Statements of Responsibility (SoRs) and What Boards Should Consider Before Appointing an SMF

Statements of Responsibility (SoRs) and What Boards Should Consider Before Appointing an SMF

Statements of Responsibility — almost always shortened to SoRs — are among the most consequential documents in any board-level appointment at an FCA-regulated firm. An SoR sets out what an individual Senior Manager Function (SMF) holder is personally accountable for. It is what the regulator looks at to understand the firm’s governance allocation. It is what the candidate will be held to under the conduct rules and, in the event of enforcement, what the FCA will trace responsibility back through.

And yet SoRs are routinely drafted late in the appointment process, treated as a paperwork exercise after the candidate has been selected, and signed off without the careful overlap analysis that the regime expects. The result is appointments where the SoR is poorly aligned to the candidate’s actual role, accountability gaps that emerge during regulatory scrutiny, and at worst, enforcement action against a senior manager for failures that fell into an SoR overlap with another SMF.

This article sets out what an SoR is, the overlap problem at committee chair level, and the questions boards should consider before approving any SMF appointment.

What a Statement of Responsibility actually is

A Statement of Responsibility is a document required for each SMF holder at a regulated firm. It sets out the specific responsibilities of that senior manager — both the responsibilities that attach automatically to their SMF designation (called “prescribed responsibilities” for the most senior SMFs) and any additional responsibilities the firm allocates to them.

The SoR sits alongside two related documents.

The firm-level Management Responsibilities Map (MRM) — required at SMCR Enhanced firms — sets out how all responsibilities at the firm are allocated across the SMF holders and senior individuals. The MRM is the firm’s “governance map” and is the document the FCA reviews to understand whether all material activities have someone accountable for them.

The Statement of Responsibilities (SoR) is the individual document for each SMF holder. Where the MRM is the firm-level view, the SoR is the personal view of one senior manager’s accountability. The SoR is what gets submitted to the FCA as part of the Form A approval application and is what the senior manager themselves signs to acknowledge they understand and accept the responsibilities allocated to them.

The Form A approval application itself is the FCA form through which the firm requests approval of a new SMF appointment. The candidate’s SoR sits within or alongside the Form A and gives the regulator a clear picture of what the candidate is being appointed to do.

The three documents work as a set. The MRM allocates responsibilities across the firm. The SoR records each individual’s allocation. The Form A presents the candidate’s appointment for regulator approval. If any one of these is poorly drafted or inconsistent with the others, the FCA approval process becomes harder than it needs to be, and the firm sets itself up for later difficulty.

The overlap problem at committee chair level

The most common practical problem with SoRs is overlap between responsibilities at the committee chair level. The board structure at most regulated firms includes multiple committee chairs — SMF10 (Risk), SMF11 (Audit), SMF12 (Remuneration), SMF13 (Nominations) — whose responsibilities can interact in complex ways.

Consider the appointment of a new SMF10 (Chair of Risk Committee). The SoR for this role might include responsibility for “oversight of the firm’s risk management framework, including risk appetite, risk strategy and risk culture”. That sounds clean enough in isolation. But the SMF4 (Chief Risk Officer) holder also has accountability for the risk management framework, and the SMF11 (Chair of Audit Committee) has accountability for the internal control framework, which intersects with the risk framework at several points.

Where exactly does SMF10 accountability end and SMF11 accountability begin? Where does SMF10 accountability end and SMF4 accountability begin? If these boundaries are not crisply drawn in the SoRs, two problems follow.

First, the FCA may push back on the appointment application. Approval applications where the SoR overlaps in unclear ways with existing SMFs at the firm regularly trigger additional regulator questions, extend timelines and sometimes lead to refusals where the firm cannot articulate a clean accountability map.

Second, if something goes wrong at the firm later — a risk event, a control failure, a customer harm issue — the FCA will look at the SoRs to identify the accountable senior manager. Where the SoRs are overlapping, the regulator may pursue multiple SMF holders simultaneously, or may pursue the senior manager whose SoR most closely matches the failure point regardless of who was actually responsible. SoR drafting is enforcement risk drafting.

The fix is straightforward in principle but requires careful work in practice. Each SoR should be drafted in conjunction with the SoRs of related senior managers, with explicit attention to where one person’s accountability ends and another’s begins. The drafting should be reviewed by someone who is familiar with how the regulator reads SoRs in enforcement contexts — usually a regulatory lawyer or an experienced compliance leader — not just by the firm’s in-house legal team.

Drafting the SoR before the candidate is selected

The traditional sequence at many regulated firms is: identify the candidate, agree the appointment, then draft the SoR. That sequence is the wrong way round.

The right sequence is: draft the SoR first, then design the candidate brief around what the SoR requires, then run the search to find the candidate whose experience and competence map cleanly to the SoR. The SoR should drive the search, not the other way round.

Three reasons for this.

First, the SoR is the document the FCA will assess the candidate against. Approval will turn on whether the regulator believes the candidate is fit and proper, and competent, for the specific responsibilities allocated to them in the SoR. If the SoR is drafted after the candidate has been selected, there is a temptation to tailor the SoR to the candidate — reducing scope to fit the candidate’s experience, or expanding scope to use the candidate’s capability fully. Both moves compromise the integrity of the firm’s governance allocation.

Second, drafting the SoR first surfaces the overlap question early. If the new SMF role overlaps awkwardly with existing SMFs at the firm, that should be resolved before the search starts — not after the candidate has been identified. Resolving the overlap may involve redrawing other SoRs at the firm, which is easier to do before everyone has been recruited than after.

Third, drafting the SoR first gives the recruitment agency a precise brief. A clean SoR tells the agency exactly what the candidate must be able to do, what their conduct rule accountability will be, and what the FCA will be assessing them against. A vague SoR produces a vague brief, which produces a vague shortlist.

The practical sequence at well-run regulated firms is: the Chair, the Chief Risk Officer (if relevant) and the firm’s legal or compliance leader work through the SoR for the new role in collaboration with the recruitment agency before the search starts. The SoR is then signed off as a working draft, the search proceeds, and the SoR is finalised — with any minor adjustments — once the candidate has been identified.

How the SoR shapes the candidate brief

A well-drafted SoR translates directly into a candidate brief in three ways.

It defines competence requirements. Each accountability area in the SoR maps to a competence the candidate must have. SoR responsibility for oversight of the ICAAP/ILAA process means the candidate must understand the capital and liquidity adequacy frameworks at the firm’s level of authorisation. SoR responsibility for Consumer Duty oversight at board level means the candidate must understand the Consumer Duty regime and its practical application at firms in the relevant sector. Vague SoR language produces vague competence requirements, which produces candidates who look right on paper but fail in role.

It defines sector experience requirements. The SoR makes clear what kind of firm the candidate must have operated in. SoR responsibility for oversight of investment management activity means the candidate’s prior experience needs to include investment management firms, not just generic regulated firm experience. The SoR is the test of whether sector experience transfers or not.

It defines accountability tolerance. The SoR makes clear the level of personal accountability the candidate is signing up to. Candidates evaluating an SMF role increasingly want to see the SoR before accepting the appointment — not after. Firms that present the SoR as part of the offer process, rather than as a post-acceptance formality, find that candidates engage more seriously with the appointment and that withdrawals after offer acceptance are less common.

Common SoR mistakes that boards make

Several SoR drafting patterns recur often enough at regulated firms to be worth flagging.

The cut-and-paste SoR. The firm has an existing SoR for the outgoing SMF holder. The new SMF holder gets the same SoR, unchanged. The risk: the new SMF holder may have different experience, different competence and different stretch capacity than the outgoing holder. The SoR that worked for the previous holder may not be the right SoR for the new appointment.

The catch-all SoR. The SoR includes language like “and such other responsibilities as the Chair may from time to time allocate”. This kind of open-ended drafting is read by the FCA as the firm not knowing what the senior manager is accountable for, which invites questions. It is also read by the candidate as an unbounded accountability risk, which can put off strong candidates.

The aspirational SoR. The SoR describes what the firm would like the SMF holder to do, rather than what they will actually be doing in the first 6–12 months. The risk: the senior manager is held to accountability they cannot deliver in the time available. The SoR should describe the role as it actually will be, not as the firm hopes it might become.

The overlapping SoR. Already discussed above. The most common practical failure mode, and the one most likely to cause problems later.

The unread SoR. The candidate signs the SoR without having read it in detail, often during the offer process when other documents are competing for attention. The candidate is then held to accountability they did not properly internalise. Strong candidates increasingly want a structured conversation about the SoR before signing, with their own legal advice where appropriate.

The Management Responsibilities Map context

For SMCR Enhanced firms, the SoR sits inside a Management Responsibilities Map that is also a regulator-facing document. The MRM should be reviewed and updated whenever an SMF appointment is being made, because the new appointment will change how responsibilities are allocated across the firm.

Common MRM-related questions to consider before a new SMF appointment.

Are there any responsibilities currently held by the outgoing SMF that should be reallocated to a different SMF rather than transferred to the incoming hire? Senior manager transitions are an opportunity to rebalance accountabilities across the firm, not just to swap names on existing SoRs.

Are there any responsibilities not currently allocated to any SMF that should be allocated as part of this appointment? Regulatory expectations evolve, and the MRM that worked two years ago may have gaps relative to current FCA expectations.

Are there any responsibilities currently overlapping between two SMFs that should be cleaned up as part of this appointment? The new appointment is the opportunity to fix problems that have accumulated in the MRM.

Firms that approach senior appointments as a chance to refresh the MRM, rather than as an isolated event that simply needs the new SoR drafted, get better long-term governance outcomes.

How Exec Capital uses SoRs in the search process

Exec Capital recruits senior appointments at FCA-regulated firms, and SoR considerations are built into our search process from day one. Every mandate is led personally by Adrian Lawrence FCA, an ICAEW Fellow whose own regulated professional background gives Exec Capital a meaningful frame of reference for the accountability that SMF roles carry.

Our approach to SoR work in a senior search has three elements.

We engage with the SoR drafting before the brief is finalised. Where the firm has not yet drafted the SoR, we work with the Chair, the firm’s legal or compliance leader, and where appropriate the firm’s regulatory lawyer to make sure the SoR is in place before the search starts. Where the firm has drafted the SoR, we read it carefully and flag any overlap, gap or scope issues before the candidate brief is finalised.

We use the SoR to define the candidate competence and experience requirements. The shortlist is built around what the SoR requires, not just around generic seniority or sector experience. Candidates are assessed against the specific accountability areas in the SoR before being presented to the firm.

We engage candidates with the SoR before offer acceptance. Strong SMF candidates increasingly want a structured conversation about the SoR, the accountability scope, the relationship with other SMFs at the firm and the support structures around the role. We facilitate that conversation as part of the search process — because candidates who fully understand the SoR before accepting are less likely to withdraw or to fail in role.

For senior board recruitment mandates at FCA-regulated firms, speak to Adrian directly on 0203 834 9616 or through our FCA-regulated firms page.

Adrian Lawrence

Adrian Lawrence FCA is the founder of Exec Capital. He is a Chartered Accountant and holds an ICAEW practising certificate in his own name with over 25 years’ experience operating at C-suite level, Adrian brings direct executive experience to senior search. His background spans private equity-backed businesses, owner-managed companies, and listed environments, giving Exec Capital a practitioner’s understanding of what leadership hires actually require.