Mansion House: UK SMCR proposals for reform announced

The HM Treasury (HMT), the UK Financial Conduct Authority (FCA) and the UK Prudential Regulation Authority (PRA) have published consultations on various proposals to reform the UK Senior Managers and Certification Regime (SMCR). The proposals fall into two phases. Phase 1 comprises amendments to the FCA and PRA rules which the regulators can implement without legislative changes, meaning firms can benefit from these changes more quickly. Phase 2 will cover reforms requiring primary legislation to be amended, with a view to giving the regulators more flexibility to develop a proportionate regime.

For phase 1, the regulators have collaborated to produce consistent proposals in relation to areas for improvement arising from the feedback received in response to the regulators' 2023 joint discussion paper. Key proposed rule changes include amendments to the 12-week rule so that it is more practicable, streamlining and reducing duplication in the course of the application process, and increasing the thresholds for categorisation as an enhanced SMCR firm.

Other amendments aimed to reduce frictions of implementing the regime in practice include, giving firms more time to report updates to statements of responsibilities and directory information and increasing the validity period for criminal checks from three months to six months. In addition, both the FCA and the PRA propose to provide guidance in areas where firms have requested further clarity, including in relation to the SMF7 role, allocation of prescribed responsibilities, application of conduct rules, reporting requirements and regulatory references.

The FCA and PRA proposals are not identical, and certain changes would be applied differently, where relevant, depending on whether a firm is solo- or dual-regulated. For example, while both regulators propose a six-month timeframe for providing updated statements of responsibility and management responsibility maps, dual-regulated firms would be expected to submit all relevant versions of updated statements of responsibility and management responsibility maps, while solo-regulated firms would only be expected to submit the most recent version.

For phase 2, the consultations consider additional areas that could be updated which require changes to be made to the primary legislative framework. HMT's consultation asks for views on proposals to remove the certification regime from legislation (meaning that it would be transferred to the regulator rulebooks where the FCA and the PRA would be able to make changes more readily) and to reform the approach to regulatory pre-approval. More broadly, all consultations seek views on areas which could be improved to ease the regulatory burden on firms.

The deadline for responses for all consultation papers is 7 October.

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