SMF1 CEO Appointments at FCA-Regulated Firms

The CEO as SMF1 at an FCA-Regulated Firm: Responsibilities and the Search Brief

Of all the Senior Management Functions designated under the Senior Managers and Certification Regime, SMF1 — the Chief Executive function — carries the broadest scope and the most direct line of personal accountability to the regulator. The CEO at an FCA-regulated firm is not simply the business’s most senior executive. Under SMCR, they are a designated individual whose fitness and propriety the FCA has approved, whose responsibilities are individually documented, and who can be held personally accountable for regulatory failures within their area of oversight.

For the boards, nomination committees and investors responsible for appointing a CEO at an FCA-regulated firm, this changes the nature of the search in ways that a generalist executive search firm will not fully appreciate. This guide sets out what the SMF1 designation means in practice, what it requires of the individual, and how firms should approach the search process for a regulated CEO appointment.

What Is the SMF1 Designation?

The Chief Executive function — SMF1 — is one of the required senior management functions under the FCA’s Senior Managers Regime. At any FCA-regulated firm that has a designated chief executive, that individual must hold the SMF1 designation. The designation requires the individual to be formally approved by the FCA before they can take up the role. It cannot be assumed informally, delegated, or left unfilled without the regulator’s awareness.

The SMF1 designation makes the CEO personally subject to the FCA’s Conduct Rules and the Senior Managers Conduct Standards. It attaches a Statement of Responsibilities that defines what the individual is personally accountable for. And it means that in the event of a regulatory failing, the FCA can take enforcement action against the CEO as an individual — not just against the firm as a body corporate.

This framework applies across the full range of FCA-regulated firms — banks, insurers, asset managers, wealth management firms, consumer credit providers, payment institutions and investment firms among them. At firms that are dual-regulated — subject to both FCA and PRA oversight — the CEO requires approval from both regulators, and the PRA’s assessment of the individual’s fitness and propriety runs alongside the FCA process.

The CEO’s Regulatory Responsibilities Under SMF1

The Statement of Responsibilities (SoR) is the document that gives the SMF1 designation its practical meaning. The SoR sets out the specific areas for which the CEO is personally accountable — covering the business’s strategy, risk governance, regulatory relationships, capital and liquidity management, and the oversight of other senior management functions. It is agreed between the firm and the regulator at the point of approval and updated whenever there is a material change in the CEO’s responsibilities.

Under the Duty of Responsibility introduced by the Financial Services (Banking Reform) Act 2013 and extended more broadly by the Bank of England and Financial Services Act 2016, a CEO who is subject to enforcement action must demonstrate that they took reasonable steps to prevent the regulatory breach occurring. The burden of proof has, in effect, been reversed: the CEO must show they acted appropriately, rather than the regulator having to demonstrate they acted in bad faith.

This is a significant practical accountability, and it shapes what good CEOs at regulated firms actually do on a day-to-day basis. Effective SMF1 holders maintain close oversight of the firm’s risk framework, ensure they receive accurate and timely management information across all regulated activities, document significant decisions and their rationale, and maintain a genuinely constructive relationship with the FCA’s supervisory team. These are not administrative tasks — they are the evidence base that protects the individual in the event of regulatory scrutiny.

The FCA Approval Process for an SMF1 Appointment

Before a CEO can take up their role at an FCA-regulated firm, the firm must submit a Form A application to the FCA. The Form A covers the individual’s personal details, their regulatory history, any material disclosures (criminal convictions, civil proceedings, previous regulatory actions), and a self-certification of fitness and propriety. The firm must also provide a regulatory reference from any employer for whom the individual has worked in a regulated capacity in the past six years.

The FCA has up to three months to process a standard Form A application, though in practice approvals for straightforward appointments at lower-complexity firms are often received in four to six weeks. At larger or more complex firms — systemically important institutions, dual-regulated businesses, or firms that have recent regulatory concerns on their record — the FCA may request additional information, extend the processing period, or conduct a regulatory interview with the proposed CEO.

The regulatory interview, where it occurs, is a significant undertaking. The FCA will typically focus on the candidate’s understanding of the firm’s risk profile, their plans for the regulated business, and their approach to managing the regulatory relationship. Candidates who have not previously engaged with FCA supervisors at this level should prepare carefully. The quality of the interview has a lasting effect on how the firm’s regulatory relationship begins under new leadership.

For dual-regulated firms, the PRA runs a parallel approval process. The PRA’s assessment is more focused on prudential matters — the CEO’s understanding of capital adequacy, liquidity risk, and the firm’s safety and soundness — and it tends to be more intensive than the FCA process at smaller firms. At challenger banks, insurance firms and large investment managers, PRA approval for a CEO appointment can take considerably longer than FCA approval alone, and this must be factored into the search timeline.

How the FCA Supervises the CEO

The FCA’s supervisory relationship with the CEO of a regulated firm is qualitatively different from its relationship with the firm as an institution. The SMF1 holder is the regulator’s primary individual point of contact for matters of firm strategy, senior governance, and significant regulatory events. The FCA expects the CEO to be accessible, prepared, and candid in supervisory meetings — and it maintains assessments of individual SMF holders’ quality of engagement alongside its assessment of the firm’s regulatory compliance.

Supervisory meetings between the FCA and the CEO typically cover the firm’s business model and strategic direction, the quality of the firm’s risk governance, recent regulatory or compliance events, and the CEO’s plans for any material change in the business. The FCA may also seek to understand the CEO’s relationship with the board and with other senior management functions — whether the governance structure is genuinely effective or whether formal structures are masking a more concentrated decision-making culture.

CEOs who perform poorly in supervisory contexts — who appear unfamiliar with their firm’s regulatory position, who provide incomplete or inconsistent information, or who are defensive rather than constructive — create a supervisory relationship problem that is difficult to repair and that typically results in more frequent and more intensive regulatory engagement for the firm as a whole. The quality of the CEO’s supervisory relationship is therefore not a soft consideration for a regulated firm’s board — it is a material governance risk.

The CEO Search Brief at a Regulated Firm — What Is Different

Boards approaching a CEO search at an FCA-regulated firm are frequently surprised by how much the regulatory dimension changes the nature of the brief. At an unregulated business, the CEO brief is primarily about commercial leadership, strategic vision and people management capability. At a regulated firm, these remain important — but they are joined by a set of requirements that have no equivalent in other sectors.

The CEO must be able to fulfil their FCA approval obligations, which means they cannot have disqualifying regulatory history. They must be willing to engage directly with the FCA supervisory team — a requirement that some highly capable commercial leaders find uncomfortable or unfamiliar. They must be able to manage the accountability structure that the SoR imposes, which means maintaining genuine oversight across the business rather than delegating upward-facing regulatory responsibilities to the compliance or risk functions. And they must understand, at least at a conceptual level, the principal regulatory obligations that apply to the firm’s activities — even if they rely on specialist functions for technical detail.

The brief must therefore be more precise than a standard CEO search brief. Exec Capital works with boards and nomination committees to define the regulatory competence requirements of the role in specific terms — not simply “financial services experience” but a clear account of which aspects of the regulatory environment the CEO must be able to navigate personally, and which can be effectively delegated. This precision produces a narrower but more commercially useful candidate pool than a broad brief, and it significantly reduces the risk of late-stage disruption to the appointment process when regulatory considerations emerge during due diligence.

The Candidate Profile for an SMF1 CEO

The pool of credible CEO candidates for FCA-regulated firms is smaller than it appears from a distance. Not everyone with a strong financial services background has operated at the level of accountability the SMF1 designation requires. Not everyone who has held a CEO title at a regulated firm has done so in a way that involves direct supervisory engagement — at some firms the CEO operates primarily as a commercial leader while a COO or deputy CEO manages the regulatory relationship. And not everyone with the right regulatory track record has the commercial and leadership capability the firm needs to achieve its strategic objectives.

Exec Capital assesses CEO candidates for regulated firm appointments against three dimensions simultaneously: the depth and relevance of their commercial track record, the quality of their regulatory history and relationship management capability, and their ability to operate effectively within the governance structure that the SMF1 designation imposes. We pay particular attention to candidates’ track records under regulatory scrutiny — their conduct during supervisory visits, enforcement investigations, skilled person reviews or significant regulatory events — because this is where the individual’s genuine regulatory character is revealed rather than asserted.

For positions at dual-regulated firms, we additionally assess candidates’ understanding of prudential risk management. A CEO at a challenger bank or an insurance firm who cannot engage credibly with the PRA on capital adequacy and liquidity risk will struggle in supervisory meetings regardless of their broader commercial capability. This does not require the CEO to have a specialist prudential background — but it does require sufficient fluency to hold an informed dialogue with PRA supervisors and to rely appropriately on the CRO and CFO for technical detail without delegating the oversight responsibility itself.

Interim and Fractional Coverage While the Search Progresses

An SMF1 vacancy at an FCA-regulated firm is not simply an operational gap — it creates a regulatory notification obligation and, depending on the firm’s circumstances, may generate supervisory concern if it is not addressed promptly. The FCA expects firms to have succession arrangements in place for their senior management functions, and an extended SMF1 vacancy without a clear plan for coverage and resolution will draw attention during the next supervisory interaction.

Where a CEO departure is planned, the transition should be managed to ensure continuity of the SMF1 designation — either through a formal overlap period or through the appointment of an appropriately qualified acting CEO who can hold the SMF1 pending the permanent appointment. Where a departure is unplanned, the firm’s solicitors and compliance team should advise on the notification obligations and interim coverage options under SUP 10A of the FCA Handbook.

Exec Capital can provide access to experienced interim CEO candidates who are familiar with SMF1 obligations and who have held the designation previously. Interim coverage allows the permanent search to proceed at the pace it requires rather than being compressed by operational urgency — which consistently produces better appointment outcomes.

Timing the CEO Search at a Regulated Firm

The most common mistake in regulated firm CEO searches is starting too late. The combination of the search process itself — typically eight to twelve weeks from brief to preferred candidate at this level — and the FCA approval process — typically six to twelve weeks from Form A submission to approval — means that a CEO appointment at a regulated firm routinely takes five to six months from initiating the search to the individual being in post and approved. At dual-regulated firms, this can extend to six to nine months.

Boards that treat the CEO search as urgent but begin it when the outgoing CEO has already tendered their resignation are typically working with a three-to-four-month timeline for the full process. That is achievable with a well-run search, but it requires a fast-moving brief process, no delays in the shortlist stage, and a Form A submission as soon as the preferred candidate is identified. Any significant delay at any stage — a board that takes three weeks to review the shortlist, a preferred candidate who requests additional time before committing — pushes the timeline out and creates operational and regulatory risk.

Exec Capital advises on search timing from the outset of every regulated firm CEO engagement. Where circumstances require a compressed timeline, we can accelerate the search process and advise on regulatory approval preparation to reduce the risk of delays at the FCA stage. Our typical shortlist delivery time for a CEO appointment at an FCA-regulated firm is four to six weeks from brief sign-off.

Working with Exec Capital on Your CEO Appointment

Exec Capital places CEOs at FCA-regulated firms on both a retained and contingency basis. For complex or senior mandates — dual-regulated businesses, challenger banks, firms with recent regulatory concerns, or businesses where the CEO’s regulatory track record is a primary selection criterion — we work exclusively on a retained basis. For smaller authorised firms where the candidate pool is broader and the search can be progressed at pace, contingency search is available.

Every CEO search at an FCA-regulated firm is led personally by Adrian Lawrence FCA. Our search process integrates the regulatory approval timeline from the outset, supports Form A preparation once a preferred candidate is identified, and advises boards on how to structure the Statement of Responsibilities to reflect the genuine scope of the role. If you are approaching a CEO appointment at a regulated firm and want to understand the market, the timeline, and the right search approach for your circumstances, call us on 0203 834 9616 or use the link below.