FCA proposes to abolish the Certification Regime and reduce Senior Management Functions (CP26/37)

Action required. All FCA-authorised firms.

CP26/37, published 22 October 2026, is Phase 2 of the FCA's SM&CR review and it goes further than Phase 1. The headline proposals are the removal of the Certification Regime entirely and a reduction in the number of Senior Management Functions. Both are structural changes, not tweaks.

The Certification Regime covers individuals who are not Senior Managers but whose roles could cause significant harm to the firm or its customers. Rather than the regulator approving them, firms assess and certify them as fit and proper. The FCA now proposes to drop that layer altogether.

On Senior Management Functions, the proposal is to remove certain SMFs outright and convert others to notified rather than approved roles. Notified roles require less process: the firm tells the FCA rather than seeking pre-approval.

Three ongoing requirements would be abolished: submissions of Statements of Responsibilities, Management Responsibilities Maps, and the FCA's Directory of certified and assessed persons. Three further areas would be simplified: Prescribed Responsibilities, Conduct Rule training, and breach reporting thresholds.

Firms currently in the Enhanced regime may find themselves out of it. The FCA proposes to raise the thresholds that determine which firms sit in Enhanced. Phase 1 already moved the assets under management threshold from £50bn to £65bn, consumer credit lending revenue from £100m to £130m, and intermediary regulated business revenue from £35m to £45m.

The reforms are enabled by the Financial Services and Markets Bill 2026–27, which completed its report stage in the House of Lords on 9 September 2026 and transfers responsibility for setting SM&CR requirements from legislation to the regulators themselves.

The consultation applies to all firms already in scope of the SM&CR, including third-country branches, and to firms due to come into scope, including cryptoasset firms. Cryptoasset firms should also refer to PS26/13. That document confirms the FCA's modification by consent approach to the Certification Regime for firms entering the crypto gateway.

Dual-regulated firms must read the PRA's parallel consultation, CP14/26, published alongside CP26/37.

The FCA expects to publish final rules in a Policy Statement in the first half of 2027. Removing the Certification Regime alone will require firms to rethink how they manage accountability for a significant population of staff.

Sources

• Cp26 37 senior managers certification regime review phase 2fca.org.uk
• Senior manager functions explainedsmfcapital.co.uk
• Horizon scanning q4 2026mha.co.uk
• FCA crypto regulatory overhaulbrownejacobson.com