When an SMF Application Is Refused or Withdrawn: What Happens Next
Most Senior Manager applications are approved. A minority run into trouble: the regulator raises concerns, the questions keep coming, and the firm and candidate face a choice between pressing on and withdrawing. It’s a stressful position for everyone, and decisions made in a hurry can have long-lasting consequences for the candidate’s career and the firm’s relationship with its supervisor. This guide explains the difference between withdrawal and refusal, how the formal process works, what has to be disclosed afterwards and how firms can recover the appointment.
How Applications Get Into Difficulty
Applications rarely fail without warning. The usual pattern is a series of questions from the regulator after the Form A is submitted, sometimes followed by a request for an interview. Common triggers include:
- information that wasn’t disclosed on the Form A but emerges from checks, such as a past directorship of a failed firm or an adverse credit history;
- a regulatory reference that reveals a disciplinary matter or conduct breach;
- a Statement of Responsibilities that doesn’t match the candidate’s experience;
- a candidate who performs poorly at interview, particularly on the firm’s risks or their own responsibilities;
- doubts about whether the candidate has enough time for the role, especially where they hold other positions; or
- wider concerns about the firm itself, such as weak governance, that make the regulator cautious about any appointment.
Our guide to what goes wrong in Form A submissions covers the avoidable causes in detail. This piece is about what happens when, despite everyone’s efforts, an application is in trouble.
Withdrawal and Refusal Are Very Different Outcomes
| Withdrawal | Refusal | |
|---|---|---|
| Who decides | The firm, usually with the candidate’s agreement | The regulator |
| How | The firm notifies the regulator that it is withdrawing the application | Through a formal statutory process with warning and decision notices |
| Formal finding | No finding about the candidate | A decision that the candidate has not been shown to be fit and proper for the role |
| Publicity | Not published | Final notices following refusal can be published |
| Future impact | May need to be explained in future applications | Likely to be a significant issue in any future application |
| Right to challenge | Not applicable | The candidate and firm can refer the decision to the Upper Tribunal |
Withdrawal is not a clean slate. A withdrawn application may still need to be disclosed and explained if the candidate applies for approval again, and future employers may ask about it. But it is usually far less damaging than a formal refusal, which is why firms and candidates facing serious regulatory concerns often choose to withdraw.
The Formal Refusal Process
The regulators can’t simply refuse an application without notice. Under section 62 of the Financial Services and Markets Act 2000, if the regulator proposes to refuse an application, it must give a warning notice. The process then follows the regulators’ statutory notice procedures:
- Warning notice. The regulator sets out its proposal to refuse and the reasons. The firm and candidate can make representations.
- Representations. The firm and candidate respond, in writing and sometimes orally, setting out why the application should be granted.
- Decision notice. If the regulator still decides to refuse, it issues a decision notice.
- Reference to the Upper Tribunal. The firm or candidate can refer the decision to the Upper Tribunal, which considers the matter afresh.
- Final notice. If the decision stands, the regulator issues a final notice, which may be published.
Before any warning notice, the regulator will usually have made its concerns clear through questions or at interview. That gives the firm and candidate an opportunity to address them, or to decide whether to withdraw.
Deciding Whether to Withdraw
When the regulator signals serious concerns, the firm and candidate should take advice and decide together. The questions to work through are:
- Are the concerns about facts that can be clarified or corrected, or about the candidate’s fundamental suitability?
- Could the role or Statement of Responsibilities be changed to address the concern, for example by narrowing the scope?
- Would further evidence, such as additional training, a stronger support team or a revised time commitment, change the regulator’s view?
- How would a refusal affect the candidate’s future career, compared with a withdrawal?
- How would continuing affect the firm’s wider relationship with its supervisor?
- How quickly does the firm need someone in the role, and what are the cover options?
Candidates and firms can have different interests here. The candidate may want to fight; the firm may need certainty quickly. Agreeing the approach early, and documenting it, helps avoid conflict later. Candidates may wish to take their own legal advice.
Scenario: A consumer credit firm applies for its new compliance officer to hold SMF16. At interview, the FCA probes the candidate’s limited experience of affordability rules and asks how she would oversee the firm’s collections activities. Further questions follow. The firm and candidate agree to withdraw the application, appoint an experienced fractional SMF16 for twelve months, and keep the candidate as Head of Compliance below the SMF with a development plan. Eighteen months later, the firm applies again, this time with a record of her leading the function, and approval is granted.
What Has to Be Disclosed Afterwards
A withdrawn or refused application doesn’t disappear. Candidates should expect to be asked about it:
- In future applications. Approval applications ask about the candidate’s regulatory history. A candidate should disclose a previous withdrawn or refused application where the form asks for it, and give a clear explanation. Failing to disclose something the regulator already knows about is far more damaging than the original issue.
- By future employers. Firms recruiting Senior Managers ask about previous applications as part of their pre-offer checks.
- In regulatory references. Depending on the circumstances, matters connected with an application may be relevant to the questions in a regulatory reference.
The best protection is a short, factual record made at the time: what the concern was, why the application was withdrawn, and what the candidate has done since. That record makes a future explanation credible.
Recovering the Appointment
Once an application has been withdrawn or refused, the firm still needs someone to perform the function. Options include:
| Option | When it works |
|---|---|
| Interim or fractional SMF | The firm needs an approved person quickly while it plans a permanent solution; see interim and fractional cover |
| Reallocate responsibilities | Another approved Senior Manager can take on the responsibilities temporarily, if they have the capacity and competence |
| Restructure the role | The original candidate stays in a non-SMF role while an approved person holds the function |
| New external search | The firm needs a different profile; see internal promotion or external hire |
| Reapply later | The concerns can genuinely be addressed with time, experience or training |
The firm should also look at its own process. If checks or the application missed something, fix that before the next application. The regulator will look more closely at the firm’s next appointment to the same role.
Avoiding the Situation in the First Place
Most difficult applications can be traced back to issues that were knowable before the offer was made. Firms reduce the risk by:
- running thorough pre-offer checks and asking candidates directly about anything that might come up;
- requesting regulatory references as soon as the offer is accepted;
- making sure the Statement of Responsibilities matches what the candidate has done before;
- preparing the candidate for interview; see preparing for an FCA or PRA approval interview; and
- assessing the candidate honestly against the fit and proper test before deciding to apply.
The conditional offer should also say what happens if approval isn’t granted. See offer subject to FCA approval.
Getting SMF Appointments Approved
Approvable candidates and well-prepared applications. Every SMF search is led personally by Adrian Lawrence FCA
Approval Support
Getting the application right.
→ SMF authorisation support
→ Form A pitfalls
Cover
When you need an approved person now.
→ Fractional and interim cover
→ The 12-week rule
Recruitment
Finding approvable candidates.
→ SMF recruitment services
→ Compliance officer (SMF16)
Every SMF search is led personally by Adrian Lawrence FCA
Frequently Asked Questions
Is withdrawing an SMF application better than being refused?
Usually, yes. A withdrawal involves no formal finding about the candidate and isn’t published, though it may still need to be explained in future.
Can the regulator refuse an application without warning?
No. If it proposes to refuse, it must give a warning notice, and the firm and candidate can make representations before any decision.
Can a refusal be challenged?
Yes. The firm or candidate can refer a decision notice to the Upper Tribunal.
Does a candidate need to disclose a withdrawn application in future?
They should disclose it wherever an application form or employer asks, with a clear explanation. Non-disclosure is far more damaging than the original issue.
Can the firm reapply for the same candidate?
Yes, once the concerns have genuinely been addressed. The regulator will expect to see what has changed.
Can you help if our application is in difficulty?
Yes. We can help you assess the options and, if needed, provide interim cover or find an alternative candidate. For legal issues, take specialist legal advice.
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, from shortlist through to regulatory approval. View Adrian’s ICAEW profile.
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Adrian Lawrence FCA is the founder of SMF Capital and a Fellow of the Institute of Chartered Accountants in England and Wales and holds an ICAEW practising certificate in his own name. He holds a BSc from Queen Mary College, University of London, and has over 25 years of experience working with boards, investors and business owners across the UK. He founded SMF Capital to help FCA and PRA-regulated firms appoint the Senior Managers the regulators expect, with the fit and proper assessment built into every search, and personally leads every Senior Manager Function search.
