The Regulatory Backdrop

Anyone acquiring or increasing control of an FCA-authorised firm needs the regulator’s approval before completion, under Part XII of the Financial Services and Markets Act 2000. The FCA explains the process on its change in control pages. The regulator has a statutory period of 60 working days to assess a complete notice, and it can pause that period to ask for more information.

The change in control assessment looks at the acquirer, but the regulator also cares about what happens to the firm afterwards: who will run it, whether its governance will remain adequate and whether key Senior Managers are staying. A credible plan for the Senior Manager team strengthens the application.

Why Senior Managers Leave After a Deal

• Founders cash out. Founder Senior Managers often plan to step back once the deal completes, sometimes sooner than the buyer expected.
• Uncertainty. Senior Managers unsure of their future role or reporting line start talking to recruiters.
• Loss of independence. Control function holders worry that a group structure will weaken their authority.
• Culture clash. Different approaches to risk, customers or management can push people out.
• Duplication. The acquirer already has someone in the equivalent group role.

Due Diligence Questions About the SMF Team

The answers shape both the deal and the integration plan. A firm whose compliance officer and MLRO are both leaving at completion has a very different risk profile from one with a stable, well-regarded team.  Find us on ProvenExpert

Keeping the People You Need

Talk Early

Once confidentiality allows, speak to key Senior Managers directly about their future roles. Uncertainty is the biggest driver of departures.

Retention Arrangements

Retention bonuses tied to staying through completion and integration are common for Senior Managers. Where Remuneration Code rules apply, structure them accordingly, and take advice.

Protect Control Function Independence

Make clear that the compliance officer and MLRO will keep direct access to the regulated firm’s board. That reassures both the individuals and the regulator.

Clarify Group Roles

Where the acquirer has group functions, agree early how they’ll work with the regulated firm’s Senior Managers. Our article on group SMF roles covers when group executives need approval themselves.

Planning the Changes You Do Want

Most acquirers want some changes: a new chief executive, an independent chair, a stronger risk function or a group finance director taking on SMF2. Each needs regulatory approval, and the timing needs planning:

Running the searches alongside the transaction avoids a gap between completion and the new team being approved. Our page on multi-SMF board and executive team builds explains how we coordinate several appointments at once.

The First 100 Days After Completion

• Confirm every Senior Manager Function is filled by an approved individual.
• Update Statements of Responsibilities and the Responsibilities Map for any changes.
• Submit approval applications for new Senior Managers and notifications for leavers.
• Agree how group functions will interact with the regulated firm’s Senior Managers.
• Introduce the new leadership to the FCA supervisor.
• Review board composition, including whether to add an independent non-executive.

Adding an independent non-executive to the acquired firm’s board often reassures both the regulator and the remaining Senior Managers. Our sister practice NED Capital specialises in non-executive appointments, and we recruit where the board role carries a Senior Manager Function.

Private Equity Buyers

Private equity investors acquiring regulated firms face the same issues, often with a sharper focus on growth plans and an eventual exit. Investors frequently want to strengthen the board with an independent chair or non-executives, and to bring in a chief executive or finance director with experience of growing a business under investor ownership. Those appointments need regulatory approval like any other, and the regulator will want to understand how the investor’s plans affect the firm’s risk profile and its customers. Planning the senior team as part of the investment case, rather than after completion, keeps the timetable on track. It also gives the investor a clearer view of the costs involved.

Common Mistakes

• Assuming key Senior Managers will stay without asking them.
• Leaving new SMF searches until after completion, creating a gap.
• Overlooking fractional Senior Managers whose contracts end on a change of control.
• Weakening control functions by routing them through group reporting lines.
• Forgetting the regulator until the change in control notice is due.

Advice for Sellers

If you’re selling a regulated firm, a stable, well-documented Senior Manager team makes the business more attractive and the change in control process smoother. Make sure Statements of Responsibilities are current, deputies are in place where possible, and you’ve thought about your own role after the deal. A buyer that sees a clear succession plan for a founder Senior Manager will usually value the business more highly.

Frequently Asked Questions

Does a change in control require new SMF approvals?

Not automatically. Existing Senior Managers stay approved. But any new Senior Managers the buyer appoints need approval.

When should we start searching for new Senior Managers?

During due diligence or soon after signing, so approvals can be submitted at completion.

Can the buyer’s group executives take on Senior Manager Functions?

Yes, with approval, if they’ll perform the function at the regulated firm. They need enough time and knowledge of the firm.