A process recently can mis-pitch the role to candidates who would not pass assessment and waste several months on a search that ultimately does not complete.

The Form A Approval Timeline

The Form A approval process typically adds three to six months to the appointment timeline beyond the offer date. The submission itself takes time to prepare — comprehensive disclosure of the candidate’s career history, any regulatory engagement, fitness and propriety attestations, and the firm’s submission about the role and the candidate’s fit. The FCA assessment then runs its own course, with most applications completed within the published service standards but more complex cases taking longer.

The timeline matters for the brief in three ways. First, interim cover needs to be planned for. If the current CEO is leaving before the new CEO can be approved, the firm needs to think about interim leadership during the approval window. Second, the candidate’s notice period management needs to align with the approval timeline rather than the offer date. Third, communication to internal stakeholders and the wider market needs to acknowledge the approval timeline rather than implying the new CEO will start immediately on offer acceptance.

Boards that plan for the approval timeline at the start of the search have meaningfully better experiences than boards that treat it as a back-end administrative step. The search firm needs to surface the timeline implications early and to plan the search around them rather than treating Form A as someone else’s problem after the offer is signed.

What Makes the SMF1 Candidate Pool Narrower

The candidate pool for an FCA-authorised firm CEO is materially narrower than the equivalent commercial CEO pool. Three factors drive the narrowing.

First, prior SMF1 or SMF3 experience is highly valued. The FCA is more likely to grant approval quickly to a candidate who has previously held a Senior Manager Function, ideally at a similar firm type. Candidates who have only held senior commercial roles at non-regulated firms face a longer approval process and a higher risk of approval friction. Boards therefore tend to weight prior SMF experience heavily when shortlisting.

Second, regulatory engagement experience matters. The CEO of an FCA-authorised firm is the principal point of contact for the regulator on strategic matters. A candidate who has built productive working relationships with the FCA across previous roles brings something to the brief that a candidate with no regulator engagement history cannot. The strongest CEO candidates have specific examples of how they handled regulator engagement during difficult periods at previous firms.

Third, technical and prudential familiarity is often required. A bank CEO needs depth in capital adequacy, liquidity and the prudential framework. An insurance CEO needs depth in Solvency II. An asset manager CEO needs familiarity with the CASS regime, MIFIDPRU and the firm’s specific regulatory landscape. The technical learning curve for a CEO new to regulated FS is steep and most boards prefer candidates who arrive with the technical fluency rather than candidates who will need 12 months to acquire it.

Brief Construction: Five Areas That Often Get Missed

The five areas below are where the SMF1 brief most often falls short relative to what the search actually needs to deliver.

The Statement of Responsibility scope. The brief needs to articulate clearly what the new CEO’s Statement of Responsibility will cover. This is not boilerplate — different firms allocate different combinations of activities to the CEO versus other SMF holders. The brief should set out the specific activities the new CEO will own and the corresponding regulatory accountability that comes with them. Candidates need to understand this to evaluate the role properly.

Regulator engagement context. The brief should describe the firm’s current regulator relationship honestly. Is the firm under heightened supervisory engagement? Has the firm recently been through a Section 166 review or a regulatory enforcement matter? Is there a current concern the regulator has raised that the new CEO will be expected to address? Candidates evaluate this dimension carefully and the brief that omits it loses credibility quickly.

Board chemistry and Chair relationship. The working relationship between the CEO and the Chair sits at the centre of the role. The brief should describe the Chair’s working style, the board’s recent dynamics, and the type of CEO-Chair partnership the board is looking to build. This is not soft information — the chemistry between the CEO and the Chair often determines whether the appointment succeeds.

Strategic transition expectations. Is the new CEO being recruited to execute an existing strategy, to develop a new strategy, or to manage the firm through a specific transition (M&A, IPO, exit, turnaround)? The brief should be specific about which of these applies. The candidate profile for a continuation CEO is meaningfully different from the candidate profile for a transition CEO.

Compensation framework including LTIP and equity. Senior CEO compensation at regulated firms typically includes a long-term incentive structure that may include deferred shares, share options, or specific performance conditions linked to regulatory and commercial outcomes. The brief should outline the proposed framework so that candidates can evaluate the opportunity properly. Searches that treat compensation as an offer-stage discussion typically lose candidates at the offer stage.

The Search Process: Retained Is the Standard

Senior CEO appointments at FCA-authorised firms run through a retained executive search model in almost every case. The combination of confidentiality requirements, the long Form A timeline, the depth of candidate assessment required, and the importance of the role to the firm’s regulatory standing does not fit a contingency engagement. Boards that try to run an SMF1 CEO search on contingency typically find that the search firm cannot invest the time required to do the work properly.

The retained engagement typically includes briefing sessions with the Chair, key board members, and where relevant the lead regulator contacts. Candidate identification draws on the search firm’s network across regulated FS and adjacent sectors, with assessment combining traditional reference checking with specific attention to the candidate’s regulatory engagement history and the likelihood of Form A approval. Shortlists are typically smaller than commercial CEO searches — three to five candidates rather than six to eight — reflecting the narrower pool and the depth of assessment required for each.

Timeline from brief to offer is typically 12 to 18 weeks for a senior FCA-authorised firm CEO search, with the Form A process then adding three to six months to the candidate’s start date. Boards should plan on a six to nine month total timeline from search commencement to the new CEO being in role.

Common Pitfalls Boards Should Avoid

Three patterns recur in FCA-authorised firm CEO searches that go wrong.

The first is treating the regulatory dimension as an administrative formality rather than as a defining feature of the brief. Boards that treat Form A as a back-end step often find themselves at the offer stage with a strong candidate who turns out not to meet the threshold the FCA is looking for. The regulatory dimension needs to be front and centre of the brief from day one.

The second is over-weighting prior commercial scale relative to prior regulated experience. A candidate who has run a large commercial business but has no prior regulated FS experience faces a steep learning curve and a longer approval process. Boards that prioritise commercial scale over regulated familiarity sometimes end up with candidates who struggle in the first 12 months.

The third is under-investing in the Chair-CEO chemistry assessment. The working relationship between the CEO and the Chair determines whether the appointment succeeds. Searches that focus on candidate capability and skip the chemistry dimension regularly produce appointments that look right on paper but do not work in practice.

Adrian Lawrence

Adrian Lawrence FCA is the founder of Exec Capital. He is a Chartered Accountant and holds an ICAEW practising certificate in his own name with over 25 years’ experience operating at C-suite level, Adrian brings direct executive experience to senior search. His background spans private equity-backed businesses, owner-managed companies, and listed environments, giving Exec Capital a practitioner’s understanding of what leadership hires actually require.