CEO Succession at an FCA-Regulated Firm

CEO succession at an FCA-regulated firm is one of the most demanding governance challenges a board will manage. It combines the complexity of a senior executive search with the regulatory obligations of the Senior Managers Regime, the supervisory relationship dynamics of a significant change in the firm’s most senior leadership, and the operational continuity requirements of a business that cannot function without a person holding the SMF1 (Chief Executive) designation. Managing all three at once — in a way that satisfies the FCA’s expectations, protects the firm’s supervisory standing and produces the best possible appointment — requires planning that most boards begin too late.

This guide sets out what CEO succession looks like at a regulated firm, what the FCA expects, how long each stage realistically takes, and how the 2026 changes to the Senior Managers and Certification Regime (SM&CR) affect the timetable. It is written for chairs, nomination committees and company secretaries who need a practical plan rather than a summary of the rules.

The FCA’s Framework for CEO Succession

The SMF1 Chief Executive function is a pre-approved role. A firm must apply for, and receive, regulatory approval before the incoming CEO begins performing the function, and it must notify the regulator when the outgoing holder stops performing it. In practice that means a Form A application for the successor and a Form C notification for the departing CEO, which is due within seven business days of the individual ceasing to perform the role. At dual-regulated firms (banks, building societies, insurers and PRA-designated investment firms) the Prudential Regulation Authority is also involved in the approval.

The FCA expects regulated firms to have succession plans in place for their senior management functions, and it pays particular attention to CEO succession given the SMF1’s position as the individual primarily accountable for the firm’s conduct and regulatory standing. A firm that does not have a credible CEO succession plan — one that has not identified potential successors, assessed their suitability, or considered how the gap between a departure and an approved replacement would be managed — will face challenge in supervisory interactions.

The FCA’s view of a CEO succession is also coloured by the context in which it occurs. A planned succession, managed over a sensible timeline with good communication to the regulator, creates a very different supervisory impression from an unplanned departure handled reactively with thin interim cover. Supervisors notice the difference between boards that govern succession and boards that manage it as a crisis, and that difference affects the intensity of the engagement that follows. Our SMF1 CEO hiring guide covers the role’s prescribed responsibilities and the fit and proper assessment in more detail.

The underlying approval standard has not changed: the regulator must be satisfied that the candidate is fit and proper, with the honesty, integrity, reputation, competence and financial soundness the role demands. What has changed in 2026 is the procedure around the approval, which is covered below.

The Realistic Timeline for Planned CEO Succession

The most important planning input for CEO succession at a regulated firm is the realistic total elapsed time from starting the search to having an approved replacement in post. Boards that underestimate this find themselves either accepting a weaker appointment to meet an artificial deadline, running an extended period of interim cover that creates operational and regulatory risk, or both.

A practical planning timeline for a well-managed CEO succession at a mid-sized regulated firm looks like this:

• Weeks 1–4: brief development. Working with search advisers to define the candidate profile, agree the brief and confirm the scope of the search. A board that has done its succession planning properly may move faster here because candidate profiles and market maps already exist. A board starting from scratch should allow the full four weeks.
• Weeks 5–10: search and longlist. Candidate identification, discreet approaches, initial conversations and a longlist. Six weeks is realistic for a well-resourced search at this level, but it stretches at specialist firm types where the pool of people with SMF1-relevant experience is small.
• Weeks 11–14: shortlist, interviews and preferred candidate. Board interviews, referencing and selection. Four weeks is a sensible minimum for a proper process at this level.
• Weeks 15–16: offer, negotiation and Form A preparation. Agreeing terms, gathering regulatory references from previous employers, completing criminal record and credit checks, drafting the Statement of Responsibilities and preparing the application.
• Weeks 17 onwards: regulatory approval. The statutory deadline is three months from receipt of a complete application. The FCA has set itself a voluntary target of deciding at least half of senior manager applications in 35 days or fewer, measured from January 2026. Plan for the full statutory period, and longer if the regulator asks for more information or interviews the candidate, because the clock can be paused while it waits.

Taken together, a planned succession typically runs to around six months under favourable conditions, and longer at complex or dual-regulated firms, or where the approval process meets complications. Notice periods sit on top of this: a candidate leaving another regulated firm may be serving several months’ notice, and their current employer will also need to manage their own SMF transition. Boards that start the search only after a CEO resignation has been announced are working against this timeline from day one.

The approval stage is where regulated CEO searches differ most from unregulated ones. The FCA publishes guidance on how it assesses senior management function applications, including the circumstances in which it stops the clock. For a stage-by-stage view of decision times, see our guide to how long FCA SMF approval takes.

FCA Engagement During the Succession Process

How and when the firm talks to the FCA during a CEO succession is a governance decision with real consequences for the supervisory relationship. The FCA expects firms to be open about significant changes in their senior leadership, and a succession where the regulator learns of a CEO departure through market intelligence rather than from the firm will generate concern regardless of how well the eventual appointment is handled.

For a planned succession, good practice is to brief the firm’s supervisory contact before the departure is made public, either at a scheduled meeting or through a proactive call. This gives the FCA the chance to raise questions about the process and to confirm its expectations for the transition. It also shows the board’s commitment to an open relationship with its regulator, which is itself a positive governance signal.

For an unplanned succession — a sudden departure, a resignation at short notice or a forced exit — the firm should submit the required notification on time and brief its supervisory contact on the plan for interim cover and the timeline for a permanent replacement at the same time. Having a clear plan to communicate at that point is far better than notifying the departure without being able to say what happens next.

Where the firm is fixed-portfolio supervised or dual-regulated, the conversation will usually be more structured, and the regulator may want to meet the preferred candidate early. Building that possibility into the timetable avoids the common problem of an offer being accepted before anyone has thought about how the candidate will present at a regulatory interview.

Interim CEO Coverage at a Regulated Firm

Managing the gap between a CEO departure and an approved replacement is one of the most operationally sensitive parts of regulated firm succession. The firm needs someone performing the chief executive function from the point the incumbent stops, and that person must be accountable in substance, not just on paper.

The SM&CR has long allowed a firm to appoint someone to cover an SMF vacancy on a temporary basis without prior approval, under what is known as the 12-week rule. Until April 2026 the rule worked as a hard stop: the temporary cover had to end within 12 weeks in any consecutive 12-month period unless the replacement was approved. Under the FCA’s Phase 1 reforms in PS26/6, with matching PRA changes in PS12/26, which took effect on 24 April 2026, the 12 weeks became a deadline for submitting an application rather than for obtaining approval. Once an application has been submitted within that window — for either a permanent appointee or an interim candidate — the person providing cover can continue while the regulator determines it.

That change removes much of the cliff-edge pressure that used to force boards into rushed permanent appointments. It does not remove the need to plan. The firm still has to identify a credible interim holder quickly, document their responsibilities, and get a complete application in within the 12 weeks. A rushed or incomplete application is likely to be met with questions that pause the clock.

The individual providing interim SMF1 cover must be genuinely capable of exercising the CEO’s responsibilities — not a figurehead while the real executive work happens elsewhere. An interim CEO who is not actively engaged in the firm’s strategic and regulatory governance is a compliance fiction that supervisors will spot. Exec Capital works with experienced executives who have held SMF1 and similar senior roles and who can provide credible interim CEO cover while a permanent search runs. Where the vacancy is sudden, our urgent SMF appointment service is set up for exactly that situation.

What the Phase 2 SM&CR Proposals Would Change

On 22 October 2026 the FCA and PRA published joint Phase 2 consultations: the FCA’s CP26/37 and the PRA’s CP14/26. Both close on 22 January 2027, and the FCA expects to publish final rules in the first half of 2027. These are proposals, not rules, and boards should not plan on the basis that they will be adopted unchanged.

For CEO succession, the points that matter are:

• SMF1 stays pre-approved. The consultations propose moving a number of SMFs to a notification-only basis, but the Chief Executive function remains on the list of roles that need approval before the individual starts. The Form A step, and the time it takes, does not go away for CEO appointments.
• Longer temporary cover (proposed). The PRA paper sets out a joint proposal to extend the temporary cover period from 12 to 18 weeks, to be used only where there is clear justification.
• Shorter statutory deadlines (proposed). The government intends to reduce the statutory determination period for senior manager applications from three months to two months through legislation. Until that legislation is made, the three-month period applies.
• A streamlined application process. The FCA says it will simplify the SMF application process. The detail is in the consultation documents and may change before final rules are made.

None of this changes the board’s core task. The search itself, the candidate’s notice period and the quality of the application remain the main drivers of the timetable.

The Outgoing CEO’s Obligations

The outgoing CEO has regulatory obligations that continue until they stop performing the SMF1 function. These include a continuing duty to cooperate with the regulator, to close out supervisory matters within their area of accountability, and to make sure the handover gives genuine continuity of regulatory oversight, not just an operational handover.

The outgoing CEO should also be aware that their regulatory history — including any matters that arose during their tenure — will form part of the regulatory reference the firm must provide if they later seek a senior role at another regulated firm. Ending a CEO tenure in a way that is transparent, properly documented and consistent with regulatory expectations is therefore in the outgoing CEO’s own interest as well as the firm’s.

Practical points to agree early include the leaving date (which drives the Form C), any garden leave, whether the outgoing CEO will remain available for a period after leaving to answer questions, and the content of any announcement. Where the departure is contentious, these should be settled with legal advice before the notification is filed.

Succession in a Regulatory Remediation Context

CEO succession during a period of regulatory remediation — when the firm is subject to a skilled person review, an enforcement investigation or a voluntary or imposed requirement — needs particular care. The regulator will scrutinise the succession more closely, and the choice of successor will be assessed against the specific concerns the remediation is addressing.

A successor the regulator sees as likely to manage the relationship better than the outgoing CEO — someone with relevant expertise, a good regulatory track record and credibility in the area of concern — can be a positive factor in its own right. A succession that appears to carry forward the same culture or leadership approach that caused the problem will not get the benefit of the doubt. Boards in this position should take specific legal and compliance advice on how to present the succession and what the regulator is likely to expect from the incoming CEO’s early priorities.

In remediation cases it is also worth thinking about who chairs the selection panel, whether an independent non-executive should be involved, and whether the preferred candidate should meet the supervisory team before an offer is finalised. Each of these can strengthen the application.

Working with Exec Capital on CEO Succession

Exec Capital advises regulated firms on CEO succession planning and runs the search when an external appointment is needed. Our CEO of regulated firm recruitment work builds the Form A timetable into the search from the outset, plans interim cover where required and supports the firm’s communications with the regulator through the transition. Every search is run by our specialist team, with Adrian Lawrence FCA overseeing each mandate.

For CEO hires outside the regulated sector, or where the SMF1 element is secondary to a wider leadership brief, our general CEO recruitment practice applies the same discipline. To discuss a succession, call 0203 834 9616.

How the Outgoing CEO Supports the Transition

The outgoing CEO’s role in a regulated firm succession is more formal than in an unregulated business. Beyond the usual handover — briefing the incoming CEO on strategy, key relationships and operational priorities — the outgoing CEO has a specific part to play in the regulatory continuity of the transition.

They should make sure their Statement of Responsibilities is accurate as at their leaving date and that the firm’s Management Responsibilities Map is updated for the transition, where the firm is required to keep one. They should brief the incoming CEO on the current supervisory relationship — the key contacts, the status of any open supervisory matters and the regulatory history the new CEO will inherit. And they should be available for a joint meeting with the regulator if one is requested, particularly where there are live matters the incoming CEO needs to understand.

The regulatory reference the firm gives about the outgoing CEO must be completed honestly, whatever the circumstances of their departure. Where the departure follows performance or conduct concerns rather than a planned succession, the firm should take specific legal advice on its reference obligations. Giving an incomplete or misleading regulatory reference is itself a breach of the rules, and it creates compliance risk for the firm as well as harm to the next employer who relies on it.

Communication Strategy During the Succession

Communicating a CEO succession at a regulated firm — to staff, clients, counterparties and the regulator — needs careful sequencing. The regulator should hear before any public announcement, not at the same time. Key clients and major counterparties should be briefed personally by a board member or the outgoing CEO before the news is public, so they hear it directly rather than from the market. Staff should be told in a way that addresses the uncertainty a CEO change creates, particularly where the outgoing CEO has been a defining figure in the firm’s culture and client relationships.

The communication to the regulator should be substantive, not formulaic. A short note that the CEO is leaving and a successor is being sought is the minimum. A fuller briefing — covering the planned timeline, the search process, the interim cover arrangements and the type of candidate the board is seeking — demonstrates the governance quality supervisors expect. The chair or company secretary should lead this, working closely with the firm’s legal and compliance advisers.

For listed firms, market disclosure obligations add another layer, and the timing of the regulatory briefing and the market announcement needs to be planned together.

Building Succession Resilience Over the Long Term

The most effective CEO succession planning at regulated firms is not a one-off project started when succession becomes imminent. It is an ongoing governance process built into the board’s annual cycle. Boards that discuss CEO succession every year, keep a current view of internal and external candidates, and review interim cover arrangements as the firm’s regulatory profile changes are in a much stronger position than those that treat succession as an event.

In practice that means a named emergency successor who could step in at short notice, a development plan for one or two internal candidates, an external market view refreshed periodically, and minutes that record the board’s discussion as evidence of active oversight. Our practical guide to CEO succession planning for UK boards sets out how to build this into the board calendar. None of it needs large investment; it needs the chair and the nomination committee to treat CEO succession as a continuing responsibility rather than a periodic crisis.

Frequently asked questions

Does the CEO of an FCA-regulated firm still need prior approval?

Yes. SMF1 is a pre-approved senior management function, and the Phase 2 proposals published in October 2026 would keep it that way. The firm must submit a Form A and receive approval before the new CEO starts performing the function.

How long does FCA approval for a new CEO take?

The statutory deadline is three months from receipt of a complete application. The FCA’s voluntary target is to decide at least half of senior manager applications in 35 days or fewer. Requests for information or an interview can pause the clock, so plan for the full period.

What is the 12-week rule now?

Since 24 April 2026, a firm covering an SMF vacancy on a temporary basis must submit an application within 12 weeks. Once it has, the temporary cover can continue until the regulator decides. A proposal to extend the cover period to 18 weeks is out for consultation.

Can an interim CEO cover the role while the search runs?

Yes, under the temporary cover provisions, provided the individual genuinely performs the role and the application deadline is met. Many boards appoint an interim CEO and then apply for that person while the permanent search continues.

When should a board tell the FCA about a CEO departure?

Before any public announcement, through the firm’s supervisory contact, followed by the formal Form C notification, due no later than seven business days after the CEO ceasing to perform the role.