What the Senior Managers Regime Means When Recruiting at Board Level

Board appointments at FCA-regulated firms happen inside a regulatory framework that changes the shape of the search. The Senior Managers and Certification Regime (SMCR) is not a compliance overlay applied to a candidate’s CV once the board has chosen. It changes who can hold the role, how the appointment is approved, what the person is personally accountable for once in post, and what a wrong appointment costs the firm.

Most boards at regulated firms have absorbed the regime into how they think about hiring. The practical consequences still catch people out: timelines stretch, candidates withdraw mid-process for reasons that would not arise at an unregulated business, and offers unravel after regulatory questions nobody anticipated. The boards that hire well under SMCR build the regulatory dimension into the search from the first conversation, rather than bolting it on after a preferred candidate has been identified.

This guide sets out what SMCR means for board-level recruitment, the Senior Manager Functions (SMFs) that shape board hiring decisions, how the approval rules have recently changed, what the regulators are now proposing, and how the regime should shape the way a board runs a senior search. If you are planning a board appointment now, our board of directors recruitment service covers executive and non-executive seats at regulated and unregulated firms.

What the Senior Managers Regime means in practice for board hiring

The Senior Managers and Certification Regime was rolled out across financial services in stages from 2016, starting with banks and insurers and extending to solo-regulated firms in 2019, replacing the Approved Persons Regime. Its central idea is personal accountability. People performing a Senior Manager Function must be assessed as fit and proper, most of them must be approved by the regulator before they start, and each holds a Statement of Responsibilities setting out what they are personally answerable for.

For board-level recruitment, that changes three things.

First, the regulator becomes a third party to the appointment. The board may have agreed on the candidate, the candidate may have accepted, and the contract may be signed, but for a pre-approved function the person cannot formally take up the role until the FCA (and, for dual-regulated firms, the PRA) has approved the application. The regulator may approve, ask further questions, interview the candidate, impose conditions or refuse. No senior appointment that needs pre-approval is final until the regulator has decided.

Second, the brief is shaped by regulatory expectations as well as by the board’s preferences. SMF9 (Chair) at a challenger bank carries different competence expectations from SMF9 at a wealth manager. SMF10 (Chair of the Risk Committee) requires risk framework literacy the firm may need to evidence. The specification has to describe a person the regulator will regard as competent for this role at this firm, not just a person the board would like to work with.

Third, candidates assess the appointment differently. Experienced senior managers weigh the personal accountability that comes with an SMF, and they look hard at the firm’s governance, culture and control environment before committing. A candidate is asking whether the role suits their career and whether the firm is one where they are comfortable putting their name to a Statement of Responsibilities. Boards that do not anticipate that question lose strong people late in the process.

How the approval rules have changed

The FCA and PRA completed the first phase of their SMCR review in April. The FCA’s PS26/6 and the PRA’s PS12/26 were published together, with most changes in force from 24 April 2026. Several of them bear directly on how a board plans a senior appointment.

• The 12-week rule is now a submission deadline. Where a senior manager leaves unexpectedly, a firm can appoint someone to cover the function temporarily. The 12 weeks used to cover both submitting and obtaining approval; the period now runs to submission of the application, and the individual can continue in the role while the regulator determines it. That gives a board more room when it has to fill a gap quickly, but it does not remove the need to have a credible candidate ready to apply.
• Criminal record checks last longer. A check is now valid for six months rather than three, and internal or intra-group moves no longer need a fresh check. That reduces the risk of a check expiring while a long search or a notice period runs its course.
• Regulatory references must come back faster. FCA-regulated firms must now provide a requested regulatory reference within four weeks, down from six. References remain one of the slowest parts of most applications, so the shorter window helps, but references still need to be requested early.

Alongside these rule changes, the FCA has published service targets for authorisations. It aims to decide at least half of senior manager applications in 35 days or fewer, and the government has proposed reducing the statutory deadline for determining applications from three months to two (FCA: faster targets for authorisations). A target for half of applications is not a promise for any individual one. Complex cases, first-time senior managers and applications with gaps in the paperwork still take longer, and boards should plan on that basis. Our guide to Statements of Responsibilities for board appointments covers the document that sits at the centre of every application.

The specific SMFs that affect board-level recruitment

Most board and board-reporting appointments at FCA-regulated firms attach to one of the following functions. Which apply depends on the firm’s regime tier (limited scope, core or enhanced) and whether it is dual-regulated.

• SMF1 (Chief Executive). The most consequential appointment at any regulated firm. The CEO has overall responsibility for managing the firm’s business and is the senior manager the regulator looks to first. Our CEO of regulated firm recruitment service is built around this appointment.
• SMF2 (Chief Finance Function). The CFO designation, applied mainly to dual-regulated and enhanced firms. It combines board-level strategic input with accountability for financial resources and reporting.
• SMF3 (Executive Director). Applies to executive directors on the board who do not hold another SMF, such as a deputy CEO or a director with line responsibility for a major business area. See our executive director recruitment for FCA-regulated firms.
• SMF9 (Chair). The chair of the governing body. The regulator expects the Chair to lead the board’s oversight of culture, effectiveness and senior appointments, so scrutiny is heavy and first-time Chairs face a higher bar.
• SMF10 to SMF13. Chairs of the Risk, Audit, Remuneration and Nomination Committees. Each needs competence specific to the committee. SMF10 is usually the most technically demanding at banks, requiring fluency in risk appetite, capital and liquidity assessment; SMF11 needs the financial expertise familiar from any audit committee, sharpened by regulated reporting.
• SMF14 (Senior Independent Director). Acts as a sounding board for the Chair, an intermediary for other directors and a channel for shareholders, with clear expectations of independence.
• SMF4 (Chief Risk Function) and SMF5 (Head of Internal Audit). Board-attending or board-reporting roles. SMF4 leads the risk function; SMF5 leads internal audit with a reporting line to the Audit Committee Chair.
• SMF24 (Chief Operations Function). The senior operations leader, common at larger firms. It carries accountability for operational resilience, an area of continuing supervisory focus.
• SMF16 (Compliance Oversight) and SMF17 (Money Laundering Reporting Officer). Not board seats in most firms, but both report to the board and both need pre-approval. At smaller firms these are often held on a fractional basis.

The Chair’s role in senior approvals

The Chair of a regulated firm carries explicit responsibility for the board’s oversight of senior appointments. At smaller firms the Chair often also chairs the Nomination Committee, so the same person owns both board-level oversight and the senior appointments process.

That concentration matters. The Chair is not simply one voice in a board hiring decision; they are the person the regulator expects to have owned it. Two consequences follow.

First, the Chair should be directly engaged in every senior appointment: shaping the brief, reviewing the shortlist, reading the references and signing off the recommendation that goes to the regulator. A Chair who delegates this entirely to HR, to the executive team or to a search firm is exposed if the appointment later goes wrong.

Second, the Chair’s own appointment carries the heaviest scrutiny of any board seat. SMF9 candidates face a thorough fitness and propriety assessment, regulatory references and, quite often, an interview with the regulator. A first-time Chair has no prior approval record for the regulator to rely on. Boards recruiting a Chair should expect the longest timetable of any senior appointment they run, and should plan the outgoing Chair’s handover with that in mind.

The same applies, with some differences, to first-time chief executives. A candidate who has never held an SMF can be the right appointment, but the application has to make the competence case explicitly; our guide to hiring a first-time SMF1 sets out how boards approach that.

How SMCR shapes candidate selection

The regime changes what a good candidate looks like in ways boards often underestimate. Three filters apply that do not exist at an unregulated firm.

Fitness and propriety. Beyond competence and culture fit, every SMF candidate must meet the FCA’s fit and proper test: honesty, integrity and reputation; competence and capability; and financial soundness. Regulatory references cover the previous six years with regulated employers and must disclose relevant conduct issues. Candidates with conduct concerns at a previous firm, even ones that never led to formal action, can fail this filter late in the process if nobody has asked the right questions early.

Competence for this firm. The regulator expects competence for the specific role at the specific firm. A candidate who has chaired the audit committee of an asset manager will not automatically be accepted as audit chair of a bank: the prudential context, accounting judgements and supervisory relationship are different enough that competence does not simply transfer. Boards that assume sector-agnostic credentials will do can find their preferred candidate questioned hard at approval.

Personal accountability. SMF candidates think about the role in terms of what they will be answerable for. The right candidate has decided that the firm’s governance, risk management and culture are good enough that they are comfortable taking that on. Candidates withdraw for reasons that barely registered under the old regime: concerns about risk culture, overlapping responsibilities with other senior managers, unclear reporting lines or thin support around the role. A clear, well-drafted Statement of Responsibilities and an honest account of the firm’s issues usually do more to keep a strong candidate than an improved package.

What the proposed second phase could mean for boards

On 22 October 2026 the FCA and PRA published consultations on a second, more far-reaching phase of reform: the FCA’s CP26/37 and the PRA’s CP14/26. Both close on 22 January 2027, and the FCA expects to publish final rules in the first half of 2027. These are proposals, not rules, and they depend in part on legislative changes the government is taking forward.

The proposals most relevant to board recruitment are:

• Fewer roles needing pre-approval. Several functions would move from pre-approval to notification, including the Head of Internal Audit and the committee chair and Senior Independent Director roles (SMF5 and SMF10 to SMF14 among them). The firm would still have to assess fitness and propriety, obtain references and prepare a Statement of Responsibilities, but would notify the regulator rather than wait for approval.
• The most senior roles stay pre-approved. Pre-approval would remain for the functions carrying the most accountability, including the Chief Executive (SMF1), Executive Director (SMF3), Chief Risk (SMF4), Chair (SMF9), Compliance Oversight (SMF16), MLRO (SMF17), Chief Underwriting Officer (SMF23) and Chief Operations (SMF24). For dual-regulated firms, the PRA also proposes to keep pre-approval for the Chief Finance Function (SMF2).
• Wider changes to the regime. These include longer temporary cover (18 weeks rather than 12), removal of the Certification Regime and the Directory, and an end to routine resubmission of Statements of Responsibilities and responsibilities maps.

If the proposals go ahead, committee chair and SID appointments would get faster to complete, but the board’s own diligence would matter more, because there would be no regulatory approval step to catch a weak appointment before it starts. Until final rules are published, boards should plan on the current requirements.

The boundary between board hiring and compliance hiring

A common confusion at regulated firms is the line between hiring at board level and hiring into the compliance function. The two overlap, but they are different searches with different candidate pools and different specialist requirements.

Board hiring concerns the strategic direction of the firm, governance oversight and the senior management decisions that shape how it runs. The candidates are board-experienced executives and non-executive directors, and the relevant functions are SMF1, SMF2, SMF3, SMF4, SMF5, SMF9 to SMF14 and SMF24.

Compliance hiring concerns the firm’s regulatory operating function: designing and running the compliance monitoring programme, advising the business, owning the regulatory relationship day to day, and running the anti-money laundering framework. The candidates are compliance and financial crime professionals with specific regulatory specialism, and the relevant functions are SMF16 and SMF17. Our SMF16 Head of Compliance recruitment service handles these appointments separately from board search.

The CFO sits between the two: accountable for financial controls and reporting, but operating at board level with significant strategic weight.

The boundary matters for two reasons. First, running the wrong type of search produces predictable failure. A board that asks a compliance recruiter to find a Chair, or an executive search firm without compliance knowledge to find an MLRO, ends up with a shortlist missing the specialism it needs. Second, the board should expect a different kind of expertise from whoever runs each search: board search informed by regulatory awareness for the board seats, and genuine compliance specialism for SMF16 and SMF17.

Fractional SMF16 and SMF17 appointments

For many smaller regulated firms, the senior manager roles they most often need to fill are not board seats at all but the compliance oversight and MLRO functions. A small broker, adviser, payments firm or investment manager rarely needs a full-time Head of Compliance, but it does need someone who can be approved as SMF16, SMF17 or both, and who will be credible to the regulator.

That is why fractional appointments have become a common way to fill these functions at smaller firms. An experienced compliance officer works one or two days a week (more during authorisation, a remediation project or a supervisory review), holds the SMF in their own name and reports to the board. The arrangement works when:

• the individual has enough time allocated to discharge the function properly, and the board can show that;
• the Statement of Responsibilities is specific about what they own and what support they have;
• they have direct access to the board and to management information; and
• any other appointments they hold do not create conflicts or leave them too stretched.

Combining SMF16 and SMF17 in one person is common and acceptable at many firms, provided the workload and the firm’s financial crime risk support it. Our fractional compliance officer service places SMF16 and combined SMF16/17 holders on a part-time basis, and the same fit and proper standards apply as for any full-time appointment.

How Exec Capital approaches SMCR board mandates

Exec Capital recruits board and senior leadership for FCA-regulated firms. Every search is run by our specialist team, with Adrian Lawrence FCA overseeing each mandate; as an ICAEW Fellow holding a practising certificate, he brings a regulated professional’s understanding of what personal accountability means in practice.

Our approach differs from generalist executive search in three ways.

We build the SMF designation, the Statement of Responsibilities and the approval timetable into the search plan before the brief is signed off. Which function the appointment attaches to, whether the specification describes someone the regulator will regard as competent, and how the timetable interacts with other senior changes at the firm are settled at the start, not after a candidate has been chosen.

We assess candidates against the fitness and propriety standards before they reach the shortlist. Conduct history, regulatory references and any previous SMF approvals are explored early, so the board is not surprised at the application stage.

We work with the Chair as the person accountable for the appointment, not just as one stakeholder. The Chair’s view on the brief, the shortlist and the recommendation is built into the process, because that is where the regulator will look for evidence that the board owned the decision. To discuss a regulated board appointment, see our board recruitment service or tell us about your hire.

Frequently asked questions

Does every board member at an FCA-regulated firm need FCA approval?

No. Executive directors and the Chair generally hold pre-approved SMFs. Non-executive directors need approval only where they hold a designated SMF, such as a committee chair or Senior Independent Director at an enhanced or dual-regulated firm. Other non-executives are not SMFs, although they may still be subject to the Conduct Rules and the board should be satisfied they are suitable for the role.

How long does SMF approval take?

The statutory deadline is three months from a complete application, with a proposal to reduce it to two. The FCA aims to decide at least half of applications in 35 days or fewer. Complex applications, first-time senior managers and incomplete submissions take longer, so plan for the full period.

What changed with the 12-week rule?

Since 24 April 2026, the 12 weeks run to submission of the SMF application rather than to approval, and the person covering can continue while the regulator decides. The second-phase proposals would extend the period to 18 weeks.

Will committee chairs stop needing approval?

Possibly. The FCA has proposed moving SMF5 and SMF10 to SMF15 to notification (the PRA list differs slightly). These are consultation proposals closing on 22 January 2027; until final rules are made, pre-approval still applies.

Can one person hold SMF16 and SMF17 on a fractional basis?

Yes, at many smaller firms. The regulator will want to see that the individual has enough time, authority and support to perform both functions properly, and that the Statement of Responsibilities reflects that.