The Government has announced the Leeds Reforms, which aim to simplify regulation, reduce the cost of compliance and help maintain the UK’s position as a leading global financial services hub. This includes plans to make the Senior Managers and Certification Regime (SM&CR) more proportionate and responsive to change, through the FCA’s CP25/21, the PRA’s CP18/25 and HM Treasury (HMT) SM&CR consultation paper.
While significant, these changes have been highly anticipated and follow work initiated in the Edinburgh Reforms of 2022 to streamline the regulation. The work will be delivered in two phases with the most impactful elements coming into force in phase two – notably, potentially replacing the Certification Regime, finding an alternative to the directory, and reducing the number of senior management functions. These enhancements require legislative change so will take longer to develop. Consequently, phase one targets adjustments that the regulators can implement sooner, supporting some efficiencies in the short term.
Leeds Reforms – what do they mean for the financial sector?
Certification Regime may be replaced
The Certification Regime will potentially be replaced with a more proportionate approach, although regulators haven’t yet confirmed what this will be. In the meantime, they’ve suggested interim rules to reduce the regulatory burden in the short term, including:
Less re-certification and administrative obligations
The FCA will provide additional guidance on providing digital versus hard copies of the certificate, embedding re-certification into existing business processes, and the ability to re-certify to more proportionate timescales.
Streamlined requirements for individuals requiring certification for multiple functions
This would apply to: FCA material risk takers who are also certified by the PRA at the same firm; significant management function holders who are also an FCA material risk taker; and managers of certified employees if they’re already certified in their own right. This would reduce certification roles by around 15% and mean that individuals holding multiple posts would be listed once in the directory.
Changes to the directory
Extended timelines to update the directory, to 20 business days, with the exception of updating it for departures from the firm (which remains at seven days to prevent financial crime or fraud). The FCA will explore alternatives to the directory in the next phase of updates, and a simpler alternative could go a long way towards easing the regulatory burden.
Changes to senior management functions
Under the Leeds Reforms, HMT has put forward two key changes to reduce the number of senior management functions (SMFs) under SM&CR, subject to legislative change. The first will give regulators greater powers to determine what functions need to be SMFs. The second will allow firms to appoint some SMFs without pre-approval from the regulators, moving to a system of notifications instead. Selecting which roles need pre-approval versus notification will be down to the regulators.
The FCA is looking to reduce the number of SMF positions (and the volume of approval applications) in phase two. It will also provide further guidance on SMF18 (Other Overall Responsibility) and SMF7 (Group Entity Manager) to help firms identify when to apply these positions. The PRA will also offer more clarity over SMF7, while expanding its remit to include “controllers, and their representatives, who apply significant influence over the day-to-day management or conduct of the firm’s affairs in relation to its regulated activities”.
The FCA has also made a number of changes to the SMF approval process, to reduce SM&CR administrative requirements and improve the pace of approvals, including:
- updates to ‘Form A’ when applying to perform SMF roles to improve usability and consolidate information requests
- greater online guidance over the SMF approval process and more support for approving international candidates
- extension of the criminal records check validity from three months to six months
- no requirement for a criminal records check for existing SMF holders applying for another SMF position within the firm or group.
HMT has also proposed changing the statutory deadline for SMF approvals from three months to two months, reducing business uncertainty for firms.
Statements of Responsibilities and Management Responsibilities Maps (MRMs)
HMT has also suggested that producing and maintaining Statements of Responsibilities (SoRs) no longer be a legislative requirement. This would give regulators greater flexibility to decide what information they need, and when they need it, reinforcing the Leeds Reforms’ broader simplification agenda. In phase two, HMT may take this a step further and look at: inclusion of the SoRs in SMF approvals applications; SMF approval timelines during broader FSMA Part 4A applications; and annual reviews to assess whether SMF approvals should be withdrawn.
In the meantime, the FCA notes that that current submission processes for SoRs and Management Responsibilities Maps (MRMs) create a significant administrative burden. While it emphasises that they must be up to date at all times, it will allow firms to submit these updates periodically (with a maximum gap of six months).
Under the new SM&CR proposals, solo-regulated firms can submit the most recent version of all amended SoRs, together with one MRM over that timeframe. Dual-regulated firms also have that option, unless there’s been more than one change, in which case it must submit all versions of updated SoRs and MRMs to ensure a clear audit trail.
Prescribed responsibilities
The FCA and PRA have proposed to amend the rules on prescribed responsibilities. In some instances, SMF18s in solo-regulated firms can hold prescribed responsibilities. This will largely still be prohibited for dual-regulated firms, but in exceptional circumstances firms can get approval from both firms with a waiver.
The FCA has also clarified that firms can split prescribed responsibilities across multiple SMFs, although it would only expect to see this in large and complex organisations.
Changes to the 12-week rule
Firms will have 12 weeks to submit an application for a replacement SMF, rather than 12 weeks to obtain FCA approval – in theory extending the time an individual can be in the role without pre-approval. The regulators have urged firms to continue to use the rule sparingly, highlighting the need to review strategic people processes and develop internal talent to effectively manage succession planning.
SM&CR thresholds and scope
Recognising inflation in recent years, the FCA has updated its financial threshold conditions for enhanced SM&CR firms that face the most stringent requirements. The new financial thresholds are as follows:
- Assets under management of £65 billion (previously £50 billion)
- Total intermediary regulated business revenue of £65 million (previously £35 million)
- Annual revenue generated by regulated consumer credit lending of £130 million (previously £100 million)
The FCA will also introduce a new mechanism to periodically review these figures to ensure they continue to align with the wider economic landscape. Enhanced firms that no longer meet the threshold conditions can choose to remain with their current implementation (opt-up) or become a Core SM&CR firm (opt-down).
The PRA has also proposed excluding resolution-related roles from the Senior Managers Regime, while retaining individual Conduct Rules. This would apply to resolution administrators, and senior managers or directors of banks, building societies or bridging vehicles that are appointed by the Bank of England or HMT during the course of resolution, in line with the 2009 Banking Act. Insolvency practitioners are already exempt, and the PRA’s proposed extension would ensure a rapid appointment and remove barriers to safe resolution.
Looking ahead
The changes to SMC&R under the Leeds Reforms aim to simplify regulation and support innovation, in line with the Government’s Financial Services Growth and Competitiveness Strategy. The phase one consultation closes on 7 October 2025, but there’s no clear implementation timeline as yet. However, carrying out a gap analysis and mapping the associated operational changes, can support rapid adoption to maximise the value of the proposed efficiencies and improve a business’s bottom line.
It’s also essential to stay up to date with the PRA, FCA and HMT’s SM&CR-related output, tracking the more prominent changes in phase two. These will have a greater impact on the financial sector, allowing firms to reap the larger benefits from changes to SMF roles, and simpler alternatives to the Certification Regime and the directory, in line with the broader simplification agenda.
For further insight and guidance, contact Kantilal Pithia.
