SMF3 or SMF18? Getting the Designation Right Before You Recruit
SMF3, the Executive Director function, and SMF18, Other Overall Responsibility, are both broad functions that catch senior people who don’t fit a more specific SMF. They are often confused. The distinction matters before a search starts, because it changes which firms need the role, the candidate profile, the approval and the way the search is run. This post explains how to tell them apart, what changed in 2026, and the mistakes we see most often.
The Short Answer
SMF3 is about the board seat. It applies to executive directors: people who sit on the firm’s board in an executive capacity. SMF18 is about overall responsibility. It applies at Enhanced firms to the most senior person responsible for a business area or management function that no other SMF covers, whether or not they sit on the board.
| Feature | SMF3 Executive Director | SMF18 Other Overall Responsibility |
|---|---|---|
| Trigger | Being an executive member of the board | Overall responsibility for an activity, business area or function not covered by another SMF |
| Firm tiers | Core and Enhanced firms, and dual-regulated firms | Enhanced firms only |
| Board seat | Yes, by definition | Not required; usually reports to the CEO or board |
| Typical holders | Commercial director, operations director or managing director on the board | Head of a business line, distribution, investments, technology or change |
| Prescribed Responsibilities | Can hold them | From 10 July 2026, can hold any Prescribed Responsibility at solo-regulated firms |
| Search type | Board-level executive search | Senior functional or divisional search |
Our guides to SMF3 and SMF18 cover each in depth.
Common Mistakes
Calling a divisional role SMF3 because the title sounds senior
A “Managing Director, Wealth” who runs a division but doesn’t sit on the firm’s board is not an executive director of the firm, whatever the title. At an Enhanced firm they are likely to be SMF18. Treating the role as SMF3 leads to a board-level process for a role that doesn’t need one, and a Form A for the wrong function.
Missing SMF3 because the person already has another title
Executive directors who join the board are caught by the executive director definition. Where someone also holds another SMF, such as SMF2 or SMF24, check the current rules on whether both functions need approval rather than assuming the second covers it.
Looking for SMF18 at a Core firm
SMF18 doesn’t exist at Core firms. A Core firm’s senior business heads are usually certified, not approved, unless they sit on the board. See the Certification Regime.
Leaving gaps at Enhanced firms
Enhanced firms must allocate overall responsibility for every business area and management function. A gap, such as a significant business line with no identified owner, is exactly what SMF18 exists to close. The responsibilities map should show it. See the responsibilities map explained.
What Changed in 2026
The Phase 1 SMCR reforms made two changes that affect SMF18:
- The language describing SMF18 holders as having equal status to executive directors was removed. SMF18 remains the most senior individual responsible for the area, reporting to the governing body or CEO, but the guidance no longer implies board-level status.
- From 10 July 2026, SMF18 holders at solo-regulated firms can hold any Prescribed Responsibility, giving firms more flexibility in allocating them. See Prescribed Responsibilities explained.
The Enhanced thresholds also rose on 10 July 2026, so some firms that previously needed SMF18 holders no longer do. If your firm has dropped out of Enhanced status, review the structure carefully before removing roles that work. Our guide to the SMCR reforms covers the full list.
How to Decide
1. Is the firm Core or Enhanced? If Core, SMF18 isn’t available; the question is whether the person sits on the board (SMF3) or is certified.
2. Will the person be an executive director of the firm? If yes, SMF3 applies, alongside any other SMF they hold, subject to the current rules.
3. If not a director, are they the most senior person responsible for an area? At an Enhanced firm, if no other SMF covers that area, SMF18 applies.
4. Does another SMF cover it? Finance (SMF2), risk (SMF4), operations (SMF24) and compliance (SMF16) take priority over SMF18.
5. Write it down. Record the reasoning, draft the Statement of Responsibilities and update the responsibilities map before the search starts.
How the Search Differs
SMF3: a board-level executive search
An SMF3 appointment needs the rigour of any board appointment: functional capability, board-level judgement, and how the person will work with the chair, CEO and non-executives. The candidate needs to understand collective board responsibility as well as their own area. See adding an executive to the board and board chemistry.
SMF18: a specialist functional search
An SMF18 search looks like a strong divisional or functional leadership search, with the SMCR accountability added. Candidates must understand that they are taking on personal regulatory accountability even if their title doesn’t signal it. Tell them early, show them the draft Statement of Responsibilities, and test them on how they would evidence reasonable steps in their area. See the Duty of Responsibility.
Examples
| Role | Firm | Likely designation |
|---|---|---|
| Commercial director on the board | Core broker | SMF3 |
| Head of advice, not on the board | Core IFA | Certified (not an SMF) |
| Managing director of a wealth division, not on the board | Enhanced investment group | SMF18 |
| Chief technology officer reporting to the CEO, owning technology and change | Enhanced payments firm | SMF18, unless SMF24 already covers technology |
| Chief operating officer on the board | Enhanced firm | SMF24, and check whether SMF3 also applies |
| Head of a UK branch’s business line | Third country branch | Branch rules apply; see SMF19 and SMF22 |
These are typical outcomes, not rules. The firm’s structure, permissions and Prescribed Responsibilities all affect the answer, so check each case against the current rules and record the reasoning. See holding more than one SMF for combinations.
Tell the Candidate Early
Whichever designation applies, candidates should know before they accept. Show them the draft Statement of Responsibilities, explain the approval timetable and the Conduct Rules, and say whether an interview is likely. Candidates who learn about personal regulatory accountability after accepting sometimes reconsider, and the firm loses weeks. Our guide to due diligence before accepting an SMF role covers what strong candidates will ask.
Scenario: An Enhanced investment manager asks us to find an “SMF3 Distribution Director”. The role will run UK and European distribution and report to the CEO, but won’t sit on the board. We confirm with the firm’s compliance officer that it is an SMF18 role, and the firm allocates the Prescribed Responsibility for the firm’s financial promotions to it, which the 2026 rules now allow. The brief shifts from board candidates to experienced distribution heads, and the shortlist is stronger and more relevant as a result.
Where This Sits Across the Group
SMF3 candidates are board-level executives, so those searches sometimes draw on our sister practices: Exec Capital for C-suite and board roles, and FD Capital where the executive director also leads finance. We run both SMF3 and SMF18 searches through executive director recruitment and SMF18 recruitment.
Executive SMF Recruitment
SMF3, SMF18 and senior executives. Every executive search is overseen by Adrian Lawrence FCA
Executive Directors
Board-level executives.
→ Executive director (SMF3) → Regulated CEO (SMF1)SMF3 explained →
Business Heads
Overall responsibility roles.
→ SMF18 recruitment → Chief Operating Officer (SMF24)SMF18 explained →
Structure
Getting designations right.
→ Governance review → Multi-SMF team buildWhich SMFs at which tier →
Enhanced Firms
When the firm crosses the line.
→ Retained executive search → Chair and committee chairsBecoming an Enhanced firm →
Every executive search is overseen by Adrian Lawrence FCA
Frequently Asked Questions
What is the difference between SMF3 and SMF18?
SMF3 applies to executive directors on the board. SMF18 applies at Enhanced firms to the most senior person responsible for an area not covered by another SMF, whether or not they are on the board.
Does SMF18 apply at Core firms?
No. It applies only at Enhanced firms.
Can an SMF18 hold Prescribed Responsibilities?
Yes. From 10 July 2026, SMF18 holders at solo-regulated firms can hold any Prescribed Responsibility.
Is a divisional managing director SMF3?
Only if they are an executive director of the firm’s board. Otherwise, at an Enhanced firm, they are more likely to be SMF18.
What happens if we choose the wrong designation?
The Form A may be for the wrong function, causing delay, and the search may target the wrong candidates.
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 oversees every SMF Capital search. View Adrian’s ICAEW profile.
Not Sure Which Designation Applies?
Tell us about the role and your firm’s structure. We’ll help you confirm the designation before the search starts, the same working day.
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 oversees every Senior Manager Function search.