The Senior Managers and Certification Regime (SMCR) is the FCA framework that makes individuals in regulated firms personally accountable for their conduct and competence. It has applied to FCA solo-regulated firms, including advice firms, since December 2019. SMCR has three pillars: the Senior Managers Regime, the Certification Regime, and the Conduct Rules. Most advice firms are classified as "Core" firms, with a lighter version applying to Limited Scope firms and a more demanding version to Enhanced firms.
Key takeaways
- SMCR replaced the old Approved Persons Regime and shifts the emphasis to individual accountability.
- The three pillars are the Senior Managers Regime, the Certification Regime, and the Conduct Rules.
- Firms fall into one of three tiers, Limited Scope, Core, or Enhanced, and most advice firms are Core.
- Senior Managers hold Senior Management Functions (SMFs), each with a Statement of Responsibilities, and carry a personal Duty of Responsibility.
- Firms must assess fitness and propriety of relevant staff at least annually and certify them, this is not a one-off at hiring.
The three pillars of SMCR
1. The Senior Managers Regime. The most senior decision-makers hold specified Senior Management Functions (SMFs) and must be approved by the FCA. Each Senior Manager has a Statement of Responsibilities setting out precisely what they are accountable for, and a Duty of Responsibility: if something goes wrong in their area, the FCA can ask whether they took reasonable steps to prevent it.
2. The Certification Regime. Below Senior Managers, employees whose roles could cause significant harm to the firm or its customers perform certification functions. They do not need FCA approval, but the firm must assess and certify that they are fit and proper, and repeat that assessment at least once a year.
3. The Conduct Rules. A set of basic standards applying to almost everyone in the firm (with limited exceptions). There are individual conduct rules (act with integrity, with due skill, care and diligence, be open and cooperative with regulators, treat customers fairly, observe proper standards of market conduct) and additional Senior Manager conduct rules. Staff must be trained on the rules relevant to them, and firms must report certain breaches to the FCA.
Which SMCR category is your firm?
- Limited Scope firms, a reduced set of requirements; applies to a specific list of firm types.
- Core firms, the baseline regime; most advice firms sit here.
- Enhanced firms, the largest and most complex firms, with extra requirements including responsibilities maps and a longer list of prescribed responsibilities.
Getting the category right matters because it determines which SMFs, prescribed responsibilities and documents you need.
What Core firms must maintain in practice
- Approved Senior Managers in the required SMFs, each with a current Statement of Responsibilities.
- Allocation of prescribed responsibilities to appropriate Senior Managers.
- Certification of relevant staff, with annual fitness and propriety assessments.
- Conduct Rules training for staff, kept up to date.
- Records evidencing all of the above, plus timely regulatory notifications (for example, on Conduct Rule breaches or changes to Senior Managers).
Fitness and propriety, the part firms neglect
Fitness and propriety is judged on honesty, integrity and reputation; competence and capability; and financial soundness. The common failure is treating it as a hiring formality. SMCR requires an annual reassessment for certified staff and Senior Managers, supported by evidence, references, criminal and credit checks where relevant, qualifications, competence records and conduct history. A missing or perfunctory annual assessment is a straightforward finding for a supervisor to make.
How SMCR connects to the Consumer Duty
The two reinforce each other. The Consumer Duty asks whether customers get good outcomes; SMCR asks who is accountable for delivering them. Many firms now map a prescribed responsibility for the Consumer Duty to a named Senior Manager, so there is a clear owner. Expect supervisors to test whether accountability for good outcomes is real and documented.
Frequently asked questions
When did SMCR apply to advice firms?
The regime was extended to FCA solo-regulated firms, including advice firms, in December 2019.
What are the three pillars of SMCR?
The Senior Managers Regime, the Certification Regime, and the Conduct Rules.
What category are most financial advice firms under SMCR?
Most are Core firms. Some smaller or specific firm types are Limited Scope, and only the largest, most complex firms are Enhanced.
How often must fitness and propriety be assessed?
At least annually for certified staff and Senior Managers, in addition to the initial assessment on appointment.
Do all staff need Conduct Rules training?
Almost all staff are subject to the Conduct Rules and must be trained on the rules that apply to them, with limited exceptions for ancillary roles.