The Certification Regime Explained: The “C” in SMCR

SMF Holder or Certified Person: The Core Distinction

A Senior Manager is approved by the regulator before starting, appears on the FCA Register, has a Statement of Responsibilities and is subject to the Duty of Responsibility. A Certified Person is never approved by the FCA. Instead, the firm assesses whether they are fit and proper before they start, and again at least once a year, and issues a certificate confirming it. The FCA supervises the firm’s process rather than each decision, but it can and does test that process.

Certified Persons do still appear publicly. Since the FCA Directory was introduced, firms have had to report certified staff and directors so customers and other firms can look them up. That is a reporting duty, not an approval.

Our guide to Senior Manager Functions covers the SMF side. The rules for certification are in SYSC 27 of the FCA Handbook, and the fit and proper standard both sides are measured against is in the FIT sourcebook.

Who Needs Certifying

Certification functions are defined by the potential for significant harm, not by seniority. For a typical solo-regulated firm, the categories include:

• Significant management: senior heads of business areas below SMF level, mainly at Enhanced firms
• Client-dealing: people who give investment advice, deal or arrange for clients, or manage investments
• Qualification-based roles: roles that need a qualification under the Training and Competence rules, including retail investment advisers; see certified adviser recruitment
• Material Risk Takers: people whose activities can have a material impact on the firm’s risk profile under its remuneration code
• Managers of certified staff: anyone who supervises or manages a Certified Person, directly or indirectly
• CASS oversight: at firms where client money oversight doesn’t sit with an SMF
• Proprietary and algorithmic trading: traders and people who approve trading algorithms

A firm with five Senior Managers may have twenty, fifty or several hundred Certified Persons. Non-executive directors who are not Senior Managers are not certified, but they are subject to the Conduct Rules and are reported to the Directory.

Material Risk Takers sit across both regimes

A senior portfolio manager can be a Material Risk Taker subject to deferral, malus and clawback without holding any SMF. In that case the firm certifies them. If the same person later takes on an SMF, such as SMF18 at an Enhanced firm, they need FCA approval instead. Our guide to the remuneration committee chair explains how Material Risk Takers are identified.

How Certification Works in Practice

The firm needs a documented process, a named owner and evidence for each decision. At most firms the compliance officer or HR runs the process, with a Senior Manager accountable for it. Our fit and proper assessment template sets out the evidence a sound file should hold, and our guide to SMCR background checks covers the checks behind it.

What the 2026 Reforms Change

The SMCR reform programme affects certification in two stages:

Until the legislation passes and the replacement rules take effect, the current regime applies in full. Firms still need to certify, re-certify and report. The direction of travel is lighter administration, not lower standards: firms will still have to make sure people in harmful roles are fit and proper. Our guide to the SMCR reforms covers the wider programme, and the FCA’s SMCR pages carry the current position.

Why Firms Confuse the Two Regimes

The confusion runs both ways. Some firms assume any senior-sounding role needs FCA approval, and submit a Form A that was never required. That adds months to a hire for no benefit. Others assume a certified role is “only” certified and treat the assessment as a box to tick. That misreads the framework. The standard is the same; what differs is who applies it.

The question comes up most often with:

• Heads of compliance below the SMF16: a deputy or head of compliance monitoring is usually certified, not approved
• Deputy MLROs: normally certified; see do you need a deputy MLRO
• Senior business heads at Enhanced firms: they may fall under SMF18 or significant management certification, depending on whether they have overall responsibility; see SMF3 or SMF18
• Finance leads below the SMF2: often certified as Material Risk Takers or significant management at larger firms

What This Means for Recruitment

Getting the regime right at the brief stage changes the timetable. An SMF hire carries a Form A, a statutory determination period and often an interview. Our guide to how long an SMF appointment takes sets out the stages. A certified hire has no external approval step, so the firm can move as fast as its own checks allow, provided those checks are real.

For certified hires we build the evidence the firm needs into the search itself: verified employment history, regulatory references requested early, qualification checks and a documented competence assessment. That gives the firm a certification file that stands up to supervisory review, rather than a certificate issued on the strength of a CV. For senior roles where the regime is unclear, we work through the FCA’s criteria with the firm before the search starts. We do the same for internal promotions, where the jump from certified to approved is easy to miss.

Frequently Asked Questions

Does the FCA approve Certified Persons?

No. The firm assesses and certifies them. The FCA supervises the firm’s process and can challenge it.

How often must certificates be renewed?

At least every 12 months under the current rules. HM Treasury intends to remove annual re-certification from legislation, but until replacement rules are in force the current requirement applies.

Are Certified Persons on the FCA Register?

They appear on the FCA Directory, which firms update. Only approved people, such as Senior Managers, appear on the Register as approved.

Do certified staff need a regulatory reference?

Yes. Firms must request references covering the past six years when hiring someone into a certification function.

Can someone start before they are certified?

Generally no. The assessment and certificate should be in place before they perform the function. Limited temporary arrangements exist, so check the rules before relying on one.

Is a deputy MLRO certified or approved?

Usually certified. Only the MLRO holds SMF17.