Interim SMF16 & SMF17 Cover During an FCA VREQ

Interim SMF16 & SMF17 Cover During an FCA VREQ

When an FCA-regulated firm is under active supervisory attention and its Compliance Oversight function (SMF16) or Money Laundering Reporting Officer (SMF17) departs — or, at many smaller firms, the single person holding both functions resigns — the board faces two problems at once. There is a live regulatory matter that demands senior compliance leadership, and there is a control gap in exactly the place the regulator is looking hardest. How quickly, and how credibly, that gap is filled tends to shape how the wider supervisory matter develops. Many smaller firms cover SMF16 with a fractional Chief Compliance Officer rather than a full-time hire. For board-level executives at regulated firms, see our SMF3 Executive Director recruitment service.

This guide is for boards, new owners and controllers, chief operating officers and general counsel of FCA-regulated firms who need to understand the options, act quickly, and put credible cover in place without making the supervisory position worse. It covers what a voluntary requirement (VREQ) is and where it sits in the FCA’s supervisory toolkit; why a compliance or MLRO vacancy is so much more serious inside a supervisory matter than outside one; your immediate options for cover, including the 12-week rule; what “credible to the FCA” actually means for an interim appointment; how sector, financial crime and change-of-control considerations change the brief; what interim and permanent SMF cover costs to plan for; and how Exec Capital sources the right people at short notice. It closes with a detailed FAQ. If the CEO seat falls vacant suddenly, an interim CEO can hold the business steady while you recruit. When cover is needed at short notice, an interim CFO can step in.

A note on scope: this is general guidance on the senior-recruitment and interim-cover decision. It is not legal, compliance or regulatory advice. Your skilled person, compliance consultancy and legal counsel should lead the remediation and regulatory strategy itself; our role, and the focus of this guide, is putting the right people in the seats, fast. If you are hiring, our Chief Compliance Officer recruitment team can help. When cover is needed quickly, an interim Finance Director can step in.

The most damaging thing a regulated firm can do when it loses its SMF16 or SMF17 mid-supervision is leave the seat empty while it runs a leisurely search. The FCA’s central concern in almost every supervisory matter is whether the firm is being effectively managed and controlled — and an unfilled compliance or MLRO role speaks directly, and badly, to that question. The firms that come through these situations well are the ones that move quickly, with someone the regulator can recognise as credible. That is the specific problem this guide, and our practice, exists to solve.

Where a VREQ sits in the FCA’s supervisory toolkit

A voluntary requirement rarely arrives out of nowhere. It usually appears partway along a recognisable supervisory path, and understanding that path helps a board judge how serious its situation is and how fast it needs to act.

The sequence often begins with information-gathering. The FCA may issue a request for information and documents — frequently referred to by its statutory basis, a section 165 request — to understand a concern it has identified through routine supervision, a return, a complaint, a whistleblowing report or a market event. That is commonly followed by a feedback letter setting out the regulator’s concerns and expectations. Where the concerns are material, the FCA may seek a requirement on the firm’s permission. If the firm agrees to that requirement, it is a voluntary requirement, or VREQ; if the FCA imposes it using its own powers, it is an own-initiative requirement, or OIREQ. In more serious cases the regulator may also commission an independent skilled-person review — known by its statutory basis as a section 166 review — under which a qualified third party reports to the FCA on defined aspects of the firm. At the far end of the spectrum sits enforcement.

Both kinds of requirement come from the same statutory power. Section 55L of the Financial Services and Markets Act 2000 lets the FCA impose, vary or cancel a requirement on a firm with a Part 4A permission. Under section 55L(3) it can do so on its own initiative — for example where the firm is failing, or likely to fail, the threshold conditions, or where acting would advance one of the FCA’s operational objectives. Under section 55L(5) it can do the same on the firm’s own application. A VREQ is, in legal terms, a requirement the FCA imposes at the firm’s request, usually after the supervisor has made clear that the alternative is an imposed one. For a fuller walk-through of how VREQs are agreed, worded and lifted, see our dedicated guide to what a VREQ is and how the FCA uses voluntary requirements.

The important point for a board is that a VREQ and a skilled-person review are supervisory tools, not enforcement outcomes. They are the mechanisms the FCA uses to contain a risk and get a firm back to a sound footing. Handled well, with credible senior leadership in place, they are a recoverable, time-bound process — not the end of the road.

What a VREQ signals — and what it requires

A VREQ is a requirement a firm agrees to accept on its Part 4A permission, generally in place of the FCA imposing one of its own initiative. It usually restricts or requires specific actions. Common examples include limiting or pausing certain new business, ceasing a particular activity, ring-fencing an operation, holding or handling client money or assets in a defined way, obtaining the regulator’s non-objection before taking certain steps, or committing to a defined remediation programme against an agreed timetable. The firm typically continues to operate, but within agreed boundaries.

A well-constructed VREQ is often a negotiated, proportionate instrument. A firm and its advisers can frequently propose a limited and temporary VREQ — for example one that allows the firm to keep servicing existing clients while it remediates, rather than a blanket restriction that would damage the business and customers alike. The regulator’s objective is to contain a perceived risk while the underlying issues are fixed; the firm’s objective is to fix them while preserving as much of the business as possible. Credible senior compliance leadership is central to both.

Is a VREQ public?

Boards are often surprised to learn that a VREQ is not necessarily private. Requirements on a firm’s permission are generally shown on its entry on the FCA’s Financial Services Register, where clients, counterparties, banks, insurers and prospective candidates can see them. The FCA has indicated in freedom-of-information responses that some firms have not agreed to publication, so practice is not uniform, but most boards should assume the requirement will be visible and plan their communications on that basis.

A VREQ also does not simply expire when the work is done. It stays in place — and on the Register — until the firm applies to vary or cancel it and the FCA agrees. In 2024 the independent Complaints Commissioner upheld a complaint from a firm whose VREQ had remained on the Register after it had met every condition, because no one had told it to apply to lift it, and recommended that the FCA set out a clearer, consistent approach to imposing, publishing and lifting VREQs. The practical lesson is that someone needs to own the exit: tracking each condition, evidencing completion and making the application to lift the requirement. That is very often the interim SMF16’s job.

Voluntary versus imposed requirements

The distinction between a VREQ and an OIREQ matters more than it first appears. A voluntary requirement signals cooperation and lets the firm negotiate the terms; an own-initiative requirement is imposed and tends to carry a heavier reputational weight. Firms almost always prefer the voluntary route, and a constructive, well-advised firm with credible people in post is in a far stronger position to keep the requirement voluntary, proportionate and time-limited. A firm that cannot demonstrate it has its house in order — including a properly staffed second line — has less room to negotiate.

The procedure is different too. An OIREQ is imposed through the statutory supervisory notice process: the firm receives a notice explaining the requirement and the reasons for it, can make representations, and can refer the decision to the Upper Tribunal. Supervisory notices imposing requirements are frequently published on the FCA’s website, which makes the matter far more visible than a negotiated VREQ. Where the FCA considers the risk urgent, an OIREQ can take effect immediately. A firm that has just lost its SMF16 or SMF17, and cannot show who is now accountable for compliance or money-laundering reporting, gives the supervisor one more reason to consider the imposed route.

VREQ vs OIREQ vs section 166 review vs enforcement

These tools are often used together, and boards sometimes confuse them. The table below sets out how they differ and what each means for the compliance and MLRO seats.

The FCA’s skilled person review page explains that the regulator can require the firm to pay for a review, and that it either approves a skilled person the firm proposes or contracts with one directly. Either way the review draws heavily on senior management time, and a firm with no compliance lead in post struggles to give the reviewer what it needs. Our explainer on FCA supervisory and enforcement action covers the wider escalation path in more detail.

The FCA’s supervisory and enforcement stance in 2025 and 2026

Two developments are worth a board’s attention. First, in June 2025 the FCA published its policy statement PS25/5 on enforcement transparency and confirmed that it would not proceed with its proposal to name firms under investigation where it judged this to be in the public interest. Its long-standing “exceptional circumstances” test remains the main basis for announcing an investigation into a regulated firm, with a small number of narrow additions — for example confirming an investigation that has already been made public, or issuing anonymised announcements. Second, the FCA has said it wants to concentrate its enforcement resources on fewer cases and move through them more quickly, while making active use of supervisory tools such as requirements on permissions and skilled person reviews.

The practical effect is that much of the FCA’s intervention happens in supervision rather than enforcement, and a VREQ is one of its most common instruments. That makes the quality of a firm’s response to supervision — including who holds the compliance and MLRO functions while the VREQ is in force — more important, not less.

Why SMF16 and SMF17 holders often resign at exactly this moment

It is not a coincidence that compliance and MLRO resignations cluster around supervisory events. SMF16 and SMF17 are personally accountable roles under the Senior Managers and Certification Regime. The individuals holding them carry personal regulatory exposure for the areas they are responsible for, and a supervisory matter is precisely when that exposure feels most acute. Some holders conclude that the firm’s issues predate them, or that they lack the resources or mandate to fix them; others receive advice about their own position. Whatever the reason, a resignation at this point is common — and it leaves the firm exactly where it can least afford to be.

Why an SMF16 or SMF17 vacancy is so urgent here

Outside a supervisory matter, a compliance or MLRO vacancy is a normal recruitment exercise that can take weeks or months. Inside one, it is a live governance risk that needs to be resolved in days. With no one formally accountable for compliance oversight or money-laundering reporting, the firm cannot credibly demonstrate that it is being managed and controlled — and that is the very question the regulator is testing. An unfilled SMF16 or SMF17 role can turn a manageable supervisory conversation into a more serious one, because it suggests the firm cannot maintain even its baseline regulatory functions under pressure. The vacancy needs to be addressed quickly and visibly, with credible cover and prompt, appropriate engagement with the FCA. Our guide to urgent SMF appointments covers the general mechanics; the rest of this guide deals with the extra pressure a live VREQ adds.

The first 30 days: an action plan for the board

When the SMF16 or SMF17 resigns under supervisory pressure, the board’s first month matters more than any later period. The plan below is a practical sequence many boards follow. Adapt it with your counsel; the order matters more than the exact day.

Your notification obligations when a senior manager leaves

When an approved person ceases to perform a Senior Manager Function, the firm has notification obligations to the regulator, and there are established forms and timelines for recording the departure and the proposed replacement. The FCA’s guidance on changing or cancelling an approval says Form C must be submitted through Connect no later than 10 business days after an approved person ceases to perform a controlled function. In a live supervisory matter, the firm will also want to keep the FCA informed of how it is filling the gap, in a manner and to a timetable agreed with the regulator and counsel. The detail of what to file, when, and how to frame it is a question for your legal counsel and compliance consultancy — but the practical takeaway is that the departure cannot simply be managed quietly in the background. It needs a clear, documented plan for cover, and that plan is far more reassuring to a regulator when a credible name is attached to it.

Your immediate options for cover

There are broadly three routes to cover, and they are not mutually exclusive. Most firms in a live VREQ situation combine them — bridging immediately while building towards a permanent solution.

• The 12-week rule. The Senior Managers regime allows a firm to have an individual perform an SMF without that person being separately approved, to cover an absence that is temporary or reasonably unforeseen. Since the FCA’s April 2026 reforms, the cover can run beyond 12 weeks if a valid and complete application for approval of a replacement is submitted within the 12 weeks. In practice this is the mechanism that lets a firm drop credible interim cover into the seat immediately while a full approval application is prepared. Whether it is available and appropriate in your specific circumstances is a question for your counsel.
• Interim appointment with an approval application to follow. A strong interim is engaged now and, where the engagement is to continue beyond a short bridge, an approval application is submitted so the individual becomes formally approved to hold the function.
• A direct permanent appointment. Usually the slowest route because of the approval timeline, and rarely the right first move when the seat is empty today — but the destination most firms are working towards.

The 12-week rule in more detail

The 12-week rule exists precisely for situations like an unexpected resignation. It allows a firm to appoint an individual to perform an SMF for up to twelve weeks without that individual first being approved, where the appointment is to cover a temporary or reasonably unforeseen vacancy. It is a bridge, not a destination: it buys the firm time to either secure approval for the interim or appoint a permanent holder.

The rule changed on 24 April 2026, when the FCA’s first phase of SMCR reforms in policy statement PS26/6 took effect. Two points matter for a firm under supervision. First, the 12 weeks is now the period within which a valid and complete application for approval of a replacement must be submitted; if it is, the cover can continue until the FCA determines the application, rather than falling away at a hard 12-week cliff edge. Second, the person providing cover must be fit and proper, although the firm’s assessment can take into account that they will only be in post for a limited period. The FCA has since gone further: in consultation paper CP26/37, published with the PRA’s CP14/26 in October 2026, it proposes extending the window from 12 to 18 weeks for FCA functions and replacing the “reasonably unforeseen” test with a reasonable-use standard. Those proposals are open for comment until 22 January 2027 and are not yet rules, so plan on the current 12-week window.

Two practical points matter. First, the interim still needs to be genuinely capable and credible — the rule removes the prior-approval step, not the need for a competent person in the seat. Second, in a live supervisory matter where the FCA is already engaged, the regulator will take a close interest in who is performing the function even under the 12-week route, so the credibility of the individual is paramount. Take your own regulatory advice on whether and how to rely on the rule.

What the FCA expects from interim cover: competence, time and independence

An interim in a VREQ firm is not a caretaker. The FCA will expect the person performing SMF16 or SMF17 — whether under the 12-week rule or as an approved holder — to meet the same broad expectations as a permanent senior manager, applied to a firm that is already under scrutiny. In our experience those expectations fall under three headings.

Competence for this firm, not just in general

The fit and proper test asks whether the individual is competent and capable for the role at this firm. For an interim that usually means recent, relevant experience of the function; knowledge of the firm’s permissions and business model; and, in a supervisory matter, experience of working through remediation with a supervisor or skilled person. A strong general compliance CV is not enough if the firm’s issues are, say, client assets or financial crime in a high-risk client base. Our guide to FCA fitness and propriety sets out the full test.

Enough time to do the job

The FCA looks at whether a senior manager has the time to discharge their responsibilities. A fractional holder spread across several clients may be entirely appropriate for a stable small firm, but in the intensive phase of a VREQ the workload is usually heavier. Expect to show the FCA the interim’s days per week, other commitments and how the firm will cover peaks such as a skilled person’s fieldwork or a deadline in the VREQ. Two days a week may be right for a small investment adviser with a contained issue; a firm with a financial-crime backlog will typically need much more.

Independence from the problem

The interim must be able to challenge the business and report candidly to the board and the FCA. That points away from appointing someone who designed or ran the controls under review, someone closely connected with the shareholders whose conduct is in question, or an adviser who is also acting for the firm on its regulatory defence. Where the departing holder or other senior managers may be in scope of a later investigation, the interim’s independence from those events is especially valuable. A clear engagement letter that sets out the interim’s authority, access to the board and reporting line to the chair helps to evidence it.

Form A for the interim: what the application needs to show

If the interim will remain beyond the 12-week bridge, or if you want them formally approved from the start, the firm submits Form A for the relevant function or functions. A Form A for an interim in a VREQ firm is read with the supervisory file to hand, so it needs to answer the questions the FCA will already be asking. As a minimum, it should show:

• Relevant experience. Previous SMF16, SMF17 or equivalent roles, with dates, firm types and the regulatory issues handled; any prior experience of VREQ or skilled person remediation.
• Time commitment. Days per week, other directorships and engagements, and how conflicts in time will be managed.
• Fitness and propriety checks. Criminal record check, regulatory references from previous employers covering the last six years, credit checks and any disclosures.
• Statement of Responsibilities. A clear statement of what the interim is accountable for, including any prescribed responsibilities, and how it fits the firm’s responsibilities map.
• Context. A short explanation of why the appointment is being made, how it supports the agreed remediation, and the plan for permanent cover.

The statutory period for the FCA to decide a complete application is three months (six months if it is incomplete), and since January 2026 the FCA has been measuring itself against a target to complete at least half of senior manager applications in 35 days or less. In a live supervisory matter, expect questions and possibly an interview. Our guides to how long FCA SMF approval takes and the Form A approval process go into the mechanics, including the most common reasons applications stall.

What “credible to the FCA” actually means

In a supervisory matter the bar for an interim is higher than for a routine hire, because the regulator is already engaged and will look closely at whoever steps in. In our experience, credibility in this context means a combination of the following:

• A genuine recent record of holding SMF16 and/or SMF17. Someone who has recently performed the function — ideally at a firm of comparable type — is a known quantity and a far easier fit-and-proper proposition than a first-timer.
• Sector relevance. The firm’s permissions and business model matter. Investment-management, wealth, corporate-finance, payments, e-money, lending and banking firms each carry different regulatory emphases, and an interim whose background matches the firm’s activities will be more credible and more useful.
• Hands-on capability. Supervisory matters reward operators, not advisers. The right interim can run the function day to day — reviewing files, taking decisions, engaging the regulator — not just opine on it.
• UK presence and availability. Where the FCA has questioned a firm’s UK management and control, an interim who can clearly evidence a UK base and engage in person, at pace, with the board, counsel, the skilled person and the regulator, is materially more valuable than one who cannot.
• A clean fit-and-proper position. Honesty and integrity, competence and capability, and financial soundness all need to stand up to scrutiny, because they will be scrutinised.

A candidate who ticks the experience box but cannot evidence UK management and control, or cannot start for several weeks, is usually the wrong answer in this situation.

Sector fit: why an investment-management VREQ needs different cover from a payments one

Regulated firms are not interchangeable, and neither are the people who lead their compliance functions. An asset manager or wealth manager under a VREQ will typically need an interim steeped in investment-management regulation — conduct of business, client assets, suitability, market conduct, conflicts of interest, and the financial-crime profile of investment clients. A payments or e-money firm will need someone fluent in the payments and e-money regime, safeguarding and transaction monitoring. A corporate-finance house has its own conduct and inside-information emphases. Putting a strong payments compliance officer into an investment-management VREQ — or vice versa — is a mismatch the regulator will notice. Matching the interim’s sector background to the firm’s permissions is one of the most important, and most frequently underestimated, parts of the brief.

One scope point is worth noting. Payment institutions and e-money institutions are outside the Senior Managers and Certification Regime, so they do not have SMF16 or SMF17 roles as such. They still need a nominated officer (MLRO) under the Money Laundering Regulations, a compliance lead and fit and proper management, and the FCA can still agree restrictions with them. The cover logic in this guide — move quickly, appoint someone credible, tell the supervisor — applies in the same way, even though the 12-week rule and Form A do not.

The financial-crime dimension: CDD, EDD, PEPs and source of wealth

Many VREQ situations have a financial-crime component, and for some firms — particularly those owned or controlled by a family office, a high-net-worth principal, or investors from higher-risk jurisdictions — the source-of-wealth and source-of-funds question sits at the very centre of the matter. An interim MLRO in this position needs real depth in customer due diligence and enhanced due diligence, politically exposed person screening, sanctions, and the documentation and challenge of source of wealth and source of funds. Where the remediation is heavily financial-crime-weighted, the firm may be better served by pairing an approved SMF holder with a dedicated, hands-on financial-crime and remediation specialist, so that the deep CDD/EDD work has an owner while the formal accountability sits with an approved individual. For smaller firms whose ongoing MLRO workload will settle back to a few days a month once the remediation is done, a fractional MLRO is often the right longer-term model.

Combined SMF16/SMF17, or split the functions?

Many smaller firms run SMF16 and SMF17 through one person, and a single credible, recently approved combined holder is often the cleanest answer in a supervisory matter — one accountable individual, one point of contact for the regulator, and the simplest story to tell. But it is not the only model. Where the strongest available financial-crime operator has not previously held the functions, splitting them — or pairing an already-approved SMF holder with a hands-on financial-crime and remediation lead — can give the firm approved cover from day one while still adding the operational horsepower the remediation needs. The right structure depends on the candidates actually available and on the steer from counsel and any independent reviewer. The combined model is usually the preference where a single credible, approved candidate exists; the paired model is the pragmatic fallback where they do not.

When a first-time SMF candidate is, and isn’t, the answer

A candidate who has never personally held SMF16 or SMF17 approval can be exactly the right hands-on hire for the financial-crime, CDD and EDD remediation workstream — a former deputy MLRO or a senior financial-crime consultant, for instance, may have outstanding operational depth. But appointing a first-timer into a combined SMF16/SMF17 role in a live supervisory matter is a central fit-and-proper question, and one the FCA will scrutinise closely: a firm under pressure proposing an individual who has never held either function as the holder of both invites obvious questions. The pragmatic answer is often to deploy that person immediately on the remediation work alongside an already-approved SMF holder, so the firm has approved cover from day one while the first-timer’s own approval is progressed in parallel.

The change-of-control overlay

A new owner or controller who has recently acquired, or taken control of, an FCA-regulated firm may inherit a supervisory matter rather than create one. The challenge is similar but the stakes are sharper. A new controller has to demonstrate effective UK management and control at precisely the moment the regulator is questioning it — and, depending on the structure, may itself have been through, or be going through, a change-in-control approval. Securing credible interim and then permanent SMF16/SMF17 cover is a large part of how a new owner evidences that it is a fit and capable steward of the firm. It is usually the most pressing senior appointment on the list, and it is often best filled by someone who has operated through change-of-control and supervisory situations before and understands the additional scrutiny they bring.

Interim, fractional or permanent for SMF cover?

Three engagement models are available, and the right one depends on the firm’s size, the stage of the matter and the workload. An interim is a full-time or near-full-time senior resource engaged for a defined period — the standard answer for the acute phase of a supervisory matter, when the function needs a credible, accountable, present pair of hands. A fractional appointment — a senior holder working a defined number of days per week — can suit a smaller firm whose ongoing workload does not justify a full-time role, though in the intensive phase of a VREQ most firms need more than a day or two a week. A permanent appointment is the destination, and the right structure once the firm is stabilised and moving back towards growth. Many firms move through all three: full-time interim to stabilise, then a permanent hire, with a fractional arrangement sometimes bridging the two.

Choosing interim, fractional or permanent: a decision table

The table below is a starting point for the board discussion. Most firms in a live VREQ start in the left-hand column and move right as the matter settles.

Our fractional compliance officer service covers both the interim and fractional ends of this spectrum, and for firms that want a Chief Compliance Officer-level lead in post for the duration of a larger programme, we also place interim Chief Compliance Officers.

What interim and permanent SMF16/SMF17 cover costs

Cost depends on the firm’s size, the seniority and scarcity of the profile, and the intensity of the situation. Interim and fractional holders are usually engaged on a day rate, and rates for SMF cover in a live supervisory matter sit at the upper end of the compliance market, because the work carries personal regulatory exposure and the pool of people who have done it before is small. Candidates with former regulator backgrounds or proven section 166 and VREQ remediation experience typically command a further premium. A permanent combined SMF16/SMF17 appointment at a smaller regulated firm is priced on salary and package, with the breadth of a combined role and a live turnaround both pushing the number up.

The bigger cost question is usually the alternative. A VREQ that restricts new business, a skilled person review paid for by the firm, or a requirement that stays on the Register longer than it needs to, will usually cost far more than the difference between a strong interim and a cheaper one. We are happy to give you current market rates for your specific profile when you brief us; we do not publish fixed figures because they move with the profile and the situation.

How quickly can cover be in place?

For an urgent SMF cover situation, the first credible names can often be in front of a board quickly, because the right candidates are drawn from an existing, pre-qualified network rather than a cold search. We do not promise a fixed timescale, because availability, notice periods and the firm’s own decision-making all play a part. Where the 12-week route is used, an interim can begin as soon as the board has assessed them and they are engaged; where formal approval is required first, the timeline is governed by the regulatory process rather than by the search. If you want to start that conversation now, our interim and fractional compliance officer team can talk you through who is available. The practical message is that the search itself need not be the bottleneck — credible cover can move at the speed the situation demands.

Remediation programmes and the interim’s role

Most VREQs are tied to a remediation programme: a set of actions, owners and dates the firm has agreed with the FCA, sometimes shaped by a skilled person’s findings. The interim SMF16 or SMF17 rarely does all of the work, but they are usually the person the supervisor sees as owning it. A typical role includes:

• Mapping the conditions. Turning the VREQ wording and any skilled person recommendations into a single tracker with owners, evidence required and deadlines.
• Scoping the resource. Deciding what the firm can do itself, what needs contractors (for example a file review or customer due diligence refresh team) and what the skilled person will test.
• Fixing the framework. Updating the compliance monitoring plan, financial crime risk assessment, policies and MI so that the issue does not recur.
• Quality-assuring the work. Checking samples of remediated files and challenging outputs before they go to the skilled person or the FCA.
• Reporting to the board. Clear, regular MI on progress, slippage and risk, so the board can show it is overseeing the programme.
• Closing it out. Assembling evidence that each condition has been met and supporting the application to vary or lift the VREQ.

Where a firm has a large remediation, it is common to separate the interim SMF holder from the programme manager and the file-review team. The SMF holder keeps oversight and independence; the programme team delivers the volume. Our guide to compliance hiring during an FCA investigation or enforcement covers how to build that wider team.

Communicating with your FCA supervisor

How the firm talks to the FCA during the transition can matter as much as who it appoints. A few principles hold in most cases:

• Tell them early. Let the supervisor know about the departure before the Form C arrives, and say when you will come back with a plan. The duty to deal with the regulator in an open and cooperative way (Principle 11) applies throughout.
• Bring a plan, not just a problem. The best first follow-up names the interim, explains their experience, says how many days a week they will work, and confirms the VREQ timetable is still achievable — or explains honestly what will move.
• Introduce the interim in person. An early meeting or call with the CEO and the new SMF holder lets the supervisor form a view directly.
• Keep a single channel. Agree who speaks to the FCA — usually the interim and the CEO — so the supervisor gets consistent messages.
• Do not over-promise. If a remediation date is at risk, say so early and explain why. Missed dates that the supervisor learns about late do more damage than a candid revision.
• Keep a record. Minute every call and confirm material points in writing; it protects the firm and shows good governance.

From interim cover to permanent — and back to growth

The sequence that works is consistent: stabilise the firm with credible interim cover, support the delivery of the agreed remediation, restore the firm’s regulatory footing and governance, then transition to a permanent appointment and a growth phase. Framed that way, the VREQ period is not an ambulance job — it is a defined turnaround with a clear path out the other side, and the senior compliance appointment is the keystone of it. The best outcomes come when the interim and permanent tracks are run together from the start, so the firm is never again caught without a plan for who holds the function next.

How Exec Capital finds the right candidates at short notice

Speed in these situations does not come from searching harder; it comes from already knowing the people. Exec Capital maintains a live, curated network of FCA-experienced compliance and MLRO professionals — including approved SMF16 and SMF17 holders, former regulators, and senior financial-crime and remediation specialists — many of whom are between mandates and available at short notice. When a firm calls with an urgent cover need, the work is one of matching and verifying rather than starting from zero. In practice that means we can:

• Shortlist from a known pool. Rather than advertise and wait, we go straight to individuals we already know hold the right approvals and sector background and are available now.
• Verify FCA Register status quickly. We confirm a candidate’s recent SMF16/SMF17 approvals and history against the FCA Register before they reach you, so the fit-and-proper story is sound from the outset.
• Pre-check the basics. We sense-check conflicts, independence, availability and willingness to operate in a live supervisory environment up front, so the names you see are genuinely deployable.
• Structure the cover sensibly. We advise on the combined-versus-split question against who is actually available — for example pairing an approved SMF holder with a hands-on financial-crime lead where that gives the firm approved cover from day one.
• Run interim and permanent in parallel. We bridge the immediate gap while building the permanent solution, so the firm is not solving the same problem twice.
• Make decisions quickly. Every search is run by our specialist team, with Adrian Lawrence FCA overseeing each mandate, so senior judgement calls are made promptly rather than escalated through layers.

Typical short-notice cover scenarios

The following are the kinds of situation boards bring to us, and the cover structures that usually fit them. They are general scenarios, not client case studies.

• A wealth manager facing a skilled-person review. A firm loses its combined SMF16/SMF17 shortly before a skilled-person review is due to begin. The usual answer is an interim with recent combined SMF16/SMF17 experience at a comparable wealth manager, UK-based and able to start promptly, who bridges the function while a permanent search runs alongside — giving the board a credible, present holder to put in front of the reviewer and the regulator.
• A firm under a VREQ with a heavy financial-crime remediation. The most pressing need is hands-on CDD and EDD remediation, but the strongest available financial-crime operator has not previously held an SMF. A common structure pairs that specialist, deployed full-time on the remediation, with an already-approved interim SMF holder, so the firm has approved cover from day one while the specialist’s approval is progressed.
• A newly acquired regulated firm inheriting supervision. A new controller takes on a firm already in a supervisory matter. The brief is usually an interim who has operated through both change-of-control and supervisory situations, plus a permanent candidate to transition into once the firm has stabilised — helping the new owner evidence effective UK management and control at the point it matters most.

Frequently asked questions

What is an FCA VREQ?

A VREQ, or voluntary requirement, is a requirement a firm agrees to accept on its FCA permission — usually in place of one the FCA would otherwise impose. Legally, the FCA imposes it on the firm’s application under section 55L(5) of FSMA. It typically restricts or requires specific actions, such as pausing certain new business or committing to a remediation programme, while allowing the firm to keep operating within agreed limits.

What is the difference between a VREQ and an OIREQ?

A VREQ is agreed by the firm; an own-initiative requirement (OIREQ) is imposed by the FCA using its own powers under section 55L(3), through a supervisory notice that the firm can challenge. Both bind the firm to similar effect, but the voluntary route signals cooperation, allows the terms to be negotiated, and is generally less damaging to the firm’s standing.

Will a VREQ appear on the FCA Register?

Usually, yes. Requirements on a firm’s permission are generally shown on its Financial Services Register entry, and they stay there until the firm applies to have the requirement varied or lifted and the FCA agrees. Plan your client, banking and staff communications on the assumption it will be visible.

Will the FCA publicly name us if it opens an investigation?

Generally not. In June 2025 the FCA dropped its proposal to name firms under investigation on public interest grounds. Its exceptional circumstances test remains the main basis for announcing an investigation into a regulated firm, with a few narrow additions. A VREQ, by contrast, is often visible on the Register.

Can a firm keep operating without an SMF16 or SMF17?

A firm that requires these functions cannot simply leave them unfilled for any length of time, and doing so during a supervisory matter is a serious governance risk. The functions must be covered — whether through the 12-week rule, an interim pending approval, or a permanent appointment — and the regulator kept appropriately informed.

Does an interim SMF16 or SMF17 need to be FCA-approved before starting?

Not necessarily on day one. The 12-week rule can allow an individual to perform an SMF without prior approval, to cover a temporary or reasonably unforeseen vacancy, provided the firm is satisfied they are fit and proper. Beyond that bridge, formal approval is required. SMF16 and SMF17 remain pre-approval roles under the FCA’s current reform proposals. Whether and how to rely on the rule is a question for your counsel.

How long can the 12-week rule be used?

Up to twelve weeks to cover a temporary or reasonably unforeseen absence. Since 24 April 2026, if a valid and complete application for approval of a replacement is submitted within those twelve weeks, the cover can continue until the FCA determines the application. It is a bridge to either approval of the interim or a permanent appointment, not a permanent solution in itself.

Is the 12-week rule becoming 18 weeks?

It has been proposed, not decided. The FCA’s CP26/37, published in October 2026, proposes extending the period from 12 to 18 weeks for FCA functions and loosening the “reasonably unforeseen” condition. The consultation closes on 22 January 2027, so the 12-week rule as amended by PS26/6 is the one to plan on today.

Can one person hold both SMF16 and SMF17?

Yes. Many smaller firms combine the Compliance Oversight (SMF16) and MLRO (SMF17) functions in a single individual, and a credible combined holder is often the cleanest answer in a supervisory matter. Where no single approved candidate fits, the functions can be split or paired with a financial-crime specialist.

How quickly can you provide an interim MLRO or compliance officer?

Because the right candidates come from an existing, pre-qualified network rather than a cold search, the first credible names can often be in front of a board quickly. We do not guarantee a timescale, as availability and the firm’s own process both play a part. Where the 12-week route is used, an interim can begin as soon as the board has assessed and engaged them.

What does an interim SMF16/SMF17 cost per day?

Day rates for SMF cover in a live supervisory matter sit at the upper end of the compliance market, reflecting the personal regulatory exposure and the small pool of people with VREQ and skilled person experience. The right figure depends on the profile, the days per week and the situation; we can give you current market rates for your specific brief.

What is a section 166 skilled-person review?

It is a review carried out by an independent qualified third party — the skilled person — who reports to the FCA on defined aspects of a firm, such as its systems and controls or financial-crime framework. The FCA can require the firm to pay for it. It is a supervisory tool used to give the regulator independent assurance, often alongside a VREQ, and is not in itself an enforcement action.

What happens to a person’s SMF approval when they leave the firm?

SMF approvals are specific to the individual at a particular firm and do not transfer. When an approved person leaves, their approval for that function at that firm ceases, and a new holder requires a fresh application. A recently approved candidate is still far easier to approve than a first-timer, because they are a known and recently assessed quantity.

Do we have to notify the FCA when our MLRO or compliance officer resigns?

Yes. The firm must submit Form C through Connect no later than 10 business days after the person stops performing the function, and in a live supervisory matter the firm will also want to tell its supervisor directly and set out its plan for cover. The specifics should be handled with your legal counsel and compliance consultancy.

Can a new owner or controller act as the SMF16 or SMF17?

Only if that individual is approved to perform the function and is genuinely fit and proper and competent for it. In most cases a new controller is better served by appointing a credible, experienced SMF holder and demonstrating effective management and control through that appointment, rather than taking the function on personally.

Can you find candidates who have worked under a live VREQ before?

Yes. Our network includes compliance and MLRO professionals who have held SMF16 and SMF17 through live FCA supervisory situations, section 166 reviews and VREQ remediation — exactly the experience that gives a board and a regulator confidence at short notice.

Related Exec Capital resources

• SMF16 Head of Compliance Hiring Guide
• SMF17 MLRO Hiring Guide
• When a Firm Needs a Fractional MLRO
• SMF Roles: A Complete Guide
• Head of Compliance (SMF16) Recruitment
• MLRO (SMF17) Recruitment
• Interim Executive Recruitment
• FCA-Regulated Firm Recruitment Hub

This guide is general information about the senior-recruitment and interim-cover decision and does not constitute legal, compliance or regulatory advice. Decisions about a VREQ, a skilled-person review, regulatory notifications and the use of any temporary-cover provisions should be taken with your own legal counsel, compliance consultancy and skilled person.