Meta Title: Becoming an Enhanced Firm: The SMF Hires You’ll Need
Meta Description: Moving from Core to Enhanced under the SMCR? The extra Senior Managers, committee chairs and responsibilities you’ll need, and how to plan the hires.
Becoming an Enhanced Firm: The SMF Hires That Come With It
Most FCA-regulated firms are Core firms under the Senior Managers and Certification Regime. Firms that grow past certain size thresholds become Enhanced firms, and the regime asks much more of them: more Senior Manager Functions, more Prescribed Responsibilities, a Responsibilities Map, handover procedures and the expectation that every area of the business has a Senior Manager accountable for it.
For many firms, crossing the Enhanced threshold means several senior appointments in a short space of time. This page explains what changes and how to plan the hires.
When a Firm Becomes Enhanced
The criteria for Enhanced status are set out in SYSC 23 of the FCA Handbook. They’re based on measures such as the size of client money and assets held, assets under management, intermediary revenue, consumer credit lending, and the number of regulated mortgages outstanding, mostly measured as rolling averages over several years. Firms should check the current thresholds against their own figures and plan ahead if they’re approaching one.
Our guide to which SMFs apply at which firm tier sets out the differences between Limited Scope, Core and Enhanced firms in detail.
What Changes at an Enhanced Firm
| Requirement | Core firm | Enhanced firm |
|---|---|---|
| Senior Manager Functions | A core set, typically including SMF1, SMF3, SMF9, SMF16 and SMF17 | A wider set, including SMF4 Chief Risk, SMF5 Head of Internal Audit, SMF24 Chief Operations and committee chairs, where the firm has those roles |
| Prescribed Responsibilities | A smaller set | A larger set, allocated across Senior Managers |
| Overall responsibility | Not required for every area | Every business area and function must have a Senior Manager with overall responsibility |
| Responsibilities Map | Not required | Required |
| Handover procedures | Not required | Required when Senior Managers change |
| Board committees | As the firm chooses | Risk, audit, remuneration and nomination committees typically expected, with chairs holding SMFs |
The overall responsibility requirement is often the biggest change. Any area of the business without a Senior Manager accountable for it needs one, which is where SMF18 Other Overall Responsibility often comes in.
The Hires Most Firms Need
Chief Risk Officer (SMF4)
Many Core firms have a head of risk who isn’t a Senior Manager. At an Enhanced firm with a chief risk function, that role becomes SMF4, with independence and board access expected. See chief risk officer recruitment.
Chief Operating Officer (SMF24)
Operations, technology and operational resilience usually need a named Senior Manager. See chief operating officer recruitment.
Head of Internal Audit (SMF5)
Where the firm has an internal audit function, its head becomes a Senior Manager. Some firms outsource internal audit, but the oversight still needs to be owned. See our SMF5 guide.
Committee Chairs and Independent Non-Executives
Enhanced firms are typically expected to have board committees, and their chairs hold Senior Manager Functions: risk (SMF10), audit (SMF11), remuneration (SMF12) and nomination (SMF13), plus a Senior Independent Director (SMF14). Many firms need to recruit independent non-executives to fill these roles. See SMF10 and SMF11 and chair and committee chair recruitment.
Additional Overall Responsibility Holders
Business heads who run significant areas without a Senior Manager Function may need approval, often as SMF18.
Planning the Transition
| When | What to do |
|---|---|
| 12–18 months before crossing the threshold | Monitor the criteria; run a gap analysis of SMFs, Prescribed Responsibilities and committees |
| 9–12 months before | Decide the target structure; start searches for the roles with the longest lead times, usually committee chairs and the CRO |
| 6–9 months before | Draft the Responsibilities Map and Statements of Responsibilities; recruit remaining roles |
| 3–6 months before | Submit approval applications so they’re decided in time |
| On becoming Enhanced | Responsibilities Map in place; every area covered; handover procedures operating |
Because several approvals are often needed at once, coordinating the searches matters. Our multi-SMF board and executive team build service runs them together, so the new team arrives in a sensible order and the board’s composition makes sense as a whole.
A wealth manager’s client assets have grown steadily and its finance director projects it will cross an Enhanced threshold within 18 months. A gap analysis shows it needs a chief risk officer, a chief operating officer, an independent risk committee chair, an audit committee chair and a Senior Independent Director, plus SMF18 approval for the head of its discretionary business. Running the searches as a single programme over nine months, with the committee chairs appointed first, means the new governance is in place before the threshold is reached.
The Responsibilities Map
Enhanced firms must maintain a Responsibilities Map showing how responsibilities are allocated across Senior Managers and how the governance arrangements fit together. Drafting it early is one of the best ways to find gaps, because it forces the firm to name who is accountable for each area and Prescribed Responsibility. Each Senior Manager’s Statement of Responsibilities must be consistent with it.
Handover Procedures
Enhanced firms must have procedures for handing over responsibilities when Senior Managers change. That’s also good practice for succession planning. Our SMF succession planning template helps boards plan cover and successors for every function.
Changes for Existing Senior Managers
Becoming Enhanced doesn’t only mean new appointments. Existing Senior Managers often take on additional Prescribed Responsibilities, and their Statements of Responsibilities need updating. Some will find their role has grown significantly: a chief executive who was the main accountable person at a Core firm may now share responsibility across a larger team, while a compliance officer may need more resources to oversee a more complex business. Firms should review each existing Senior Manager’s capacity and readiness as part of the transition, and support them with training or additional team members where needed.
Cost and Budgeting
The additional appointments are a significant cost, particularly the independent non-executive fees and senior executive salaries. Building them into the budget a year ahead avoids pressure to make compromises later. Our SMF and compliance salary guide gives current benchmarks for each role.
Common Mistakes
- Noticing the threshold too late, leaving months rather than a year to recruit and obtain approvals.
- Assuming existing heads of function can simply be designated without checking whether they’re ready for approval.
- Leaving business areas without overall responsibility.
- Recruiting committee chairs individually without considering the board as a whole.
- Treating the Responsibilities Map as paperwork rather than a way to find gaps.
Board and Executive Search
Larger firms becoming Enhanced often recruit C-suite executives and board members at the same time. Exec Capital, a sister practice of SMF Capital, runs FCA-regulated executive search at C-suite level. SMF Capital leads where the appointments carry Senior Manager Functions and need approval, and coordinates the full programme.
Becoming an Enhanced Firm
Services and guides for firms moving from Core to Enhanced. Every SMF search is led personally by Adrian Lawrence FCA
Team Build
Several appointments at once.
→ Multi-SMF team build
→ Governance structure review
Executive Roles
New executive Senior Managers.
→ Chief Risk Officer (SMF4)
→ Chief Operating Officer (SMF24)
Documentation
Mapping responsibilities.
→ The Responsibilities Map
→ Statements of Responsibilities
Every SMF search is led personally by Adrian Lawrence FCA
Frequently Asked Questions
How do we know if we’ve become an Enhanced firm?
Check your figures against the criteria in SYSC 23. Most are based on rolling averages, so you can usually see the change coming.
Do we need every Enhanced SMF?
No. Many functions apply only where the firm has that role, for example a chief risk function or internal audit function. But every area of the business must have a Senior Manager with overall responsibility.
How long should we allow?
Ideally 12 months or more from identifying the change, to allow for several searches, notice periods and approvals.
Can existing staff take on the new functions?
Often, where they’re ready. The regulator will assess each person, so check readiness honestly and recruit externally where needed.
About the Author
Adrian Lawrence FCA is the founder of SMF Capital. He is a Chartered Accountant and Fellow of the ICAEW, holds a practising certificate in his own name, and is a former listed-company Finance Director with a BSc from Queen Mary College, University of London. He founded FD Capital in 2018 and has since built a network of five specialist recruitment practices. He leads every SMF Capital search personally, including coordinated team builds for firms moving from Core to Enhanced. View Adrian’s ICAEW profile.
Approaching the Enhanced Threshold?
Talk to us early. We can help you identify the roles you’ll need and run the searches as one coordinated programme.