The Authorisation Journey: Building an SMF Team From Scratch

A firm applying for FCA authorisation is not only building a business — it is assembling a senior management team the regulator will assess before it grants permission. The Senior Management Functions a firm needs, and the people approved to hold them, are central to the authorisation decision. Getting the team right, and in the right order, is one of the things that most often decides whether an application moves smoothly or stalls. This article sets out which senior managers an authorisation-stage firm needs, how to sequence the hires, and how to keep the people side of the application from becoming the bottleneck.

It is written for founders and management teams taking a firm through authorisation for the first time. Where specialist search is the right route, Exec Capital runs FCA and regulated-firm recruitment across the Senior Management Functions, and its urgent SMF appointment service is built for the time pressure authorisation timetables create.

Why the People Side Decides the Application

Authorisation is, in large part, an assessment of whether the firm has the people and the governance to operate safely within its permissions. The regulator looks at who will hold the Senior Management Functions, whether they are fit and proper, and whether the firm’s governance gives those individuals the standing and independence to discharge their roles. A strong business plan with a weak or incomplete senior team is a common reason an application struggles.

SMF Capital’s guide to building an SMF team from scratch walks through the journey in detail, and its guide to going directly authorised and the senior managers you will need sets out which functions an authorisation-stage firm must plan for. The complete SMF designations guide maps the full set of functions.

Which Senior Managers an Authorisation-Stage Firm Needs

The governing functions

Most firms will need the core governing functions: a chief executive (SMF1) responsible for the day-to-day running of the firm, and, where the firm has a board, executive directors (SMF3) and a chair. The chief finance function (SMF2) is needed where the firm has one, and at many firms the governing team is small — a handful of individuals holding the applicable functions between them.

The required oversight functions

Almost every authorised firm needs compliance oversight. The SMF16 compliance oversight and, where the firm is within scope of the money laundering regulations, the MLRO (SMF17) functions are among the first a new firm must plan for — and at smaller firms they are frequently held by one person. Larger or higher-risk firms will also need a chief risk function (SMF4) and internal audit.

Firm-tier and sector-specific functions

Which functions apply depends on the firm’s tier and sector. An enhanced firm carries more required functions than a core or limited-scope one; an insurer needs the PRA insurance functions; a payments or e-money firm has its own people requirements. The firm needs to map its applicable functions early, because that map drives the whole hiring plan.

Sequencing the Hires

The order matters. A firm that leaves its senior appointments to the end of the authorisation process risks discovering gaps it cannot fill in time, or presenting a team the regulator is not satisfied with at the point of decision. The better approach is to identify the functions early, prioritise the hires that are hardest to fill or most central to the regulator’s assessment, and build the team in parallel with the rest of the application.

• Map the Senior Management Functions that apply to the firm, given its tier, permissions and sector, before starting to hire;
• Prioritise the governing functions and the hardest-to-fill specialist roles, which have the longest lead times;
• Line up compliance oversight and, where needed, the MLRO function early — these are central to the regulator’s assessment;
• Confirm each candidate is approvable and fit and proper before relying on them in the application;
• Keep the Statements of Responsibilities and the responsibilities map coherent as the team comes together.

The documentation side matters as much as the hiring. Each senior manager needs a Statement of Responsibilities, and the firm needs a coherent responsibilities map showing how accountability is allocated. SMF Capital’s guide to the responsibilities map and its Statement of Responsibilities template are practical starting points, and getting them right early avoids rework later in the process.

Keeping the People Side From Stalling the Application

Two things most often slow the people side of an authorisation. The first is leaving senior hires too late, so the firm is still searching for a key function holder when the rest of the application is ready. The second is relying on candidates who turn out not to be approvable, forcing a restart. Both are avoidable with an early, structured approach to the senior team — treating it as a core workstream of the authorisation rather than an afterthought.

Exec Capital runs these searches as retained mandates, coordinated across the functions a firm needs. Briefing establishes the firm’s target permissions, tier and the functions it must fill; research maps approvable, fit-and-proper candidates for each; and we sequence the searches so the hardest-to-fill and most central roles are prioritised. Where the timetable is tight, we run the searches to it. The aim is a complete, approvable senior team ready when the application needs it — not a gap that holds everything up. For a function that must be covered immediately, our urgent SMF appointment service bridges the gap while the permanent search runs.

After Authorisation: Keeping the Team in Place

The authorisation decision is the start, not the end, of the firm’s obligations on its senior team. Once authorised, the firm must keep its Senior Management Functions filled by approved, fit-and-proper individuals, maintain the Statements of Responsibilities and the responsibilities map as the team changes, and reassess fitness and propriety on an ongoing basis. A departure from a key function creates an immediate obligation to fill it, and the firm cannot simply leave a required function vacant.

That is why the team a firm builds for authorisation should be built to last, not just to pass the application. A function holder recruited only to get through the gateway, with no real commitment to the firm, is a liability the moment they leave. Where a vacancy does open in a required function after authorisation, Exec Capital’s urgent SMF appointment service and the market for fractional compliance cover keep the firm compliant while a permanent replacement is found — but the better position is a stable, committed team that does not need replacing under pressure in the first place.

Frequently Asked Questions

When should we start hiring our senior managers?

Early — in parallel with the rest of the application, not after it. The senior team is central to the regulator’s assessment, and the specialist functions have long lead times. Mapping the functions and starting the hardest searches early is the single most effective way to keep the people side off the critical path.

Do we need every function filled before we apply?

The firm needs to be able to present a credible, approvable senior team for the functions that apply to it. Exactly what must be in place at each stage depends on the firm and the application; the practical point is that the regulator will assess the senior team, so it cannot be an afterthought. Planning the team against the application timetable is essential.

Can one person hold several of the functions at authorisation?

Yes, within the usual limits of capacity and conflict. At a small authorisation-stage firm a few individuals often hold the applicable functions between them. The firm must be able to show each holder can genuinely discharge what they hold, and that the independent oversight functions are not compromised.

Sources and Further Reading

• FCA — Authorisation
• FCA — Senior Managers and Certification Regime
• FCA Handbook — SUP 10C (FCA senior management functions)