CFO Recruitment: SMF2 Chief Finance Function
A Chief Financial Officer at a bank, insurer or Enhanced FCA firm isn’t just a finance leader. They hold SMF2, the Chief Finance Function, and must be approved by the regulator before they start. That changes the search. The candidate needs the right prudential and regulatory reporting experience, a clean regulatory history and the standing to challenge the executive team, and the firm needs a plan that allows for approval time. SMF Capital recruits permanent, interim and fractional SMF2 CFOs, with every search led personally by a Chartered Accountant and former listed-company Finance Director.
The SMF2 Chief Finance Function
SMF2 covers the person responsible for managing the firm’s financial resources and reporting directly to the board on its financial affairs. It applies to banks, building societies and Solvency II insurers, where it is a PRA-designated function approved with FCA consent, and to FCA solo-regulated firms in the Enhanced tier. At Core firms, a finance director on the board usually holds SMF3 instead. Our guide to SMF2 explained covers the function in detail, and the rules sit in the FCA’s SUP 10C and the PRA Rulebook.
The practical consequence for recruitment is simple: a CFO who can’t be approved can’t do the job. Every SMF2 search we run is built around approvability from the first conversation.
Why SMF2 Searches Are Different
Most CFO searches test commercial and technical finance skills. An SMF2 search adds three further tests.
| Test | What it means in practice |
|---|---|
| Regime-specific experience | Bank capital and liquidity, Solvency II, or the ICARA for investment firms. Each is a specialism, and the regulator will look for direct experience of the one your firm operates under. |
| Regulatory reporting | Ownership of returns to the PRA or FCA, and the controls behind them. See our guide to FCA regulatory reporting. |
| Personal accountability | The candidate must be ready to hold a Statement of Responsibilities, meet the Senior Manager Conduct Rules and show they can take reasonable steps over their area. |
A strong finance director from an unregulated business can pass the first set of tests and fail all three of these. That is why we approach SMF2 as a specialist search, as we explain in why an SMF2 search should start with a CFO recruiter.
Permanent, Interim and Fractional CFOs
Permanent
For banks, insurers and larger investment firms, a permanent SMF2 is the norm. We run a direct, confidential search, approach candidates who aren’t actively looking and present a shortlist of finance leaders who can be approved for your regime.
Interim
When a CFO leaves unexpectedly, or a firm is in the middle of a capital raise, acquisition or remediation, an interim CFO keeps the finance function and the regulatory relationship stable. Interim SMF2s still need approval, so we plan cover and approval together. The 12-week rule may help in limited circumstances; see our page on fractional and interim SMF cover.
Fractional
Smaller Enhanced firms sometimes need an approved CFO for two or three days a week. A fractional SMF2 can work well where the firm has a capable financial controller and the CFO’s time commitment is realistic. Our guide to when interim and fractional appointments work sets out the considerations.
How We Run an SMF2 Search
- Brief against the Statement of Responsibilities. We start from what the CFO will be accountable for: financial reporting, regulatory returns, capital and liquidity, the ICARA or solvency position, and any Prescribed Responsibilities.
- Direct, confidential search. The strongest SMF2 candidates are usually in role. We approach them discreetly, without naming your firm until the right point.
- Fit and proper pre-assessment. Every candidate is tested against the fit and proper test before reaching your shortlist: qualifications, previous approvals, regulatory history, directorships and financial soundness.
- Shortlist and interview. Adrian Lawrence FCA interviews every shortlisted candidate personally, with questions that test regime knowledge as well as finance leadership.
- References and application. We start regulatory references early and support the Form A and Statement of Responsibilities.
- Through approval to day one. We plan notice periods around the regulator’s timetable. See managing the gap between offer and approval.
What We Look For in SMF2 Candidates
- A recognised accounting qualification and a track record of senior finance leadership
- Direct experience of the prudential regime your firm operates under
- Ownership of regulatory reporting and the controls that support it
- Experience of working with boards, audit committees and external auditors
- The judgement and standing to challenge the chief executive and the business
- A finance team leadership record, because an SMF2 can only take reasonable steps with a capable team behind them
- A clean regulatory history and nothing in their background that will surprise the regulator
Scenario: An Enhanced investment manager’s CFO announces his retirement with six months’ notice. The board wants a successor who can also lead a planned fundraising. We brief against a revised Statement of Responsibilities that adds the ICARA and investor reporting, approach candidates from comparable asset managers and present a shortlist of four in under five weeks. The chosen candidate is approved before the outgoing CFO leaves, and the two overlap for a month.
The Finance Team Behind the CFO
SMF2 searches often reveal gaps in the team below. A CFO who has to prepare regulatory returns personally won’t have the time to oversee them. We regularly recruit the supporting roles alongside the CFO, including financial controllers, regulatory reporting managers and CASS specialists, through our group practices. Our guides to the finance team behind your Senior Managers, financial controllers in regulated firms and regulatory reporting support cover what those roles involve.
SMF2 Across Sectors
We recruit SMF2 CFOs for banks and building societies, insurers, investment managers, wealth managers and consumer credit firms in the Enhanced tier. Each needs different experience. A bank CFO must understand capital and liquidity frameworks; an insurer’s CFO, Solvency II; an investment firm’s CFO, the ICARA and IFPR.
Timing, Pay and Approval
A permanent SMF2 search typically takes three to five weeks to shortlist, and dual-regulated approvals can add several months. Our guide to how long an SMF appointment takes gives realistic timings. Pay varies widely with firm size and sector; our salary guide sets out current ranges, and structuring an SMF offer covers buy-outs and deferred pay.
Questions to Answer Before You Start an SMF2 Search
- Is the role SMF2, or SMF3 because you are a Core firm? See which SMFs apply at which tier.
- Which prudential regime must the candidate know: banking, Solvency II or the investment firm regime?
- Will the CFO also own operations, IT or company secretarial work, and is that realistic? See combining Senior Manager roles.
- Is the finance team below strong enough, or does it need investment at the same time?
- Who covers the function if the outgoing CFO leaves before the successor is approved?
- Has the board agreed the package range, including any buy-out of deferred pay?
Clear answers to these questions shorten the search, improve the shortlist and make the Form A more straightforward.
SMF2 CFO Recruitment
Approved finance leadership for regulated firms. Every SMF2 search is led personally by Adrian Lawrence FCA
Cover Options
Interim and fractional CFOs.
→ Fractional and interim cover
→ Retained executive search
Getting Approved
Fitness, timing and references.
→ SMF authorisation support
→ Form A pitfalls
Related Roles
The rest of the executive team.
→ CEO (SMF1)
→ Chief Risk Officer (SMF4)
Every SMF2 search is led personally by Adrian Lawrence FCA
Frequently Asked Questions
Does our CFO need to be approved as SMF2?
If you are a bank, building society, Solvency II insurer or Enhanced FCA firm, almost certainly. At a Core firm, a finance director on the board usually needs SMF3 instead.
How quickly can you shortlist an SMF2?
Typically three to five weeks for a permanent role. Interim cover can often be arranged more quickly, though approval is still needed.
Can a fractional CFO hold SMF2?
Yes, at smaller Enhanced firms, provided the time commitment is realistic and the finance team below them is strong enough.
Do you recruit first-time SMF2 CFOs?
Yes. Many strong candidates are deputy CFOs or finance directors of regulated subsidiaries ready for their first approval. The application must show why they’re ready.
Can you also recruit the finance team?
Yes. Through our group practices we recruit financial controllers, regulatory reporting specialists and other finance roles alongside the CFO.
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, one of the UK’s specialist CFO and FD recruiters, and has since built a network of five specialist recruitment practices. He leads every SMF2 search personally. View Adrian’s ICAEW profile.
Recruiting a CFO?
Whether you need a permanent SMF2, an interim CFO at short notice or a fractional finance leader, tell us about your hire. We’ll come back to you the same working day.