What Is SMF7?

SMF7 is the Group Entity Senior Manager function. It applies to an individual who is employed by a parent undertaking or another group entity, rather than by the regulated firm itself, and who exercises significant influence over the management or conduct of the firm’s regulated activities.

It’s mainly relevant to dual-regulated firms, such as banks and insurers, which are part of wider groups. Which firms SMF7 applies to depends on the regulators’ rules: the FCA’s designations are in SUP 10C and the PRA’s in its Rulebook. Check the current rules for your firm, and see our guide to SMFs by firm tier and complete designations guide.

The Significant Influence Test

The key question is whether a group individual exercises significant influence over the UK firm. That usually means they take, or effectively control, decisions about the firm’s strategy, risk appetite, business, capital or major operational matters. Signs that someone may need approval as SMF7 include:

Holding a group title isn’t enough on its own. What matters is the influence in practice. Equally, calling someone an adviser doesn’t avoid SMF7 if they effectively take the decisions.

SMF7 and SMF6 Compared

Approval and Accountability

An SMF7 holder is a Senior Manager like any other:

• they need regulatory approval before exercising the function
• they must meet the fit and proper test
• they need a Statement of Responsibilities setting out what they’re accountable for in relation to the UK firm
• they’re subject to the Senior Manager Conduct Rules and the Duty of Responsibility

Many SMF7 holders are based overseas. That isn’t a barrier to approval, but the regulators will want to understand how they exercise their influence, how much time they spend on the UK firm, and how they’ll be available to UK supervisors. Our guide to SMF approval for overseas firms and group structures covers the process.

Why It Matters to Groups

Getting It Wrong Either Way

Groups can fall into two traps. The first is failing to identify group executives who effectively direct the UK firm, leaving accountability gaps the regulator will see. The second is designating too many group individuals as SMF7s, which blurs responsibility and makes it unclear whether the UK firm’s own Senior Managers are really in charge.

Local Accountability

The regulators want UK firms to be run by people who are accountable in the UK. Where group executives exercise significant influence, the UK firm still needs strong local Senior Managers and an effective board that can challenge group decisions where they aren’t in the UK firm’s interests. Independent non-executives are particularly important here. See our page on non-executive directors at FCA-regulated firms.

Mapping the Group’s Influence

The clearest way to manage SMF7 questions is to map how decisions affecting the UK firm are actually made: who proposes, who approves, and who can override. The Responsibilities Map should explain group arrangements, and our Responsibilities Map template includes a section for them.

Practical Questions for Group Executives

• Time: can you give the UK firm enough attention alongside your group role?
• Conflicts: how will you handle decisions where the group’s interests differ from the UK firm’s?
• Information: will you get the management information you need to discharge your UK responsibilities?
• Records: can you show the reasonable steps you took on UK matters?
• Insurance: does your D&O cover extend to your UK Senior Manager role?

SMF7 at Solo-Regulated and Smaller Groups

Smaller groups and FCA solo-regulated firms face the same underlying question, even where SMF7 itself doesn’t apply: if a group executive effectively runs the regulated firm, how is that person accountable? Depending on the firm, the answer may be approval in another function, such as SMF1, SMF3 or SMF18, or restructuring decision-making so that accountability clearly sits with the UK firm’s own Senior Managers. Our article on group SMF roles and our post on SMF3 or SMF18 explain the options.

How SMF Capital Helps Groups

Group executives who may need SMF7 approval are usually already in post. Where we help is in building the UK side of the structure: local Senior Managers with the authority to run the UK firm, independent non-executives and committee chairs who can challenge the group, and approval applications that explain clearly how the group’s influence is exercised. Our overseas firms and group structures service and governance and SMF structure review support groups through this.

Frequently Asked Questions

What is SMF7?

The Group Entity Senior Manager function, for individuals employed by a group entity who exercise significant influence over a regulated UK firm.

Does every group executive need SMF7 approval?

No. Only those who exercise significant influence over the UK firm’s management or regulated activities.

Can an SMF7 holder be based outside the UK?

Yes. The regulators will want to understand how they exercise their influence and how they’ll be available to UK supervisors.

Which regulator approves SMF7?

It depends on the firm. At dual-regulated firms, applications go through the PRA, with the FCA’s consent. Check the rules that apply to your firm.

What is the difference between SMF7 and SMF6?

SMF7 covers group individuals with significant influence over the UK firm. SMF6 covers people running very large business areas within the firm itself, mainly at larger banks.