SM&CR Reforms 2026: What FCA and PRA Proposals Mean for Employee Screening

The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) have announced proposals for significant reforms to the Senior Managers and Certification Regime (SM&CR), potentially changing how UK financial services firms assess and appoint regulated personnel.

Published on 22 October 2026, the proposals include removing the Certification Regime, reducing the number of senior management appointments requiring regulatory pre-approval and simplifying several existing administrative requirements.

The regulators aim to reduce compliance burdens while maintaining individual accountability and appropriate standards of professional conduct.

For financial services employers, the reforms raise important questions about how background screening, fitness and propriety assessments and recruitment procedures may need to evolve.

However, the proposals remain subject to consultation and legislative changes. Existing regulatory obligations continue to apply until any new rules take effect.

What Changes Are Being Proposed to the SM&CR?

The SM&CR was introduced to strengthen accountability within financial services following concerns about individual conduct and decision-making across the sector.

It requires regulated firms to assess the suitability of individuals performing specified functions and maintain appropriate arrangements for accountability.

The FCA and PRA have now published their second phase of reforms, building on changes introduced earlier in 2026.

The principal proposals include:

• Removing the existing Certification Regime.
• Reducing the number of Senior Management Functions requiring regulatory pre-approval.
• Introducing notification arrangements for certain senior appointments.
• Simplifying Statements of Responsibilities and Management Responsibilities Maps.
• Reducing administrative and reporting requirements.
• Streamlining aspects of the Conduct Rules framework.

The regulators believe these changes could make recruitment and appointments more efficient while preserving important safeguards.

Proposed Removal of the Certification Regime

One of the most significant proposals is the removal of the existing Certification Regime.

Under the current framework, firms must assess individuals performing Certification Functions as fit and proper before certification and at least annually thereafter.

The proposed reforms would remove these specific certification requirements, including the obligation to issue certificates and obtain regulatory references for individuals previously covered by the regime.

The PRA estimates that approximately 7,700 individuals within its Certification Regime would be affected.

The FCA is also proposing to remove certification requirements within its regulatory framework.

However, removing certification does not mean financial services firms would no longer need to assess whether employees are suitable for their responsibilities.

Employers would remain subject to applicable competence, conduct, governance and other regulatory requirements.

The practical distinction is between removing a prescribed certification process and removing the broader responsibility to employ appropriately qualified and competent individuals.

Changes to Senior Manager Approvals

The proposals would also change how certain Senior Management Functions are approved.

Currently, individuals performing designated Senior Management Functions generally require regulatory approval before taking up their positions.

Under the proposed arrangements, some appointments would move to a notification-based process.

This would allow firms to appoint individuals to specified functions after assessing their fitness and propriety and notifying the relevant regulator, without waiting for formal pre-approval.

The PRA anticipates that the changes could reduce its Senior Manager pre-approval applications by approximately 43%.

Nevertheless, firms would remain responsible for determining whether individuals appointed to these roles are fit and proper.

Senior Managers would also remain subject to applicable conduct and accountability standards.

For employers, the proposals could increase flexibility when filling senior positions, but they would also reinforce the importance of having appropriate internal assessment procedures.

What Would the Reforms Mean for Pre-Employment Screening?

The proposed changes could alter how financial services firms structure screening programmes for regulated appointments.

Where formal certification requirements are removed, employers may have greater flexibility to determine which background checks are necessary and proportionate to a particular position.

However, this flexibility should not be interpreted as a reason to abandon relevant verification.

For senior or sensitive appointments, organisations may still need to establish:

• The candidate's identity and employment history.
• Relevant academic and professional qualifications.
• Previous regulatory findings or disciplinary matters.
• Appropriate criminal-record information where legally permitted.
• Financial information relevant to the responsibilities involved.
• Material discrepancies in professional or corporate history.

The appropriate combination of checks will depend on the position, legal requirements and the firm's risk-based policies.

Conflict International's SMCR Screening and FCA Vetting Services support regulated businesses with independent background verification tailored to relevant appointments.

Our screening programmes can incorporate employment, identity, qualification, financial and other appropriate checks, helping firms obtain factual information for their internal assessment processes.

The employing firm remains responsible for its regulatory decisions and determining an individual's suitability.

Fitness and Propriety Remain Important

The distinction between regulatory approval and employer responsibility is central to the proposed reforms.

Under the PRA proposals, individuals appointed to Senior Management Functions would continue to require fitness and propriety assessments, including where the position becomes subject to notification rather than pre-approval.

The PRA also proposes to clarify the responsibility of relevant Senior Managers for ensuring that appropriate assessments take place.

This means firms would still need reliable processes for establishing whether senior candidates possess the necessary competence, integrity and suitability.

Independent background screening can support these assessments by providing verified information that may not be established through interviews or candidate-supplied documentation alone.

It is also important that findings are assessed fairly and in context.

An employment discrepancy, financial difficulty or historic allegation should not automatically be treated as evidence that a candidate is unsuitable.

What Should Regulated Employers Do Now?

Because the reforms remain proposals, financial services firms should continue to comply with the current SM&CR requirements.

However, employers can begin considering how their existing recruitment and screening procedures might need to adapt if the changes are implemented.

Relevant considerations include reviewing which roles currently fall within the Certification Regime, identifying positions that may move to notification and examining existing fitness and propriety procedures.

Firms should also consider whether their background screening policies are appropriately tailored to the responsibilities and risks associated with individual appointments.

Where certification requirements may eventually be removed, decisions about additional verification should be supported by a clear and proportionate rationale.

For a broader explanation of the current framework, read our guide to What Is SMCR Screening? Everything You Need to Know About FCA Vetting.

When Could the SM&CR Reforms Take Effect?

Both regulators are consulting on the proposals until 22 January 2027.

The PRA currently anticipates implementation during the second half of 2027, subject to the necessary legislation, consultation responses and final regulatory decisions.

The precise requirements and implementation timetable may therefore change.

Employers should avoid making premature changes to screening procedures based solely on the consultation proposals.

Existing certification, approval and fitness and propriety obligations must continue to be followed until the relevant requirements are formally amended.

Supporting Financial Services Recruitment

The proposed reforms represent a significant potential change to how regulated financial services firms manage appointments and demonstrate employee suitability.

While some administrative obligations may be removed, employers will continue to require reliable information when assessing individuals appointed to positions involving substantial responsibility.

Conflict International supports UK financial services organisations with pre-employment screening, regulatory background checks and verification for senior and specialist appointments.

Our screening services can be tailored to individual recruitment requirements or coordinated through our secure vetting portal for organisations managing multiple appointments.

As the regulatory framework develops, firms can review the appropriate scope of screening while maintaining proportionate recruitment and assessment procedures.

Contact Conflict International to discuss your SMCR screening and FCA vetting requirements.