SMF Capital

Welcome to SMF Unlocked, the podcast exploring senior management, regulatory accountability and recruitment across UK financial services.

In this episode, we’re focusing on SMF Capital: who we are, what we do, and how we help FCA and PRA-regulated firms recruit the senior people they need.

That is where specialist recruitment can make a difference.

SMF Capital was established to focus on Senior Manager Function appointments, bringing together recruitment expertise and an understanding of the regulatory considerations that influence these hires.

What Is SMF Capital?

SMF Capital is a specialist recruitment practice working with regulated financial services businesses that need experienced senior managers, executives and board-level professionals.

We support firms recruiting across a range of Senior Management Functions, from chief executives and senior finance leaders to compliance officers, money laundering reporting officers, risk professionals and non-executive chairs.

Our work spans different types of regulated business, including wealth management, investment management, consumer credit, insurance, banking, payments and fintech.

You can find out more about our approach on the SMF Capital website.

Why SMF Recruitment Requires a Specialist Approach

The Senior Managers and Certification Regime places particular emphasis on individual accountability.

For relevant Senior Management Functions, regulatory approval is required before an individual can begin performing the function. The firm must identify the responsibilities attached to the role and provide the regulator with the information needed to assess the appointment.

This creates several challenges for employers.

First, the job specification must accurately reflect the function and the responsibilities involved. A generic search for a senior executive with financial services experience may not identify candidates with the right regulatory background.

Second, the candidate’s experience needs to be examined in context. Having worked at a regulated firm does not automatically mean someone is ready to take on a particular SMF designation at another business.

Third, recruitment planning needs to account for the approval process, references and supporting documentation, as well as the normal stages of search, interviews, offer and notice periods.

At SMF Capital, we believe these considerations should shape the recruitment process from the beginning rather than being left until a preferred candidate has already been selected.

The Senior Management Functions We Recruit

SMF Capital works across a broad range of executive and non-executive appointments.

Executive and operational leadership.

The specific designation depends on the firm and the responsibilities assigned to the individual.

Compliance and financial crime

Compliance oversight and money laundering reporting are particularly important areas for regulated firms.

A strong candidate needs to understand the applicable regulatory framework, but also how to apply it in practice. That may involve building compliance arrangements, managing regulatory relationships, overseeing financial crime controls or supporting a firm through a period of growth and change.

Risk, audit and governance

Some businesses require specialist risk leadership, internal audit expertise or experienced board committee chairs.

These appointments demand candidates who can provide effective challenge, understand the firm’s risk profile and contribute to sound governance.

Interim and fractional appointments

Not every firm needs a full-time senior manager for every function.

Smaller regulated businesses may need experienced interim or fractional support, whether they are filling a vacancy, strengthening governance or managing a period of transition.

The suitability of any arrangement depends on the firm's requirements, the relevant regulatory rules and whether the individual has sufficient capacity and authority to perform the function properly.

Who Do We Work With?

SMF Capital works with firms at different stages of development.

A new entrant preparing for FCA authorisation may need to assemble an appropriate senior management team before submitting its application.

An established firm may need to replace a departing compliance officer, appoint a new chief executive or strengthen its risk oversight.

A growing business may need to review its governance arrangements as its operations become more complex.

An overseas firm establishing a UK presence may need senior managers with relevant experience of the UK regulatory framework.

Each situation presents different challenges. Our aim is to understand the firm's requirements, identify the relevant responsibilities and find candidates whose experience matches the actual role.

Meet the Founder

SMF Capital was founded by Adrian Lawrence FCA, a Chartered Accountant and Fellow of the ICAEW, and a former listed-company Finance Director.

His background combines senior financial leadership with specialist recruitment. This provides a practical perspective on the challenges boards face when appointing executives and assessing whether a candidate is suitable for a position carrying regulatory accountability.

Every SMF search is led personally by Adrian. The intention is to maintain a consistent understanding of the brief, the regulatory context and the candidates being considered throughout the process.

That founder-led approach is particularly relevant when a firm needs a candidate with a specific combination of technical experience, leadership ability and regulatory readiness.

How SMF Capital Approaches a Search

A successful SMF appointment begins with a clear definition of the requirement.

We start by understanding the firm, the relevant designation, the responsibilities attached to the position and the experience needed to perform it effectively.

We then identify suitable candidates and assess their background against the requirements of the role. Interviews should explore not only professional achievements, but also the individual's judgement, understanding of accountability and readiness for the responsibilities involved.

Where appropriate, the process also considers regulatory references and the information needed to support an application.

Finally, recruitment planning must account for the regulatory approval timetable. Firms should not assume that making an offer means the individual can immediately start performing an SMF.

The objective is to help clients make informed appointments and reduce avoidable surprises later in the process.

Part of a Wider Specialist Recruitment Network

SMF Capital sits alongside a wider network of specialist recruitment practices.

FD Capital focuses on Finance Directors, CFOs and senior finance appointments. Exec Capital covers C-suite and board-level executive search. NED Capital specialises in non-executive directors and governance appointments, while Accountancy Capital recruits qualified finance professionals below director level.

This network provides access to complementary expertise across senior leadership and finance recruitment.

Where a requirement does not involve a Senior Management Function, the appropriate specialist practice may be better placed to help. The important thing is to match the search to the actual appointment rather than treating every senior role as identical.

Why Choose Specialist SMF Recruitment?

For a regulated firm, the consequences of a senior appointment extend beyond the usual questions of salary, experience and cultural fit.

The individual may need regulatory approval, will have defined responsibilities and must be capable of meeting the expectations associated with the function.

A specialist recruiter can help the firm focus its search, understand the candidate market and address regulatory considerations earlier in the process.

That does not remove the firm's own responsibilities. The firm remains accountable for its regulatory decisions and must make its own assessment of the candidate's suitability.

However, a recruitment process designed around the realities of SMF appointments can help boards and hiring managers make better-informed decisions.

Find Out More About SMF Capital

If your firm is recruiting a senior manager, planning a new authorisation, reviewing its governance structure or looking for interim or fractional SMF support, we invite you to learn more about our work.

Visit SMF Capital on FreeIndex to find our business profile.

You can also visit the main SMF Capital website to explore our recruitment services, learn more about the different Senior Management Functions and access our guides to the SM&CR.

Whether you are a board member planning a senior appointment, a compliance professional strengthening your team or an experienced executive considering your next SMF role, understanding the requirements is an important first step.

Final Thoughts

SMF recruitment is a specialist area because these appointments combine leadership, professional experience and regulatory accountability.

The right candidate must be able to do the job, understand the responsibilities attached to the role and demonstrate the suitability required for the appointment.

SMF Capital exists to help regulated firms navigate that recruitment challenge, with a focus on the specific demands of Senior Management Functions.

Thank you for listening to SMF Unlocked. For more information, visit

Welcome to SMF Unlocked, the podcast from SMF Capital.

Today we are looking at one of the most important aspects of being an FCA Senior Management Function holder: the Conduct Rules.

For an SMF, regulatory responsibility is not simply about having a particular job title or being approved by the FCA.

Senior managers are subject to specific standards of behaviour and have personal accountability for the areas of the business for which they are responsible.

The FCA's Conduct Rules set minimum standards of individual behaviour, while SMF holders are also subject to four additional Senior Manager Conduct Rules.

So what do those rules actually mean in practice?

The Six Individual Conduct Rules

The FCA's individual Conduct Rules apply broadly across relevant staff within SMCR firms.

They require individuals to:

1. Act with integrity.
2. Act with due skill, care and diligence.
3. Be open and cooperative with the FCA, the PRA and other regulators.
4. Pay due regard to the interests of customers and treat them fairly.
5. Observe proper standards of market conduct.
6. Act to deliver good outcomes for retail customers, where the relevant Consumer Duty requirements apply.

For an SMF holder, these principles form the foundation.

But there is another layer.

Senior managers have four additional rules specifically concerned with the responsibilities they carry.

Senior Manager Conduct Rule One: Effective Control

The first Senior Manager Conduct Rule is:

You must take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively.

This is a fundamental principle of senior management accountability.

The FCA does not expect an SMF holder to personally perform every task within their area.

A CEO cannot personally monitor every transaction.

A CFO cannot personally check every financial entry.

A Chief Risk Officer cannot personally assess every risk.

Instead, the requirement is to take reasonable steps to ensure that the business is properly controlled.

Senior Manager Conduct Rule Two: Regulatory Compliance

The second rule requires an SMF to:

Take reasonable steps to ensure that the business for which they are responsible complies with the relevant requirements and standards of the regulatory system.

This does not mean that every senior manager needs to be a regulatory lawyer.

Senior Manager Conduct Rule Three: Delegation

The third rule is particularly important for senior executives:

You must take reasonable steps to ensure that any delegation of your responsibilities is to an appropriate person and that you oversee the discharge of the delegated responsibility effectively.

Delegation is unavoidable in most substantial financial services businesses.

A senior manager simply cannot do everything personally.

But delegation does not mean abandoning responsibility.

The person receiving the delegated responsibility needs to be appropriate for the task, and the senior manager needs to retain sufficient oversight.

That creates an important distinction between delegating a task and transferring accountability.

An SMF might delegate operational activity to a senior member of their team, but they still need to understand what is happening within the area for which they remain accountable.

The FCA specifically warns that delegation does not remove an SMF holder's accountability.

Senior Manager Conduct Rule Four: Disclosure

The fourth rule requires an SMF to:

Disclose appropriately any information of which the FCA or PRA would reasonably expect notice.

This is about ensuring that important information reaches the regulator when appropriate.

That reinforces a wider principle running through the SMCR:

Senior managers need to be informed about the businesses they are responsible for.

The Importance of "Reasonable Steps"

One phrase appears repeatedly in the Senior Manager Conduct Rules:

reasonable steps.

This is important because the FCA is not saying that a senior manager must guarantee that nothing ever goes wrong.

Financial services businesses are complex.

Mistakes happen.

Systems fail.

Employees make errors.

Customers complain.

Regulatory breaches can occur.

The question is whether the senior manager took appropriate and proportionate steps given the circumstances and the responsibilities allocated to them.

That makes the quality of management particularly important.

An SMF should have appropriate information, monitoring, escalation and challenge mechanisms.

If something significant happens, they need to respond appropriately.

Your Statement of Responsibilities Matters

The Conduct Rules cannot be considered separately from an SMF holder's Statement of Responsibilities.

The FCA requires every SMF to have a Statement of Responsibilities setting out what they are responsible and accountable for.

This provides an important link between the firm's governance structure and the individual's personal responsibilities.

Conduct Is More Than Financial Misconduct

Another important development is the FCA's approach to non-financial misconduct.

New rules and guidance concerning non-financial misconduct came into effect on 1 September 2026.

For non-banking firms within the relevant SMCR framework, the Conduct Rules now cover certain bullying, harassment or violence towards colleagues where there is a sufficient work-related link.

This reflects the broader regulatory focus on workplace culture and individual behaviour.

For senior managers, conduct therefore extends beyond obvious financial or regulatory breaches.

Leadership behaviour, decision-making, treatment of colleagues and the response to inappropriate behaviour can all become relevant depending on the circumstances.

What Happens If an SMF Breaches the Rules?

A breach of the Conduct Rules can have serious consequences.

The FCA states that disciplinary action can include a fine, restrictions, a prohibition on carrying out certain activities or withdrawal of approval.

Firms also have obligations concerning disciplinary action arising from Conduct Rule breaches.

This reinforces why Conduct Rules should not be treated as a box-ticking exercise.

For someone considering an SMF appointment, understanding the rules before accepting the role is important.

What Does This Mean for Recruitment?

For firms recruiting an SMF, the Conduct Rules provide another reason to look beyond the candidate's CV.

A candidate may have impressive technical qualifications and many years of industry experience.

But the firm also needs to consider whether the individual has demonstrated the judgement and leadership capability necessary to operate under a regime of personal accountability.

Can they challenge difficult decisions?

Do they understand risk?

Can they delegate effectively?

Will they escalate problems?

Are they comfortable dealing directly with regulators?

And will they take responsibility when something goes wrong?

These characteristics can be just as important as technical expertise.

Preparing for an SMF Appointment

For candidates, understanding the Conduct Rules before entering an SMF role can be extremely valuable.

You should understand your Statement of Responsibilities.

You should know what areas of the business you are accountable for.

You should understand how responsibilities are delegated.

You should know how material issues are escalated.

And you should be confident that you have sufficient authority, resources and information to discharge the responsibilities attached to your position.

If those things are not clear before accepting the role, they are worth discussing.

SMF Capital

SMF Capital specialises in senior-level recruitment for regulated businesses.

That means helping firms identify candidates who have not only the technical experience required for a position, but also the leadership capability and regulatory understanding required to operate effectively within an SMCR environment.

For candidates, the same principle applies.

An SMF appointment is a significant career step and should be approached with a clear understanding of the responsibilities involved.

The Conduct Rules Explained resource provides further information on who the Conduct Rules apply to and what they require.

Final Thoughts

The Conduct Rules are ultimately about how senior people behave when they have responsibility for a regulated business.

For an SMF holder, the four additional Senior Manager Conduct Rules can be reduced to four important questions:

Is the business properly controlled?

Is it complying with the relevant regulatory requirements?

Are responsibilities being delegated appropriately and overseen effectively?

And is important information being disclosed to the regulator when it should be?

Those questions sit at the heart of individual accountability under the SMCR.

That concludes this episode of SMF Unlocked.

For more information, visit SMF Capital and explore the specialist resources and recruitment services available for regulated senior management appointments.

Thank you for listening.

Welcome to SMF Unlocked, the podcast from SMF Capital.

Today we are looking at an issue that can become particularly important when recruiting senior people into regulated financial services: regulatory references and the FCA's six-year rule.

For an individual applying for an SMF, taking on a certification function or moving into another regulated senior position, references are not simply a standard HR formality.

The regulatory reference process can provide important information about a person's previous roles, conduct, fitness and propriety.

And for employers, understanding the six-year rule is essential.

So, what exactly does it mean?

What Is the Six-Year Rule?

The FCA's regulatory reference requirements are contained in SYSC 22 of the FCA Handbook.

The rules apply to SMCR firms and require firms considering appointing someone to certain regulated positions to take reasonable steps to obtain appropriate references from their current employer and previous employers within the preceding six years.

That means the reference process can go considerably further back than the candidate's most recent employer.

If someone has changed employers several times during the previous six years, the recruiting firm may need to obtain references covering those employers.

This is one reason why candidates should keep an accurate record of their employment history.

A gap or an overlooked previous employer can potentially complicate the reference process.

Why Does the FCA Require Regulatory References?

The purpose is fundamentally about fitness and propriety.

When a regulated firm appoints someone to an SMF or another relevant position, it needs to have sufficient information to assess whether that person is appropriate for the role.

A CV tells you where someone worked and what positions they held.

That makes the reference an important part of the wider assessment process.

Six Years Does Not Mean Everything Older Is Irrelevant

There is an important distinction here.

The six-year period is not necessarily a simple rule saying:

"Anything more than six years old can never matter."

The FCA rules contain an important exception for serious misconduct

This is an important point for candidates.

A historic issue does not automatically disappear simply because six years have passed.

What Does a Regulatory Reference Actually Cover?

This is why regulatory references can sometimes feel very different from an ordinary employment reference.

A conventional reference might simply confirm:

• employment dates;
• job title;
• salary; and
• perhaps a brief description of responsibilities.

A regulatory reference is concerned with information that may be relevant to the individual's suitability for regulated responsibilities.

That is particularly important when the proposed appointment involves significant senior management accountability.

What If a Candidate Has a Difficult Reference?

Instead, the recruiting firm needs to understand the circumstances and assess the information appropriately.

This is where a transparent recruitment process becomes valuable.

Trying to hide an issue can potentially create a much bigger problem than the original issue itself.

Candidates should be prepared to explain relevant matters accurately and consistently.

The recruiting firm should also consider the evidence, context, seriousness, relevance and subsequent history rather than simply reacting to a single sentence in a reference.

Regulatory References Must Be Fair and Accurate

There is also an important responsibility on the firm providing the reference.

The FCA guidance states that references should be true, accurate, fair and based on documented fact. It also recognises that firms may provide frank and honest views, provided reasonable care is taken over factual content and opinions.

This matters because regulatory references can have a significant impact on someone's career.

A former employer cannot simply use the reference process to make unsupported allegations or provide misleading information.

There needs to be a proper basis for what is disclosed.

The FCA also notes that firms have duties under general law when preparing references, including a duty to exercise due skill and care.

What If the Previous Employer Has No Complete Records?

Another practical issue is that employment records may not always go back for the entire period required.

A business may have changed systems.

Records may have been transferred.

A previous employer may have merged with another organisation.

Or the candidate may have worked for an overseas business.

The FCA rules recognise that firms may not have records covering the maximum periods contemplated by the regulatory reference requirements.

Where appropriate, the firm should explain that limitation rather than simply pretending the information does not exist.

This is another reason for candidates to provide accurate information about their employment history at the outset.

The Rule Also Matters to Employers

The six-year rule is not just something candidates need to understand.

It matters to recruiting firms too.

If a regulated business is considering appointing someone to an FCA controlled function, the reference process needs to be incorporated into the overall appointment timetable.

The FCA rules specify when references should be obtained, including in relation to applications for controlled functions.

That means recruitment teams should not leave regulatory references until the last minute.

An apparently straightforward senior appointment can become delayed if an old employer cannot immediately provide the required information.

Planning ahead can make the process considerably smoother.

Regulatory References and SMF Recruitment

This is one reason why recruiting an SMF is different from ordinary executive recruitment.

A successful appointment involves more than identifying someone with the right experience.

The firm needs to consider:

Does the candidate have the right technical background?

Do they have the appropriate seniority?

Does their experience match the firm's responsibilities?

Can they demonstrate the necessary competence and judgement?

What does their regulatory history look like?

Are the necessary references available?

And ultimately:

Is the firm comfortable that the individual is fit and proper for the proposed role?

The reference process forms part of that wider assessment.

Candidates Should Prepare Early

If you are a senior financial services professional considering an SMF appointment, there are several sensible steps you can take.

Keep an accurate record of your employment history.

Make sure you know which organisations employed you during the previous six years.

Understand the regulatory functions you have previously performed.

Keep copies of relevant employment and regulatory documentation where appropriate.

And if there has been a significant disciplinary, regulatory or conduct issue in your career, make sure you understand exactly what happened and how it was resolved.

Being prepared does not mean assuming there will be a problem.

It simply means avoiding unnecessary surprises later in the process.

SMF Capital's Candidate Perspective

At SMF Capital, the recruitment process is focused on senior appointments within regulated businesses.

That means understanding the candidate's career history is an important part of identifying an appropriate match.

If you are a senior financial services professional considering your next move, the SMF Capital Candidates service provides a route to engage with specialist recruitment focused on Senior Management Functions and regulated leadership positions.

The objective is not simply to match a CV with a job description.

It is about understanding the candidate's experience, regulatory background, leadership responsibilities and the type of regulated environment in which they are likely to be most effective.

You can find out more through the SMF Capital Candidates page.

Final Thoughts

The FCA's six-year regulatory reference rule is easy to misunderstand.

It does not simply mean that every detail of someone's career is examined indefinitely.

Nor does it mean that everything disappears after six years.

Instead, the framework provides a structured period for obtaining relevant employment and regulatory information, while recognising that serious misconduct may require consideration beyond that period.

For employers, the lesson is to build regulatory references into the recruitment and approval timetable.

For candidates, the lesson is preparation and transparency.

And for both sides, the ultimate objective is the same:

making sure the person appointed to a regulated position is genuinely suitable for the responsibilities they are being asked to undertake.

If you are a senior professional considering your next regulated appointment, or a firm looking to recruit an SMF, listen to more episodes of SMF Unlocked and explore the specialist services available from SMF Capital.

You can also visit the SMF Capital Candidates page to find out more about opportunities and specialist support for senior professionals in regulated financial services.

Thank you for listening to SMF Unlock

Welcome to SMF Unlocked, the podcast from SMF Capital for anyone involved in FCA Senior Management Functions.

If you are a board member, senior executive, compliance professional, HR or governance specialist, investor, or someone considering taking on an SMF appointment, this podcast is designed to make the Senior Managers and Certification Regime easier to understand in practical terms.

The aim is straightforward.

Rather than simply repeating regulatory terminology, each episode looks at a specific Senior Management Function, a particular regulatory issue or a practical problem that can arise when recruiting and appointing senior people into regulated businesses.

You can listen to the full series on the SMF Capital Audioboom channel, where the podcast brings together episodes covering individual SMF designations, FCA authorisation, fit and proper assessments, governance, temporary SMF cover, fractional senior managers and the challenges faced by international firms operating in the UK.

Listen to SMF Unlocked on Audioboom

Why SMF Appointments Deserve More Attention

For many businesses, appointing a senior executive can appear relatively straightforward.

You identify the role, find candidates with the right experience, conduct interviews, make an offer and complete the appointment.

That means the recruitment process and the regulatory process are closely connected.

A candidate can have an impressive career history and still not necessarily be the right person for a particular SMF.

The important questions include:

Does their experience match the responsibilities of the role?

Do they understand the regulatory environment?

Can they demonstrate the necessary judgement and competence?

Will they have sufficient authority and resources?

Are their responsibilities clearly defined?

And perhaps most importantly:

Does the candidate actually fit the firm's governance structure?

These are the kinds of questions that SMF Unlocked explores.

There is also an episode on SMF2, examining why a regulated CFO needs more than a traditional finance background.

For risk professionals and boards, the podcast explores SMF4, the Chief Risk function, including the importance of having a risk leader capable of providing effective challenge.

For board members, SMF9 looks at the Chair function and what changes when the role sits within an SMCR environment.

The series also examines SMF16 and SMF17, covering Compliance Oversight and the Money Laundering Reporting Officer function.

And for firms operating through UK branches, there is an episode dedicated to SMF19, the Head of Third Country Branch function.

This makes the podcast useful not only as a general introduction to SMCR, but also as a reference library for particular appointments.

Beyond Individual SMF Designations

SMF Unlocked is not only about individual job titles.

Some of the most important questions arise from the way the functions fit together.

For example, what happens when a business is moving from a Core to an Enhanced SMCR structure?

How should a firm think about building a multi-SMF team?

Is the firm's Responsibilities Map actually fit for purpose?

What happens when an SMF holder unexpectedly leaves?

When might temporary or fractional senior management support be appropriate?

And how should an overseas firm structure its UK branch and senior management responsibilities?

These are practical questions that can become very important when a regulated business is growing, restructuring or preparing for FCA authorisation.

The Recruitment Perspective

There is another reason for creating the podcast.

SMF appointments are ultimately about people.

Equally, a candidate from a smaller firm may have precisely the hands-on experience required by another business.

The right assessment therefore needs to look beyond job titles.

It should consider the candidate's actual responsibilities, regulatory exposure, leadership experience, technical knowledge, decision-making authority and ability to operate within the firm's governance structure.

That is particularly important for smaller firms, where one senior individual can sometimes have a very significant influence on the overall regulatory framework.

Who Is SMF Unlocked For?

The podcast is intended for a broad professional audience.

Boards and Non-Executive Directors

If you sit on the board of a regulated business, understanding the responsibilities attached to senior management functions can help you ask better questions about governance and appointments.

CEOs and Senior Executives

If you are considering an SMF appointment, the podcast provides a practical introduction to the responsibilities and considerations surrounding different functions.

Compliance and Risk Professionals

For people progressing towards senior regulatory positions, the individual SMF episodes provide useful context around the expectations associated with particular functions.

HR and Recruitment Teams

SMF recruitment involves considerations that go beyond an ordinary executive search.

Understanding the regulatory designation and the responsibilities attached to it can make the recruitment process considerably more effective.

Firms Preparing for FCA Authorisation

For a new regulated business, the senior management structure should not be an afterthought.

The right people, responsibilities and governance arrangements need to be considered as part of the wider authorisation process.

What Makes the Podcast Different?

There are plenty of sources of regulatory information.

The purpose of SMF Unlocked is not to compete with the FCA Handbook or formal regulatory guidance.

Instead, the podcast takes those requirements and asks:

What does this mean when you actually have to appoint someone?

What should a board look for?

What experience matters?

Where can responsibilities become blurred?

What can go wrong?

And how can a firm build a senior management structure that works in practice rather than simply looking correct on paper?

That practical perspective is particularly relevant because SMF Capital specialises in senior-level recruitment for regulated businesses.

The podcast is therefore closely connected to the real-world challenges encountered during senior management searches.

Building a Library of SMF Knowledge

The series is also designed to become a continuing reference library.

As the regulatory environment develops, new episodes can examine changes affecting senior management functions, governance, authorisation and recruitment.

For someone researching an SMF appointment today, that means the podcast can provide a starting point.

You might begin with the general introduction to SMF authorisation, then listen to the episode covering the particular function you are interested in.

From there, you can explore related subjects such as the fit and proper test, responsibilities, governance structures, temporary cover or recruitment.

The result is a growing collection of short, focused discussions rather than one long programme trying to explain everything about SMCR in a single episode.

SMF Capital

SMF Unlocked is produced by SMF Capital, a specialist UK recruitment practice focused on FCA Senior Management Function appointments.

The wider SMF Capital service covers areas including SMF recruitment, FCA authorisation support, governance and senior management structures, and fractional or interim SMF cover.

That creates a natural connection between the podcast and the practical services required by regulated firms.

If you are listening because your business is preparing for an appointment, restructuring its senior management team or looking for a particular SMF candidate, the podcast can help you understand the issues you should be considering before beginning the search.

Final Thoughts

Senior Management Functions are ultimately about accountability.

The FCA framework may define the functions, but the effectiveness of that framework depends heavily on the people occupying those positions and the governance structure around them.

That is why understanding an SMF appointment is important for more than just the individual candidate.

It matters to the board.

It matters to shareholders and investors.

It matters to compliance and risk teams.

And it matters to the firm as a whole.

SMF Unlocked is designed to make those issues easier to understand, one function and one practical question at a time.

If you are involved in FCA-regulated financial services, recruiting senior leaders, considering an SMF appointment or preparing a business for authorisation, listen and subscribe to the SMF Capital podcast on Audioboom.

Listen to SMF Unlocked on Audioboom

And for further information on Senior Management Functions and specialist recruitment support, visit SMF Capital.

Visit SMF Capital

Thank you for listening to SMF Unlocked.

Welcome to the SMF Capital podcast.

Today we are looking at SMF19 – the Head of Third Country Branch function and the particular responsibilities involved when an overseas financial services firm operates through a branch in the United Kingdom.

For an international firm, establishing a UK branch is not simply a question of bringing an overseas business model into a new market. The UK branch operates within a UK regulatory framework, and the firm needs clear local accountability for the activities carried out here.

So what does that mean in practice?

What Is SMF19?

SMF19 is commonly described as the Head of Third Country Branch.

The important point is that the role is not simply a country manager or commercial representative.

The individual has a defined senior management responsibility for the UK branch and its regulated activities.

That distinction matters.

An overseas parent may have its own CEO, board, risk function, compliance function and regional management structure. Those people may remain responsible for group-wide or international matters. But the existence of a group structure does not remove the need for appropriate accountability for activities undertaken through the UK branch.

That creates an important recruitment question:

Who is actually in charge of the UK operation from a regulatory perspective?

The Difference Between Group Authority and UK Accountability

One of the challenges for an international firm is the relationship between the UK branch and the overseas headquarters.

But the UK regulatory environment still requires appropriate local oversight.

The FCA's approach to international firms emphasises effective governance and clearly defined accountability for senior management. It also says that individuals directly involved in UK activities would typically be expected to spend adequate and proportionate time in the UK, while recognising that people with purely strategic responsibilities may be based elsewhere.

This creates an important distinction between strategic oversight and day-to-day implementation.

Someone sitting at global headquarters and setting the broad strategy for Europe is not necessarily the person who should be carrying the practical responsibility for implementing that strategy within the UK branch.

The FCA's guidance on local responsibility specifically indicates that where responsibility is allocated to an SMF manager outside the branch, the FCA would generally expect the relevant responsibility to sit with the person most senior in implementing the strategy for the branch, rather than someone whose role is limited to setting the overall strategy.

What Should an SMF19 Candidate Bring?

Recruiting an SMF19 therefore requires more than finding someone with a strong CV in financial services.

The candidate needs to understand the UK regulatory environment and be capable of operating within a potentially complex international governance structure.

Depending on the firm's activities, useful experience may include:

• Senior leadership within a UK branch of an international firm
• FCA-regulated financial services
• Governance and regulatory accountability
• Risk management
• Compliance and regulatory relationships
• Managing international reporting lines
• Implementing group strategy within a UK regulatory framework
• Working with boards and overseas headquarters
• Managing regulatory change
• Dealing with the FCA and other relevant authorities

Perhaps most importantly, the individual needs sufficient authority and influence to discharge the responsibilities attached to the role.

It is difficult to create meaningful local accountability if the person technically responsible for the branch cannot influence the decisions, resources or controls affecting that branch.

The Responsibilities Map and SMF19

For firms where the relevant requirements apply, the allocation of responsibility needs to be documented properly.

This is not simply an organisational-chart exercise.

The firm's governance arrangements should make clear which individual is responsible for which activities and how responsibilities interact with those held elsewhere in the group.

For overseas SMCR firms, SYSC 26 distinguishes between overall and local responsibility and requires clear allocation of responsibilities.

That means an international firm's governance documentation should stand up to a relatively simple question:

If something goes wrong in the UK branch, can the firm clearly identify who had responsibility for it?

If the answer is unclear, the structure may need closer examination.

SMF19 and Other Senior Management Functions

SMF19 rarely exists in isolation.

Depending on the firm's regulatory status and activities, the UK branch may also have other relevant senior management functions, such as Compliance Oversight or the Money Laundering Reporting Function.

For example, the FCA's current rules identify SMF19 alongside functions such as SMF16 and SMF17 for relevant overseas firms.

This makes the relationship between senior managers particularly important.

The SMF19 should not be expected to personally perform every control function. Instead, the governance structure needs to establish clear lines of responsibility, escalation and challenge.

The UK branch therefore needs a senior management team that works as a system.

Recruiting an SMF19

Recruitment for SMF19 can be particularly challenging because the candidate has to operate comfortably in two worlds.

On one side is the international parent company, with its own governance, culture, policies and strategic objectives.

On the other is the UK regulatory environment, with its own expectations around accountability, governance and conduct.

The successful candidate needs to be capable of explaining UK regulatory requirements to an international leadership team while also ensuring that the UK branch is properly controlled.

That requires judgement, communication and credibility as well as technical knowledge.

It is also why an international firm should think carefully about the reporting relationship attached to the position.

Does the SMF19 have genuine access to the people who make important decisions?

Can they escalate concerns?

Can they challenge group decisions where those decisions create UK regulatory concerns?

Do they have sufficient resources?

And does the firm's governance documentation accurately reflect how the branch actually operates?

These questions are just as important as the candidate's previous job titles.

When the Structure Needs Reviewing

Sometimes the challenge is not simply finding a new SMF19.

An overseas firm may already have a senior executive in place, but its UK governance structure may have evolved without the documentation and responsibilities being updated.

A new acquisition, change of reporting lines, expansion of UK activities, outsourcing arrangement or change at group level can all create reasons to review the structure.

This is where an independent review can be valuable.

SMF Capital's https://www.smfcapital.co.uk/job/smf19-head-of-third-country-branch/ service looks at the relationship between the overseas parent, the UK branch and the senior management structure, helping firms consider whether responsibilities and senior management arrangements are appropriately aligned.

The objective is not simply to produce another organisation chart.

It is to create a structure that reflects how the business actually operates and makes accountability understandable.

Finding the Right SMF19

For an overseas firm entering or expanding in the UK, appointing the right Head of Third Country Branch can be one of the most important senior-management decisions it makes.

The right person needs to understand the UK market, the firm's international structure and the responsibilities that come with being an SMF.

That is why SMF19 can be relevant when an overseas firm needs to identify, assess and appoint senior regulatory leadership.

The search can focus not just on technical experience, but on the candidate's ability to operate within an international governance structure while maintaining the independence, authority and judgement required for UK responsibilities.

Final Thoughts

SMF19 sits at an interesting point between international corporate governance and UK regulatory accountability.

An overseas firm may be global in its ownership, strategy and operations, but its UK branch still needs clear responsibility for the activities conducted here.

The key questions are therefore straightforward:

Who is responsible for the UK branch?

Do they have the authority to discharge that responsibility?

Can they challenge decisions where necessary?

Are responsibilities clearly allocated?

And does the documented governance structure accurately reflect what happens in practice?

For international firms, getting those questions right is an important part of building a credible UK regulatory structure.

That concludes this episode of the SMF Capital podcast.

For more information about SMF19, overseas firm structures and senior management recruitment, visit SMF Capital and explore the firm's specialist support for regulated senior leadership appointments.

Thank you for listening.

Welcome to the SMF Capital podcast.

Today we're looking at an important governance question for regulated firms:

Is your Responsibilities Map actually fit for purpose?

For an Enhanced firm, the Responsibilities Map is not simply a document prepared for the regulator and then filed away.

It should provide a clear picture of how the firm is managed, how responsibilities are allocated between senior managers, and where accountability sits across the organisation.

What Is a Responsibilities Map?

A Responsibilities Map provides a collective view of how an Enhanced firm's management and governance arrangements operate.

It sits alongside the individual Statements of Responsibilities held by SMF managers.

The FCA's guidance explains that Enhanced firms must have a Responsibilities Map and that it can be used to show how the firm is managed and governed.

The key distinction is important.

A Statement of Responsibilities tells you what an individual SMF holder is responsible and accountable for.

What Is the Map Supposed to Achieve?

The FCA's rules require an SMCR firm within scope to ensure that one or more SMF managers have overall responsibility for each relevant activity, business area and management function.

The allocation needs to be systematic, explicit and clear.

That leads to a simple test:

Can someone unfamiliar with the organisation look at your governance structure and understand who is accountable for what?

If the answer is no, the Responsibilities Map may need attention.

A good map should not merely reflect the organisation chart.

It should explain the actual allocation of management responsibility.

The Gap Test

One of the most useful ways to review a Responsibilities Map is to look specifically for gaps.

Consider the firm's major activities.

Who has overall responsibility?

Who reports to whom?

Which SMF is responsible for each relevant function?

Are any responsibilities sitting ambiguously between two executives?

Are there areas where everyone is involved but nobody is clearly accountable?

The FCA's rules are designed to prevent precisely this sort of ambiguity.

The purpose is not necessarily to give every individual activity its own separate SMF.

Instead, the firm needs a coherent allocation of responsibilities that covers the relevant activities without gaps.

The Overlap Test

The opposite problem can also occur.

Two senior managers may both believe that they have responsibility for the same area.

Sometimes that overlap is deliberate and appropriate.

But sometimes it reflects an unclear governance structure.

For example, consider an area involving technology, operations, risk and compliance.

Several executives may legitimately have an interest.

But who actually has overall responsibility?

Who makes the management decisions?

Who reports to the board?

Who is accountable for ensuring that the relevant controls operate effectively?

The Responsibilities Map should make those relationships understandable.

Has Your Business Changed?

A Responsibilities Map can become outdated surprisingly easily.

Perhaps the firm has grown.

A new Chief Operating Officer has joined.

The Chief Risk Officer has taken on additional responsibilities.

The compliance function has been reorganised.

A business line has been acquired.

Technology operations have been outsourced.

A new committee has been established.

Or the firm has moved from a relatively simple structure to a much more complex operating model.

Every one of these changes can potentially affect the way responsibilities are allocated.

A map that accurately described the business two years ago may no longer accurately describe it today.

Responsibilities Maps and SMF Changes

The connection between the Responsibilities Map and SMF recruitment is particularly important.

When a new SMF joins, the firm should not simply add another name to the organisation chart.

The new appointment needs to fit into the existing allocation of responsibilities.

Similarly, when an SMF leaves, the firm needs to consider what happens to the responsibilities previously allocated to that individual.

The FCA's rules specifically require firms to make clear who has which responsibilities.

That makes an SMF departure an obvious trigger for a governance review.

Is the Right Person Holding the Responsibility?

Another important question is whether the person allocated a responsibility is sufficiently senior and credible to discharge it effectively.

The FCA says individuals with overall or local responsibility should have sufficient seniority, resources and authority to exercise their responsibilities effectively.

The governance structure needs to evolve with the business.

That is an important governance principle.

The CEO should not become the accidental owner of every responsibility simply because nobody else has been clearly allocated the role.

The Board Challenge

A useful practical test is to ask:

Could the board use the Responsibilities Map to understand where accountability sits when something goes wrong?

The FCA describes SMFs as the firm's most senior decision makers, with key responsibilities allocated to them.

Every SMF holder also has a Statement of Responsibilities and a Duty of Responsibility.

The Responsibilities Map therefore needs to work alongside the firm's actual governance processes.

It should not be disconnected from the way management meetings, committees, reporting lines and escalation arrangements operate in practice.

The Outsourcing Test

Outsourcing is another area worth examining.

A firm may outsource technology, operations, compliance support, finance or other activities.

But outsourcing does not necessarily mean that senior management responsibility disappears.

The firm's governance structure still needs to make clear who has responsibility for the relevant activity and who oversees the relationship.

The map should therefore reflect the firm's real operating model, including important outsourced activities where relevant.

When Should You Review Your Responsibilities Map?

There is value in reviewing the map whenever there has been a material change to the firm's structure.

Useful triggers can include:

• Appointment or departure of an SMF holder
• Major organisational restructuring
• Acquisition or disposal of a business
• New regulated activities
• Significant outsourcing
• Creation of new executive functions
• Changes to board or committee structures
• Changes in reporting lines
• Movement into a different SM&CR category

The FCA's 2026 reforms have also changed aspects of the SM&CR framework, including the thresholds for Enhanced firms, making it sensible for firms to ensure their governance documentation reflects their current regulatory position.

You can explore the service here:

https://www.smfcapital.co.uk/governance-smf-structure-review/

The objective is not simply to produce another document.

It is to help ensure that the documented structure reflects how the business is actually managed.

What If the Review Identifies a Gap?

Sometimes a governance review identifies that the problem is not the document.

The problem is the organisation itself.

Perhaps an important responsibility has no obvious senior owner.

Perhaps an existing SMF has too broad a range of responsibilities.

Perhaps the business has grown to the point where another senior manager is needed.

Or perhaps the existing structure needs a new executive with the appropriate regulatory experience.

That is where governance and recruitment become closely connected.

SMF Capital also provides specialist SMF Recruitment Services for firms that need to appoint senior managers across regulated functions.

You can find out more here:

https://www.smfcapital.co.uk/smf-recruitment-services/

Final Thoughts

A Responsibilities Map should be more than a compliance document.

It should provide a clear picture of how responsibility actually works within the firm.

The strongest test is simple:

If a significant issue occurred tomorrow, could your board, senior management team and regulator clearly identify who was responsible for the relevant area?

If the answer is uncertain, it may be time to review the structure.

As businesses grow, responsibilities change.

SMFs join and leave.

New functions are created.

Operating models evolve.

Regulatory requirements change.

The Responsibilities Map needs to evolve with them.

If your firm is reviewing its SMF structure, governance arrangements or allocation of senior management responsibilities, visit SMF Capital's Governance & SMF Structure Review service.

And where a governance review identifies the need for additional senior leadership, SMF Capital's SMF Recruitment Services can support the search for the appropriate senior management talent.

SMF Capital — specialist governance, recruitment and senior management support for regulated businesses.

Welcome to the SMF Capital podcast.

Today we're looking at a transition that can significantly change the senior management structure of a regulated business: moving from Core to Enhanced SM&CR status.

For a growing financial services firm, reaching the point where enhanced requirements apply is an important stage of development. It can mean additional Senior Management Functions, more formal allocation of responsibilities and a greater need for a coordinated board and executive structure.

The FCA currently categorises solo-regulated firms as Enhanced, Core or Limited Scope, with Enhanced firms subject to additional requirements reflecting their greater size, complexity or potential impact on consumers or markets.

The 2026 SM&CR reforms also raised a number of thresholds for becoming an Enhanced firm, meaning businesses should monitor their position rather than assuming that historic thresholds still apply.

Today we'll look at what happens when a firm needs to build several SMF roles rather than recruit one senior manager at a time.

Why Core-to-Enhanced Is Different

A Core firm may have a relatively compact senior management structure.

As the business grows, however, its regulatory obligations and governance requirements can become more extensive.

Moving into Enhanced scope can bring additional SMF requirements and responsibilities into the firm's structure.

The challenge is that these appointments don't exist independently.

The Chief Executive needs to work effectively with the Chief Risk Officer.

Risk needs to interact with Compliance.

Operations needs to work alongside Risk and Technology.

The board needs clear visibility across all of these functions.

This means that simply launching several separate recruitment searches may not produce the best overall result.

The firm needs to consider the team as a whole.

What Does an Enhanced Firm Need to Consider?

The exact SMF requirements depend on the firm's regulatory status, activities and circumstances.

Enhanced firms can have additional Senior Management Functions and prescribed responsibilities compared with Core firms.

The objective is straightforward:

There should not be uncertainty about who is responsible for what.

That can leave the business operating with an incomplete senior management structure for an extended period.

A coordinated multi-SMF programme takes a different approach.

The firm identifies the roles it expects to need, maps the responsibilities, establishes the desired board structure and then sequences the recruitment process accordingly.

Why Board Dynamics Matter

Senior appointments cannot be assessed entirely in isolation.

A candidate may have an excellent individual CV but still be unsuitable for the particular team.

The question is not only:

"Can this person perform the SMF?"

It is also:

"How will this person work with the other SMF holders?"

A Chief Executive and Chief Risk Officer, for example, need to be able to challenge one another constructively.

A Compliance Oversight function needs sufficient independence while still working effectively with executive management.

The board needs a mixture of expertise, challenge and collaboration.

That is why a multi-SMF recruitment project should consider the resulting team rather than simply the individual vacancies.

Consistency in Fit and Proper Assessment

Another advantage of a coordinated search is consistency.

The FCA requires SMF candidates to be fit and proper before they are approved, and every SMF holder has a Statement of Responsibilities setting out what they are responsible and accountable for.

When several SMFs are recruited independently, there is a risk that different standards or assessment processes are applied to different candidates.

A coordinated process allows the firm to establish the requirements for the whole leadership team from the outset.

The recruitment assessment can then consider:

• Technical competence
• Regulatory experience
• Leadership capability
• Relevant sector knowledge
• Governance experience
• Independence and judgement
• Board and executive working relationships

This creates a much more coherent appointment process.

The Importance of Responsibilities Mapping

When several SMFs are being appointed, responsibility mapping becomes particularly important.

The FCA's rules require firms to allocate responsibilities systematically and explicitly, with appropriate coverage of the firm's activities and management functions.

This means that recruitment and governance should work together.

If the firm is recruiting an SMF4 Chief Risk Officer, for example, it should understand how that responsibility interacts with the Chief Executive, Compliance Oversight and other senior managers.

The same principle applies to operations, finance, financial crime and other functions.

The objective is to create a structure where responsibilities are clear and meaningful.

Don't Recruit the Titles — Recruit the Structure

One of the biggest mistakes in a multi-SMF recruitment exercise can be starting with job titles.

Instead, start with the firm's requirements.

What has changed as the business has grown?

Which areas now require dedicated senior oversight?

Where are the existing responsibilities allocated?

Where are the gaps?

Which functions need additional independence?

Which roles need to interact closely?

Once those questions have been answered, the appropriate SMF structure becomes much clearer.

The recruitment process can then identify people who fit that structure.

Timing Multiple SMF Appointments

Timing is another important consideration.

Several SMF applications reaching the regulator at approximately the same time need to be properly coordinated.

The firm needs to ensure that each application is complete, that responsibilities are clearly documented and that the candidates are ready for the approval process.

A coordinated recruitment programme allows the business to work backwards from its desired governance structure and build a realistic timetable.

It can also reduce the risk of one appointment being completed months before another, leaving the firm with a partially refreshed senior team.

What About Existing SMF Holders?

A Core-to-Enhanced transition does not necessarily mean replacing the existing leadership team.

Existing SMF holders may remain entirely appropriate.

The question is whether their responsibilities, experience and authority continue to fit the firm's new structure.

Some responsibilities may need to be redistributed.

Additional SMFs may need to be appointed.

The firm's Statements of Responsibilities and, where applicable, its Responsibilities Map may also need to be updated.

This is therefore both a recruitment exercise and a governance exercise.

Multi-SMF Recruitment With SMF Capital

SMF Capital supports firms that need to build several senior management positions as part of a wider governance change.

Our Multi-SMF Board & Executive Team Build service is designed for situations such as Core-to-Enhanced transitions and coordinated board refreshes.

Rather than treating each vacancy as a completely separate project, the process considers the overall senior management structure, sequencing the searches and assessing how the resulting team will work together.

You can explore the service here:

https://www.smfcapital.co.uk/multi-smf-board-executive-team-build/

Permanent SMF Recruitment

For firms that have individual SMF vacancies, SMF Capital also provides specialist SMF Recruitment Services.

The service covers senior management recruitment across a range of regulated functions, with fit-and-proper considerations built into the recruitment process from the outset.

You can find out more here:

https://www.smfcapital.co.uk/smf-recruitment-services/

Final Thoughts

Moving from Core to Enhanced is more than a regulatory classification change.

For a growing firm, it can be an opportunity to review whether the senior management structure still reflects the scale and complexity of the organisation.

Additional SMFs may need to be appointed.

Existing responsibilities may need to be reconsidered.

And the board and executive team need to work effectively as a whole.

The FCA's current framework continues to emphasise individual accountability, clear allocation of responsibilities and appropriate senior management oversight, while the 2026 reforms have changed aspects of how Enhanced firms are defined and how the regime operates.

For firms approaching an Enhanced threshold, planning early can make the transition considerably more structured.

Rather than recruiting one SMF at a time, a coordinated approach can look at the whole senior management team, the responsibilities it needs to carry and how those individuals will operate together.

If your firm is approaching a Core-to-Enhanced transition or planning a wider board and executive refresh, visit SMF Capital's Multi-SMF Board & Executive Team Build service.

For individual appointments, explore SMF Recruitment Services.

SMF Capital — specialist recruitment for Senior Management Functions and regulated leadership teams.

Welcome to the SMF Capital podcast.

When should you build your Senior Management Function team?

For a new regulated business, it can be tempting to concentrate first on the business plan, technology, product and commercial team, and leave the senior regulatory structure until later.

But the people responsible for the firm's key functions are not simply an organisational detail to be added at the end.

The FCA expects individuals performing Senior Management Functions to be approved before they start those roles, and firms need to demonstrate that proposed SMF candidates are fit and proper. Each SMF also has clearly allocated responsibilities.

That means building the right senior team should form part of the authorisation strategy from the outset.

You can find out more about SMF Capital's SMF Authorisation Support here:

SMF Authorisation Support

An FCA authorisation application is ultimately about a real regulated business with real people responsible for running it.

The FCA describes SMFs as roles held by a firm's most senior decision makers, with key responsibilities allocated to them. Which functions apply depends on the firm's type and its position within the Senior Managers and Certification Regime.

For a new firm, that means asking some fundamental questions early.

Who will be responsible for compliance?

Who will oversee financial crime?

Who will be responsible for risk?

Who will run operations?

Who will lead the business?

And how will these responsibilities fit together?

The answers need to make sense as a coherent management structure.

Start With the Regulatory Model

Before recruiting individual SMF holders, the firm needs to understand which Senior Management Functions actually apply.

The SM&CR does not impose an identical structure on every regulated firm.

The requirements vary according to factors including the firm's regulatory status and, for solo-regulated firms, its SM&CR category. The FCA identifies Core, Enhanced and Limited Scope categories, with different requirements applying to each.

This is why recruitment should follow the regulatory structure rather than the other way around.

There is little value in hiring senior executives first and only afterwards trying to work out how their responsibilities fit the firm's regulatory requirements.

The Key SMF Appointments

The exact team will depend on the business.

A new financial services firm may need a combination of executive leadership, compliance oversight, financial crime expertise, risk management and operational responsibility.

For example, depending on the firm's structure, relevant functions could include:

• SMF1 — Chief Executive
• SMF2 — Chief Financial
• SMF4 — Chief Risk
• SMF16 — Compliance Oversight
• SMF17 — Money Laundering Reporting
• SMF24 — Chief Operations

Not every firm will require all of these functions, and some responsibilities may be allocated differently depending on the firm's regulatory circumstances.

The important point is to establish the correct structure before the application is submitted.

Don't Leave Compliance and Financial Crime Until the End

One of the areas where authorisation planning can go wrong is treating compliance and financial crime as late-stage appointments.

These are not simply support functions.

The FCA's SMCR framework is specifically designed to establish who has responsibility for key areas of a regulated business. SMF holders have a Duty of Responsibility and need to take reasonable steps in relation to their allocated responsibilities.

For a new firm, this means senior compliance and financial crime leadership should be considered while the wider business is being constructed.

A strong SMF team can also help shape the firm's policies, controls, governance and operating model before submission.

The Importance of Fit and Proper

Recruiting someone with the right job title is not enough.

The firm needs to be satisfied that the proposed SMF candidate is fit and proper before applying for approval.

The FCA assesses SMF applications against its fitness and propriety requirements and will only approve an application once it is satisfied that the candidate is fit and proper for the role.

That makes the recruitment process particularly important.

The candidate needs the relevant technical experience, but also the competence, judgement and personal characteristics required for the specific regulated responsibility.

Statements of Responsibilities

Every SMF holder must have a Statement of Responsibilities, setting out clearly what they are responsible and accountable for.

This is more than paperwork.

It is an opportunity to make sure the proposed management structure actually works.

For example, if compliance, risk and operations overlap, who owns which decision?

If financial crime concerns arise, who has responsibility for escalation?

If an operational failure occurs, which senior manager is accountable?

Clear allocation of responsibility helps avoid gaps and unnecessary duplication.

Building the Team Before Submission

The timing of recruitment is therefore important.

The FCA says firms should be prepared to submit a full and complete SMF application from day one.

For a new authorisation project, that means senior recruitment should not necessarily be treated as something that happens after the business plan is complete.

Instead, the SMF team can be developed alongside the authorisation process.

The people being recruited can then help test whether the proposed governance, controls and operating model are realistic.

That can be particularly valuable for fintech, payments and other businesses where the regulatory structure needs to develop alongside a new business model.

What If You Cannot Hire Everyone Immediately?

Not every firm will want or need every senior position to be full-time from the beginning.

There may also be situations where a permanent candidate has not yet been identified, or where the business needs experienced senior regulatory leadership while a longer-term appointment is being made.

In those circumstances, firms may consider appropriate fractional or interim SMF support, subject to the applicable regulatory requirements.

The objective is to avoid creating a gap in senior oversight simply because the permanent recruitment process takes time.

This can be particularly relevant during the period leading up to authorisation.

Recruiting for Authorisation Is Different

Recruiting an SMF for an established firm is one thing.

Building an SMF team for a firm seeking authorisation is different.

The candidate needs to fit the proposed regulatory structure as well as the commercial organisation.

They may also need to contribute to the development of policies, governance arrangements and operational controls before the firm is fully operational.

This is why specialist SMF recruitment can be valuable.

The recruitment process needs to understand both the executive role and the regulatory responsibility.

SMF Capital's Authorisation Support

SMF Capital works with firms preparing for FCA authorisation to help build the senior management team required for the application.

The focus is on identifying the appropriate SMF structure, recruiting credible senior candidates and considering the fit-and-proper requirements from the beginning rather than treating them as a final administrative stage.

Our SMF Authorisation Support service is designed specifically around this process.

Explore SMF Authorisation Support

Permanent SMF Recruitment

For firms that already know which functions they need to fill, SMF Capital also provides specialist recruitment for Senior Management Functions.

That includes permanent executive and non-executive searches, with the fit-and-proper assessment built into the recruitment process.

Explore SMF Recruitment Services

The aim is to make sure the people recruited are not only capable executives, but also appropriate for the specific responsibilities attached to their SMF.

Final Thoughts

Building an SMF team should not be an afterthought in an FCA authorisation project.

The senior managers are part of the firm's regulatory architecture.

Their responsibilities need to be clear, their experience needs to be relevant, and the overall management structure needs to make sense.

The FCA's current framework requires SMF holders to receive approval before starting their roles, while firms must assess their fitness and propriety and clearly allocate their responsibilities.

For a new regulated business, starting the SMF recruitment process early can therefore help connect the people, governance and regulatory framework before the application reaches its final stages.

If you are preparing an FCA authorisation application and need to build your senior management team, visit SMF Capital's SMF Authorisation Support service.

For individual permanent appointments, you can also explore SMF Recruitment Services.

SMF Capital — specialist recruitment and senior management support for FCA-regulated businesses.

Today we're looking at a growing question for regulated businesses: does an important Senior Management Function always need to be a full-time executive appointment?

For some firms, the answer may be yes.

For others, particularly smaller regulated businesses or firms going through a period of transition, a fractional SMF can provide access to experienced senior leadership without creating a full-time permanent position.

In this episode, we'll explore when fractional SMF support can make sense, what firms need to consider from a regulatory perspective, and how fractional arrangements can sit alongside permanent recruitment.

You can find out more about Fractional and Interim SMF Cover here:

https://www.smfcapital.co.uk/fractional-interim-smf-cover/

What Is a Fractional SMF?

A fractional SMF is an experienced senior professional who provides senior management expertise to a regulated business on a part-time or flexible basis.

Rather than employing an individual full-time, the firm may engage someone for a defined number of days each month or week, depending on the requirements of the business.

The objective is not simply to provide another pair of hands.

A fractional SMF can provide senior-level oversight, experience and challenge where the firm's requirements do not justify a full-time appointment.

The exact regulatory arrangements need to be considered carefully for each firm and each function.

Why Would a Firm Need a Fractional SMF?

There are several situations where this model may be relevant.

A smaller regulated business may need experienced senior leadership but have insufficient scale to justify a full-time executive.

The common factor is that the business needs senior-level expertise without necessarily needing a full-time executive commitment.

Fractional Does Not Mean Less Senior

Which SMFs Could Benefit?

The suitability of a fractional arrangement depends heavily on the firm's circumstances.

Potential requirements can include senior roles covering areas such as:

• Compliance
• Money laundering and financial crime
• Risk
• Operations
• Finance
• Governance
• Other senior management responsibilities

For example, a growing regulated business may not require a full-time senior compliance executive but may still need experienced compliance leadership and effective oversight.

Similarly, a smaller firm may require senior operational expertise while its business model is still developing.

The appropriate structure should always be determined by the firm's regulatory requirements and actual operational needs.

Fractional SMFs and Individual Accountability

A fractional arrangement should never be viewed as a way of avoiding accountability.

The FCA's Senior Managers and Certification Regime is designed around clear individual accountability. The FCA's 2026 SMCR reforms retained that principle while introducing measures intended to make the regime more proportionate and efficient.

If an individual is performing an SMF, the responsibilities allocated to them need to be clear.

The firm also needs to ensure that the individual has sufficient authority, information and resources to perform the role effectively.

In other words, the arrangement needs to work in practice — not simply look correct on an organisational chart.

The Importance of Availability

A fractional SMF cannot be effective if the individual is effectively unavailable whenever the business needs them.

The firm needs to establish how often the individual will be present, how they will participate in governance, how urgent issues will be handled and what happens outside their normal working days.

This is particularly important for functions involving regulatory incidents, financial crime concerns, material risk or operational disruption.

The engagement should therefore define expectations clearly.

Fractional SMFs During Business Growth

A fractional appointment can also provide a useful bridge between different stages of a firm's development.

A business may initially need only a few days of senior regulatory expertise each month.

As the business grows, the requirement may increase.

Eventually, the firm may decide that a full-time permanent appointment is appropriate.

This means the fractional arrangement can form part of a longer-term leadership strategy rather than being viewed purely as a temporary solution.

It can give the firm access to experienced leadership while management gathers more information about what the permanent role should ultimately look like.

Fractional vs Interim SMF Cover

Fractional and interim arrangements are related but not identical.

Fractional generally means an ongoing part-time requirement.

Interim usually describes a temporary appointment intended to cover a defined period or vacancy.

For example, a firm might use interim SMF support after a senior manager unexpectedly leaves while it conducts a permanent search.

The FCA's revised 12-week rule, effective from April 2026, provides firms with additional flexibility when dealing with temporary absences and reasonably unforeseen departures.

Where a temporary replacement is required beyond the relevant period, firms need to consider the appropriate approval arrangements.

The regulatory position therefore needs to be assessed alongside the practical recruitment requirement.

When Is Full-Time Recruitment More Appropriate?

Fractional leadership is not suitable for every firm.

A business may reach a size or level of complexity where the SMF needs to be deeply involved in the organisation every day.

The role may involve extensive management responsibilities, significant teams, major transformation programmes or a level of operational activity that requires continuous executive presence.

In those circumstances, a permanent full-time appointment may be more appropriate.

This is why the starting point should always be the firm's actual regulatory and operational requirements rather than simply deciding that a fractional model is cheaper or more flexible.

Fractional SMFs and Permanent Recruitment

A fractional appointment can also work alongside a permanent recruitment strategy.

For example, a firm may need immediate senior leadership while recruiting a permanent SMF.

An experienced fractional or interim professional can provide continuity during the search, while the business identifies the long-term candidate.

Alternatively, a fractional appointment may continue indefinitely where the firm's size and structure make a part-time arrangement appropriate.

SMF Capital supports firms with both temporary senior management requirements and permanent SMF recruitment.

You can explore the recruitment service here:

https://www.smfcapital.co.uk/smf-recruitment-services/

What Should Firms Consider Before Appointing a Fractional SMF?

Before making an appointment, firms should consider several practical questions.

What responsibility does the individual actually hold?

The scope needs to be clearly defined.

Does the individual have enough authority?

They need to be able to challenge and influence the business.

How will they interact with other senior managers?

Responsibilities should be clear and avoid gaps or unnecessary overlaps.

How often does the business need them?

The time commitment needs to reflect the actual workload.

What happens during an urgent regulatory issue?

The firm needs a clear escalation and availability process.

Is the arrangement genuinely appropriate for the firm's regulatory structure?

The regulatory implications should be established before the appointment is implemented.

Final Thoughts

A fractional SMF can provide regulated businesses with access to senior expertise without automatically requiring a full-time executive appointment.

For smaller firms, growing businesses and organisations going through periods of change, that flexibility can be particularly relevant.

But fractional does not mean informal.

Where an individual performs a Senior Management Function, the responsibilities, authority and governance arrangements need to be clear.

The right question is therefore not simply:

"Can we appoint an SMF part-time?"

It is:

"What level of senior management oversight does our business actually require, and what structure will allow that responsibility to be discharged effectively?"

For some firms, the answer may be a permanent full-time executive.

For others, a fractional SMF may provide the appropriate level of senior expertise.

And when an unexpected vacancy occurs, interim SMF cover can provide a practical bridge while the firm works towards its longer-term solution.

To learn more about fractional and interim SMF support, visit:

https://www.smfcapital.co.uk/fractional-interim-smf-cover/

For firms looking for permanent senior management appointments, explore SMF Capital's specialist SMF Recruitment Services:

https://www.smfcapital.co.uk/smf-recruitment-services/

SMF Capital — specialist recruitment and flexible senior management support for regulated businesses.

Today we're looking at an important change to the Senior Managers and Certification Regime that came into force on 24 April 2026: the revised 12-week rule for providing temporary cover when an SMF holder is absent or unexpectedly leaves a regulated firm.

The change gives firms greater flexibility when an important senior management position suddenly becomes vacant.

But the 12-week rule is not a substitute for proper succession planning or a permanent recruitment process.

In this episode, we'll explain how the rule works, what firms need to consider when putting temporary cover in place, and why fractional and interim SMF support can be useful when a regulated business needs experienced leadership quickly.

You can find out more about SMF Capital's Fractional and Interim SMF Cover here:

https://www.smfcapital.co.uk/fractional-interim-smf-cover/

What Changed in April 2026?

The FCA and PRA introduced changes to streamline aspects of the SMCR in April 2026.

One of the important changes concerns temporary cover for SMF managers.

Under the revised rules, where an SMF manager is temporarily absent or has reasonably and unexpectedly left the firm, another individual can provide cover without requiring prior FCA approval for the SMF function, subject to the conditions of the 12-week rule.

This provides firms with additional breathing space.

Instead of being forced into an immediate permanent appointment following an unexpected departure, the firm can put appropriate temporary cover in place while it assesses its options.

How Does the 12-Week Rule Work?

The basic principle is straightforward.

Where the conditions of the rule are met, a temporary replacement can perform the relevant function for less than 12 weeks in a consecutive 12-month period without that activity being treated as the FCA-designated SMF for the replacement during that period.

The rule is intended to deal with situations such as:

• A senior manager taking an unexpected temporary absence
• A sudden and unexpected departure
• A vacancy arising before a permanent replacement can be appointed
• The need to maintain senior management responsibilities while an FCA approval application is prepared

The FCA describes the rule as an interim measure rather than a permanent solution.

What Happens If 12 Weeks Isn't Enough?

This is one of the most important aspects for firms to understand.

The 12-week period does not necessarily mean that the temporary arrangement must end on day 84 regardless of what is happening.

If a firm makes a valid and complete application for approval of the individual who will perform the SMF before the relevant period expires, the temporary arrangement can be extended while that application is being determined, subject to the rules.

The FCA also provides for time-limited approvals in appropriate circumstances where a firm needs an interim appointment for longer than the initial period.

So the key message is:

Don't wait until the 12 weeks are almost over before deciding what to do.

The permanent recruitment and approval process should begin as early as reasonably possible.

The Temporary Replacement Still Needs to Be Suitable

An important misconception would be to assume that because FCA approval isn't immediately required, the firm can simply put anybody into the role.

That isn't the case.

The FCA rules require the firm to ensure that the temporary replacement is fit and proper to perform the role.

The individual needs the skills, personal characteristics, knowledge and expertise necessary to discharge the responsibilities allocated to them.

That means firms still need to carry out appropriate due diligence.

The absence of an immediate approval application does not remove the firm's responsibility to appoint an appropriate person.

Why Succession Planning Still Matters

The FCA specifically expects firms to use the 12-week rule reasonably and to keep the period of temporary cover as short as reasonably possible.

The regulator also highlights the importance of effective and up-to-date succession plans for SMF managers.

This is an important distinction.

The 12-week rule provides flexibility.

It does not remove the need for planning.

A well-prepared regulated business should have a clear understanding of what happens if its SMF1, SMF2, SMF4, SMF16, SMF17, SMF24 or another key senior manager suddenly becomes unavailable.

Who can provide immediate cover?

Who has the relevant experience?

Who understands the firm's regulatory framework?

Who can take responsibility while the permanent recruitment process takes place?

These are questions that are much easier to answer before an unexpected vacancy occurs.

Where Fractional SMF Cover Can Help

There will be circumstances where an internal deputy is not the right solution.

Perhaps the firm does not have a suitable person internally.

Perhaps the departure has created a significant skills gap.

Or perhaps the firm needs an experienced senior regulatory professional while it conducts a permanent search.

This is where fractional or interim SMF cover can provide an additional option.

A suitably experienced interim SMF professional can provide senior-level expertise during a period of transition, subject to the firm's regulatory requirements and the structure of the appointment.

This can be particularly valuable where the firm needs continuity while it searches for a permanent candidate.

You can learn more about SMF Capital's approach to fractional and interim SMF cover here:

https://www.smfcapital.co.uk/fractional-interim-smf-cover/

The 12-Week Rule Is Not a Shortcut

The April 2026 reforms provide greater flexibility, but firms should not interpret the change as meaning that SMF recruitment can be delayed.

The FCA expects firms to submit approval applications as soon as reasonably possible and to ensure that applications are complete and of good quality.

For a permanent vacancy, the recruitment process should therefore start quickly.

The firm needs to consider the candidate's technical competence, leadership experience, regulatory background and suitability for the particular SMF.

The Statement of Responsibilities and allocation of responsibilities also need to be considered carefully.

What Should Firms Do When an SMF Leaves?

A sensible response to an unexpected departure might involve several parallel steps.

First, establish whether the 12-week rule applies.

Second, identify suitable temporary cover.

Third, carry out the necessary fit-and-proper assessment.

Fourth, review the responsibilities previously allocated to the departing SMF.

Fifth, begin the permanent recruitment and FCA approval process promptly.

Sixth, consider whether an interim or fractional SMF specialist could provide additional support during the transition.

This approach allows the firm to maintain continuity without treating temporary cover as a substitute for a properly considered permanent appointment.

Why the April 2026 Changes Matter

The revised rules recognise a practical problem faced by regulated businesses.

Senior managers can leave unexpectedly.

People can become unavailable.

Recruitment takes time.

And FCA approval takes time.

The revised framework gives firms more flexibility to manage those situations while maintaining the principle of individual accountability. The FCA and PRA described the reforms as reducing costs and increasing flexibility while retaining the core principle of senior leader accountability.

For firms, the practical lesson is that the regulatory framework now provides more room to manage an unexpected vacancy — but that flexibility needs to be used properly.

Final Thoughts

The 12-week rule is an important part of the post-April 2026 SMCR framework.

It gives regulated firms a mechanism for maintaining senior management cover following a temporary absence or reasonably unforeseen departure, while the firm progresses its longer-term solution.

But the rule should not be viewed as a replacement for succession planning.

When an SMF unexpectedly becomes vacant, the clock starts immediately.

The firm needs to identify suitable cover, assess the individual's suitability, understand the responsibilities involved and begin the permanent recruitment and approval process as soon as possible.

For firms that need experienced regulatory leadership during that transition, fractional and interim SMF cover can provide another option.

To find out more about how SMF Capital supports regulated businesses with temporary senior management requirements, visit:

https://www.smfcapital.co.uk/fractional-interim-smf-cover/

SMF Capital — specialist recruitment and interim support for Senior Management Functions in regulated businesses.