Senior Managers and Certification Regime (SM&CR) Explained

Published May 2026 · 8 min read

The Senior Managers and Certification Regime — SM&CR — is one of the most significant developments in UK financial regulation in recent years. It features in Chapter 1 of the CISI UK Financial Regulation syllabus and is regularly tested in the exam, but it is also directly relevant to anyone working in a regulated financial services firm.

Why SM&CR Exists

Before SM&CR, the regulatory framework for individual accountability was built around the Approved Persons Regime (APR). In practice, it had significant weaknesses — when things went wrong, it was often impossible to identify which individual was responsible. The financial crisis of 2008 and subsequent conduct failures demonstrated the limitations of the existing framework.

SM&CR was introduced to create clearer individual accountability, stronger standards for senior individuals, and a more robust mechanism for enforcement.

The Three Elements of SM&CR

1. The Senior Managers Regime

Applies to the most senior individuals — those performing Senior Management Functions (SMFs) such as Chief Executive, Chief Finance Officer, and Chair of the Board. Each SMF must be individually approved by the FCA before taking up their role.

Two key features:

Statement of Responsibilities — sets out clearly what each senior manager is responsible and accountable for. When something goes wrong, there is a named individual whose Statement covers that area.

Duty of Responsibility — if a firm breaches a regulatory requirement in an area for which a senior manager is responsible, the FCA can take action against that individual unless they can demonstrate they took reasonable steps to prevent the breach.

2. The Certification Regime

Covers individuals below senior manager level whose roles could pose a risk of significant harm to the firm or clients — but who do not perform a Senior Management Function. Unlike senior managers, they do not need FCA approval. Instead, the firm itself certifies that they are fit and proper to perform their role, at least once a year. Certification functions include significant management, client dealing, algorithmic trading, and proprietary trading roles.

3. Conduct Rules

Behavioural standards that apply to almost all individuals in regulated firms. Breaching a Conduct Rule can result in FCA enforcement action against the individual — not just the firm.

INDIVIDUAL CONDUCT RULES

Rule 1: Act with integrity

Rule 2: Act with due skill, care and diligence

Rule 3: Be open and cooperative with regulators

Rule 4: Pay due regard to customers

Rule 5: Observe proper standards of market conduct

SENIOR MANAGER CONDUCT RULES

Rule 6: Ensure business is controlled effectively

Rule 7: Ensure business complies with requirements

Rule 8: Ensure delegations are appropriate

Rule 9: Disclose information regulators would expect

What the Exam Tests on SM&CR

—The three elements of SM&CR and what each covers

—The difference between an approved Senior Management Function and a Certification Function

—The Statement of Responsibilities — what it is and why it matters

—The Duty of Responsibility — what it requires and when the FCA can use it

—All five Individual Conduct Rules

—All four Senior Manager Conduct Rules

—The annual certification requirement and what fit and proper means

—Which firms are subject to SM&CR — Enhanced, Core, and Limited Scope firms have different obligations

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For anyone working in financial services, SM&CR is not just an exam topic — it is the framework within which their own professional conduct is regulated. Understanding it properly is useful well beyond the CISI sitting.