SMF1 Explained: The Chief Executive Function

What SMF1 Covers

The Chief Executive function is defined in the FCA Handbook at SUP 10C. It applies to the person with overall responsibility for running the business day to day. At a dual-regulated bank, building society or insurer, SMF1 is a PRA-designated function, approved by the PRA with the FCA’s consent. At a solo-regulated Core or Enhanced firm, the FCA approves it directly. Limited Scope firms generally use the SMF29 Limited Scope function instead, which our guide to which SMFs apply at which firm tier explains.

The SMF1 holder’s Statement of Responsibilities usually includes some of the firm’s Prescribed Responsibilities, most commonly responsibility for the firm’s performance of its obligations under the Senior Managers and Certification Regime itself. At smaller Core firms, where there are only a handful of SMF holders, the chief executive may carry a considerably larger share of them. Each one widens the area in which the Duty of Responsibility applies personally.

The Duty of Responsibility at Chief Executive Level

Under the Duty of Responsibility, the FCA or PRA can act against an SMF holder personally where the firm has breached a requirement in their area and the regulator can show they did not take the steps a person in their position could reasonably have been expected to take. For most designations, “their area” is a defined function. For SMF1, it is the business as a whole.

That does not mean the chief executive is expected to know everything. It means they are expected to have built a structure in which the right information reaches them, in which other SMF holders have clear and genuinely owned responsibilities, and in which problems are escalated rather than absorbed. In practice, a chief executive’s reasonable steps are largely about architecture: clear allocation of responsibilities, management information that actually shows emerging risks, and a documented record of acting on what that information shows. Our analysis of FCA enforcement trends covers how reasonable steps are assessed.

SMF1 and SMF3: Where the Line Falls

SMF3, the Executive Director function, applies to executive members of the board. A chief executive who sits on the board is performing both roles in substance, but the chief executive function is the one that defines their accountability, and the Statement of Responsibilities should reflect that clearly. Confusion usually arises further down: a deputy chief executive, a managing director of a major business line, or a founder who has stepped back from the chief executive role but remains on the board as an executive. Each of those may be SMF3 rather than SMF1, and in some structures SMF18 is the more accurate designation.

Getting this wrong has consequences beyond the paperwork. The designation shapes the Statement of Responsibilities, the fit and proper assessment, and the scope of personal accountability. Our piece on SMF3 or SMF18 and FD Capital’s SMF3 guide set out the distinctions in more depth.

The Chair and the Chief Executive

The SMF1 holder’s most important working relationship is with the SMF9 chair. The regulators expect a clear separation: the chair leads the board and holds the executive to account, and the chief executive runs the business. In practice, supervisors pay close attention to whether that separation is real. A chair who is effectively an extra executive, or a chief executive who manages the board rather than being challenged by it, is a governance weakness that tends to show up in supervisory findings long before it shows up in a breach.

That makes chair-CEO fit a genuine part of any SMF1 appointment, not a soft consideration to be handled after the technical assessment. Our piece on the chair-CEO chemistry problem explains how to assess it without weakening either role.

What the Regulator Looks For in an SMF1 Candidate

The FCA assesses every SMF candidate against the criteria in its FIT sourcebook: honesty, integrity and reputation; competence and capability; and financial soundness. For SMF1, competence carries the most weight, and it is judged against the firm in front of the regulator, not against seniority in general.

Relevant regulated experience

A candidate who has run a regulated business of similar type and complexity is the easiest case. A candidate stepping up from a deputy role, or moving across from a different part of financial services, needs a clearer account of why their experience transfers. A candidate from outside regulated financial services entirely is not ruled out, but the application will need to show how the firm will support them, often through a strong chair, experienced SMF16 and SMF17 holders, and a documented induction plan.

Understanding of the firm’s specific risks

The regulator can, and for significant firms often does, interview SMF1 candidates. Those interviews test whether the candidate understands the particular risks of the business they are about to run: its customers, its products, its conduct risks and its regulatory history. A candidate who speaks fluently about leadership in general but vaguely about the firm’s actual risk profile is poorly prepared, however strong their CV.

A clean regulatory and reference record

The firm must obtain regulatory references covering the previous six years and complete a criminal record check. Anything in a candidate’s history that needs explaining is far better surfaced at shortlist stage than discovered once an offer has been made. Our guide to the fit and proper test in full sets out every sub-criterion.

Prescribed Responsibilities Often Held by the Chief Executive

At Core firms, the chief executive often holds several of the Prescribed Responsibilities that apply, simply because there are few other Senior Managers to allocate them to. These commonly include responsibility for the firm’s performance of its obligations under the SMCR, its compliance with the Consumer Duty where a separate champion is not appointed, and, at smaller firms, its financial crime systems alongside the MLRO. At Enhanced firms they are spread more widely. Our guide to Prescribed Responsibilities explains the allocation, and the Consumer Duty board champion covers that role.

The Approval Interview

Chief executive candidates are among the most likely to be interviewed by the regulator before approval, particularly at larger firms, dual-regulated firms and firms under supervisory attention. The interview tests the candidate’s understanding of the firm’s business model, its key risks, its regulatory obligations and how they would run the firm within them. Preparation matters: a candidate who has clearly studied the firm, its recent supervisory history and its plans performs far better than one relying on general experience. Our guide to preparing for an FCA or PRA approval interview sets out what to expect.

Where SMF1 Searches Go Wrong

The most common failure is treating an SMF1 search as a conventional chief executive search with a regulatory form at the end. A commercially outstanding candidate who has never held personal regulatory accountability can struggle at interview with the regulator, and a firm that discovers this after the board has committed is in a difficult position.

The second failure is underestimating the timeline. The search itself, notice periods and the approval process together often run well beyond what boards expect. The regulator has up to three months to decide a complete application and up to six months for an incomplete one. Our guide to how long an SMF appointment actually takes sets out the realistic plan, and what goes wrong in Form A submissions covers the avoidable delays.

The third is leaving the firm without cover. Where a chief executive departs unexpectedly, the 12-week rule allows temporary cover. Since the April 2026 reforms, firms have 12 weeks to submit an application for the person covering rather than to obtain approval, which gives boards more room to arrange a properly considered interim.

Recruiting an SMF1: What Good Looks Like

A well-run SMF1 search starts with a precise brief: the firm’s tier and regulator, the business model and its principal risks, the state of the existing SMF population, and the chair’s view of what the business needs next. Candidates are then assessed against the fit and proper standard from the first conversation, with regulated experience, risk understanding and reference history tested before anyone reaches a shortlist rather than after.

Compensation needs benchmarking against comparable regulated firms rather than the wider market, since personal regulatory accountability carries a premium. Our guide to what SMF roles pay in 2026 sets out current figures. Where the chief executive appointment is one of several changes at once, such as a new chair or a move into Enhanced tier, a coordinated multi-SMF team build avoids the gaps that come from running each search separately. For the wider framework, see our guide to Senior Manager Functions explained.

We run chief executive searches through our regulated CEO recruitment (SMF1) service, usually as a retained executive search, and where a chief executive leaves suddenly, our urgent SMF replacement service covers the first steps.

Frequently Asked Questions

Does every regulated firm need an SMF1?

Most Core and Enhanced firms with a chief executive need SMF1 approval for that person. Very small firms run by a single director may only need other functions.

What is the difference between SMF1 and SMF3?

SMF1 is the chief executive, accountable for the whole business. SMF3 covers other executive directors on the board who are not otherwise approved.

Will the FCA interview a chief executive candidate?

Often, particularly at larger, dual-regulated or higher-risk firms. Good preparation is essential.

How long does an SMF1 search take?

Typically three to five months to an accepted offer, then the approval period and any notice period.