Hiring a CEO Without Previous SMF Approval

The assumption that a CEO appointment at an FCA-regulated firm requires a candidate who has previously held an SMF designation is understandable but wrong. The FCA does not require candidates for senior management functions to have prior SMF experience — it requires them to be fit and proper for the specific role. A candidate who has led a significant business in an unregulated sector, who understands the regulatory obligations of the SMF1 designation, and who can demonstrate the personal qualities and governance capability the FCA expects, is a credible candidate for a regulated firm CEO appointment regardless of whether they have previously been FCA approved.

That said, a first-time SMF1 appointment is a materially more complex process than an appointment where the candidate has an established regulatory track record. The FCA’s assessment of a first-time applicant tends to be more searching, the Form A preparation requires more care, and the board has a greater advisory responsibility toward the candidate to make sure they understand what they are taking on. The process itself has also shifted: the first phase of the SMCR reforms came into force on 24 April 2026, and a second set of proposals is now out for consultation. This guide addresses each of these dimensions, from the reasons first-time candidates appear on shortlists through to how a new CEO builds regulatory credibility over their tenure.

Why First-Time SMF1 Candidates Arise

There are several legitimate scenarios in which the best candidate for a regulated firm CEO position has no prior SMF approval history. The most common is the transition from an unregulated sector — a successful CEO from a technology, professional services or industrial background who is moving into a regulated financial services firm for the first time. This profile is increasingly common as regulated firms recognise that deep financial services experience is not always the most important criterion, particularly for CEO appointments at fintech businesses, payment institutions, consumer credit firms or businesses at an early stage of their regulatory journey.

A second scenario is promotion from within, where the best internal candidate is a capable executive who has operated below the SMF threshold — in a senior management role that fell within the certification regime rather than the senior managers regime. Their competence is known and their cultural fit is established, but their regulatory approval history is limited to the firm’s own annual certification rather than FCA pre-approval. Promoting this individual to CEO requires a first-time SMF1 application, and it is worth noting that the regulators are now consulting on removing the Certification Regime altogether, which would make this route into an SMF role less visible in future.

A third scenario is the return to executive roles after an extended period outside the regulated sector — a former regulated firm executive who has spent several years in private equity, academia or non-executive roles. Regulatory references cover the previous six years, so an individual whose regulated executive experience is older than this has a much thinner recent regulatory record, and the FCA will be assessing them largely on current evidence rather than past approval.

A fourth, more recent scenario is the founder or commercial leader of a firm going through authorisation for the first time. Here the CEO, the firm and often most of the senior team are new to the regime together, which raises the stakes on every other appointment around them. Our CEO of regulated firm recruitment work regularly involves exactly this mix of first-time candidates and first-time firms.

What the FCA Assesses in a First-Time SMF1 Application

The FCA’s fit and proper assessment covers the same three areas for a first-time applicant as for an experienced SMF holder: honesty, integrity and reputation; competence and capability; and financial soundness. The difference is not in the framework but in the evidence base available to the FCA when making its assessment.

For an experienced SMF holder, the FCA has a regulatory track record to draw on — previous approval history, supervisory interactions at previous firms, and any regulatory references that have been submitted. For a first-time applicant, none of this history exists within the regulatory framework. The FCA must assess the individual’s fitness and propriety from their professional background, the firm’s own assessment of their suitability, the references and checks supplied, and the quality and completeness of the Form A submission itself.

This often results in closer engagement from the FCA. The FCA says in its guidance on how it processes senior manager applications that it may invite candidates to interview where it has concerns about fitness and propriety, questions about how they would address challenges at the firm, or because of the potential impact of the role, and it lists the CEO among the roles it is likely to interview for at large listed firms. In practice, a first-time applicant with no regulatory history gives the FCA more reasons to want to meet them. The interview will typically explore the candidate’s understanding of the SMCR framework, their approach to the firm’s regulatory relationship, the specific risks and obligations of the firm’s business, and their plans for the first six to twelve months in the role.

The firm’s own fitness and propriety assessment matters more for a first-time applicant, not less. The board should be able to show how it tested competence against the actual risks of the business — not just that the candidate ran a successful company elsewhere — and how it reached the conclusion that the gaps in regulatory experience are covered by the candidate’s own preparation and by the team around them.

Preparing a First-Time SMF1 Candidate for the FCA Interview

The regulatory interview is one of the most consequential steps in the approval process for a first-time SMF1 applicant. A candidate who performs poorly — who cannot explain the regulatory framework that applies to the firm, who is unprepared for the level of technical engagement the FCA expects, or who appears to have an incomplete understanding of the personal accountability the SMF1 designation carries — risks both the outcome of the application and a poor start to their relationship with the regulator.

Preparation should begin well before the Form A is submitted. The candidate should have read and understood the FCA Handbook provisions on the Senior Managers Regime, the firm’s recent supervisory correspondence, and any regulatory concerns or remediation the firm has been subject to. They should understand which SMFs apply to the firm and the responsibilities attached to each, so they can speak coherently about the governance structure they are inheriting and how they intend to run it.

They should also be ready to discuss the firm’s risk profile in specific terms — not at a high level of generality but with real knowledge of the principal risks the FCA supervises the firm against, what the current control framework addresses, and where the candidate believes further work is needed. Useful preparation usually includes:

• A structured briefing from the Head of Compliance (SMF16) and MLRO (SMF17) on open issues, recent breaches and the compliance monitoring plan.
• A walk-through of the draft Statement of Responsibilities and the management responsibilities map, so the candidate can explain how accountability is allocated beneath them.
• Time with the chair and the chairs of the risk and audit committees, so the candidate understands the board’s view of risk appetite.
• One or more mock interviews run by someone who has sat on the other side of the table, with feedback on technical gaps and on tone.
• A clear first-year plan the candidate can explain in their own words, including how they will engage with the firm’s supervisor.

A first-time SMF1 candidate who has done this preparation will make a materially better impression than one who has not, and the quality of that impression directly affects the FCA’s view of their competence and capability for the role.

The Form A Submission for a First-Time Applicant

The Form A submission for a first-time SMF1 applicant needs particular care in several respects. The fitness and propriety disclosure section must be completed with great precision — the obligation to disclose matters such as certain spent convictions, civil proceedings, disciplinary findings and financial difficulties is broader than most candidates expect, and a material omission is treated seriously whether or not it was deliberate. Candidates coming from outside financial services are the most likely to be surprised by the breadth of the questions, and the firm’s legal or compliance advisers should take them through the disclosure requirements before the form is completed.

The regulatory references section presents specific challenges for first-time applicants. Where the candidate’s previous career has been entirely in unregulated sectors, there may be no regulated employer from whom a regulatory reference is required, which simplifies this part of the process. Where the candidate has had any regulated employment in the last six years, those references must be obtained and their content reviewed and understood before the Form A is submitted. A candidate who first encounters the content of a reference at the point of FCA review is in a far worse position than one who has anticipated and planned for any disclosure.

The Form A should also explain the appointment in its own right: why the board chose this candidate, how the firm assessed their fitness and propriety, and what support has been put in place to address any gaps in regulatory experience. A short, honest account of those gaps — and how they are covered — is more persuasive than an application that tries to present an unregulated career as if it were regulated experience.

How the SMCR Reforms Affect a First-Time SMF1 Hire

The first phase of the SMCR reforms, set out in FCA PS26/6 and PRA PS12/26, took effect on 24 April 2026. Several of the changes bear directly on a first-time CEO appointment:

• The 12-week rule is now a submission deadline. Where someone steps into an SMF to cover a temporary or unforeseen gap, the firm now has 12 weeks to submit an application rather than to submit and obtain approval, and the individual can continue to act until the application is determined.
• Criminal record checks last longer. A criminal record check is now valid for six months rather than three, which reduces the risk of a check expiring while a delayed search or Form A is being finalised.
• Regulatory references come back faster. Firms asked for a regulatory reference by the FCA’s rules now have four weeks to respond rather than six — useful where a returning executive has regulated employment in the last six years.

The underlying decision period has not changed. The FCA must decide a complete application within three months, although it can pause the clock where it asks for more information or decides to interview the candidate. Separately, the FCA has said it aims to decide at least half of senior manager applications in no more than 35 days, as set out in its announcement of faster authorisation targets.

The second phase is still at proposal stage. FCA CP26/37 and PRA CP14/26, published on 22 October 2026 and open until 22 January 2027, propose moving a number of SMFs — for the FCA, SMF5 and SMF10 to SMF15 at dual-regulated and Enhanced firms — from pre-approval to notification, removing the Certification Regime, ending routine resubmission of Statements of Responsibilities, and shortening the statutory decision period from three months to two. These are proposals, not rules. SMF1 is not among the roles proposed to move to notification, so a first-time CEO will still need full FCA pre-approval, and the work described in this guide remains necessary.

The Board’s Role in Supporting a First-Time SMF1 Appointment

Where the board has chosen a first-time SMF1 candidate, it carries an advisory responsibility it does not carry to the same extent when appointing an experienced SMF holder. The experienced candidate understands what the designation involves from direct experience. The first-time candidate is relying partly on the firm and its advisers to make sure they understand the personal accountability they are accepting.

The board should make sure the candidate has had a thorough briefing on the SMCR before the appointment is confirmed — not the Form A process specifically, but the substance of the SMF1 designation: what the Statement of Responsibilities will say about their personal accountability, how the supervisory relationship works, what the Duty of Responsibility requires of them, and what the consequences of a breach in their area of accountability can be for them as an individual. Getting the Statement of Responsibilities right before the candidate signs is one of the most practical things a board can do. A CEO who accepts an SMF1 appointment without understanding the personal accountability framework is not adequately informed, and a board that has not provided that information carries its own governance responsibility.

The board also needs to look at itself. A first-time CEO benefits from a chair and non-executives who know the regime well and can challenge constructively. Where the board itself is thin on regulated experience, it is worth considering whether the appointment of an independent non-executive with SMCR background should run alongside the CEO search; our board of directors recruitment team can run the two together.

Building the Team Around a First-Time CEO

The single biggest factor in whether a first-time SMF1 appointment works is usually the strength of the people around the CEO, particularly in compliance and financial crime. The FCA will look at whether the firm has the expertise in place to support a CEO who is new to the regime, and a capable Head of Compliance and MLRO are the most visible evidence of that.

Smaller firms often do not need, or cannot justify, full-time hires in these seats. A fractional compliance officer holding SMF16, working alongside a fractional MLRO holding SMF17 — or one experienced individual holding both roles where the firm’s size and risk profile support it — can give a first-time CEO the regulatory depth they need from day one, at a cost that suits the business. Larger firms will usually want a permanent hire, and our SMF16 Head of Compliance recruitment work covers that route. Either way, the compliance appointment should ideally be settled before or alongside the CEO’s Form A, so the application can point to it.

Planning the full set of approved roles together, rather than one at a time, also avoids an application landing at the FCA that relies on support which has not yet been appointed. Our senior managers regime board recruitment work is built around that kind of joined-up planning.

Timeline and Contingency Planning

First-time SMF1 appointments can take longer to approve than applications from candidates with an established regulatory track record, mainly because the FCA is more likely to ask for further information or to interview. Boards should plan around the three-month statutory period for a complete application, and allow for the clock being paused while questions are answered or an interview is arranged. The FCA’s aim of deciding at least half of applications in no more than 35 days is a useful sign of direction, but it is a target across all applications, not a promise for any individual one.

Building this timeline into the succession plan — including identifying interim SMF1 cover where the gap between the outgoing CEO’s departure and the new CEO’s approval is likely to be more than a few weeks — is essential. Interim cover needs careful structuring. The person covering must be capable of performing the role, must be genuinely in a position to exercise the CEO’s regulatory responsibilities rather than simply holding the title on paper, and the firm must manage the 12-week rule correctly. Since April 2026, that means an application must be submitted within 12 weeks if the cover is to continue beyond that point.

The candidate’s notice period adds another layer. A first-time SMF1 cannot perform the role before approval, so the start date, the outgoing CEO’s exit and the Form A submission all need to be sequenced. Boards that leave the Form A until the candidate has resigned from their current role often find they have lost several weeks they could have used.

When First-Time SMF1 Is the Right Choice

Whether to appoint a first-time SMF1 candidate or insist on prior FCA approval depends on the circumstances of the firm and the appointment. At firms with a well-established regulatory relationship, a strong compliance function and a stable governance structure, a first-time SMF1 appointment from a highly capable external candidate can be an excellent outcome — bringing fresh perspective and commercial capability the regulated sector does not always provide. The approval process is manageable with proper preparation, and the FCA’s assessment is of the individual’s fitness and propriety rather than their regulatory credentials as such.

At firms with active regulatory concerns, an ongoing skilled person review, or a recently imposed requirement, the FCA’s scrutiny of a first-time applicant will be more intensive and the risk of a delayed or difficult approval higher. In these circumstances the board should give serious weight to whether a candidate with an established and positive regulatory track record would serve both the firm and the incoming CEO better. A practical test is whether the board could explain to the FCA, in a few sentences, why this candidate is the right person for this firm at this moment, and what has been put in place to cover their lack of regulatory history.

Working with Exec Capital

Exec Capital runs CEO searches for FCA-regulated firms and understands the preparation and process management a first-time SMF1 appointment needs. We brief first-time candidates on the regulatory framework early in the search, so that anyone who is not prepared to take on the personal accountability drops out before the shortlist rather than after the offer. We work with the board on how the fitness and propriety assessment is evidenced, help prepare the candidate for a possible regulatory interview, and can run the supporting compliance and board hires at the same time.

Every search is run by our specialist team, with Adrian Lawrence FCA overseeing each mandate. If you are weighing up a first-time SMF1 candidate, our regulated firm CEO search team can talk through the options before you commit to an approach.

Induction and Ongoing Development After Approval

The FCA’s assessment of fitness and propriety confirms that the individual is fit and proper to take up the SMF1 designation at the point of approval. It does not guarantee that they will continue to be fit and proper as the role develops and the regulatory environment changes — and the firm itself must keep assessing that. For a first-time SMF1 holder, the period immediately after approval is one of the highest-risk phases: they are exercising a level of personal regulatory accountability that is new to them, in a supervisory environment they are encountering for the first time.

Boards should invest in a structured induction for a first-time SMF1 CEO that goes beyond the operational handover from the outgoing CEO. The regulatory part of the induction should cover the firm’s supervisory history with the FCA, including any concerns raised and remediation completed; the SMCR governance map and the Statement of Responsibilities for each SMF holder; the risk framework and how it is reported to the board and the FCA; and the specific obligations the CEO’s own Statement of Responsibilities places on them personally. A first-time SMF1 holder who completes this induction systematically is far better prepared for their first supervisory meeting than one who relies on a verbal briefing.

Ongoing development — through regulatory updates, peer networks and regular engagement with the compliance function — should also be planned. The regime is changing: if the phase 2 proposals are adopted, the way Statements of Responsibilities are maintained and the shape of the senior team around the CEO will both shift. A CEO who was fully briefed at the point of approval but has not kept pace with those developments will find the supervisory relationship harder than one who has.

Long-Term View: Managing Regulatory Credibility Over a CEO Tenure

First-time SMF1 approval is the beginning of a regulatory relationship that will define the CEO’s tenure. The FCA forms its view of individual SMF holders over time — through supervisory meetings, through the quality of the firm’s regulatory submissions, and through the conduct of the firm’s regulated activities. A CEO who begins with little regulatory history, but who invests in the relationship and shows genuine regulatory engagement over their first two years, can build a strong standing with the regulator.

Conversely, a CEO whose regulatory engagement is weak or reactive — who is unprepared for supervisory meetings, unfamiliar with the firm’s regulatory position, or who defers all FCA contact to the compliance function — will find the supervisory relationship deteriorating over time, however smoothly the initial approval went. The first-time SMF1 designation is not a permanent marker. It is the starting point for a regulatory relationship the individual shapes through their own conduct over the course of their tenure.

Frequently asked questions

Does the FCA require a CEO to have held an SMF role before?

No. The test is whether the candidate is fit and proper for the specific SMF1 role at the specific firm. Prior approval helps the evidence, but it is not a requirement.

Is a first-time SMF1 applicant always interviewed?

Not always. The FCA decides case by case, and says it may interview where it has questions about fitness and propriety, about how the candidate would handle the firm’s challenges, or because of the impact of the role. Candidates should prepare as though an interview will happen.

How long does SMF1 approval take?

The FCA must decide a complete application within three months, with the clock paused if it asks for more information. It aims to decide at least half of applications in no more than 35 days. A proposal to shorten the statutory period to two months is under consultation.

Will the phase 2 reforms remove pre-approval for the CEO?

Not on the current proposals. CP26/37 and CP14/26 propose moving several SMFs to notification, but SMF1 is not among them. The proposals close for comment on 22 January 2027.

Can a first-time CEO be supported by fractional compliance staff?

Yes, where the firm’s size and risk profile support it. A fractional SMF16 and SMF17, or one person holding both, can give a first-time CEO credible regulatory support, provided they have enough time in the business to do the job properly.