Why an SMF2 Search Should Start With a CFO Recruiter, Not a Generalist
The SMF2 Chief Finance function is a regulatory designation, but the job underneath it is CFO work. When a firm starts an SMF2 search, a practical question follows: should it go to a governance or compliance recruiter, or to a CFO specialist who also understands the SMCR? For SMF2, the answer is usually the second, with regulatory readiness assessed alongside. This post explains why, what each side of the search must cover and how to brief it.
SMF2 Is a Finance Role First
Every SMF carries the same accountability structure: a Statement of Responsibilities, the Duty of Responsibility, the fit and proper test. But the work underneath varies by function. For SMF2, it is CFO work: financial strategy, capital and liquidity planning, investor and board reporting, technical accounting judgement and leading the finance team through growth, fundraising, acquisition or restructuring. The SMCR accountability sits on top of that job. It doesn’t replace it.
A search built mainly around SMCR fluency, with CFO ability checked second, tends to produce candidates who talk confidently about the regulatory framework but haven’t built or run a finance function at the level the firm needs. A search built the other way, CFO calibre first with SMCR readiness tested rigorously alongside, produces a better hire for the actual job. See SMF2 explained.
Which Firms Need an SMF2
| Firm type | SMF2 position |
|---|---|
| Banks, building societies and insurers | Applies to the person responsible for financial resources and regulatory reporting |
| Enhanced solo-regulated firms | Applies |
| Core firms | Does not apply as a separate function; a finance director on the board is usually SMF3 |
| Limited Scope firms | Does not apply |
The Enhanced thresholds rose from 10 July 2026, so check your tier; see which SMFs apply at which firm tier. A Core firm’s finance director who sits on the board needs approval as an executive director, so the regulatory layer still matters.
What a CFO Specialist Brings
A deep, active CFO network
Firms hiring an SMF2 need CFOs who are good at being CFOs: people with fundraising experience, credibility with boards and investors, and a record of building finance infrastructure that scales. A recruiter whose core business is CFO placement maintains that network as its main asset.
Judgement on CFO calibre
Telling a strong CFO from someone who has held the title takes judgement built from placing and working with many CFOs. That is a different skill from assessing fitness and propriety. A search that only does the second well can produce an approvable but operationally weak appointment.
The right engagement model
SMF2 doesn’t always need a full-time permanent hire at every stage. A CFO specialist can advise whether an interim, part-time or full-time arrangement fits, and where an interim CFO can cover a vacancy under the 12-week rule while the permanent search runs.
Where the Regulatory Layer Must Be Done Properly
None of this makes the SMCR side an afterthought. An SMF2 search must also cover:
- Prudential knowledge: the capital and liquidity framework for the firm’s sector, whether bank prudential rules, Solvency II, the IFPR and ICARA, or payment services own funds; see ICARA and IFPR
- Regulatory reporting: accountability for returns, and the team that produces them; see regulatory reporting
- Prescribed Responsibilities: often including financial resources and, at some firms, the ICARA or the firm’s wind-down planning; see Prescribed Responsibilities
- Fit and proper evidence: verified history, regulatory references and a specific Statement of Responsibilities, built into the search; see Form A mistakes
- Approval timetable: three months from a complete application, often with an interview for larger firms; see how long SMF appointments take
The point isn’t that regulatory rigour matters less for SMF2. It is that CFO calibre and regulatory readiness both need specific expertise, and a search that is strong on only one is incomplete.
What an SMF2 Statement of Responsibilities Usually Covers
| Area | Typical content |
|---|---|
| Financial resources | Managing the firm’s capital and liquidity, and keeping them above requirements |
| Regulatory reporting | Accuracy and timeliness of financial and prudential returns |
| Financial planning | Budgets, forecasts and the stress testing behind the ICARA or equivalent |
| Financial controls | The control environment over accounting and payments, working with internal audit |
| Wind-down planning | Making sure the firm could wind down in an orderly way |
| Finance team | Resourcing and competence of the finance function |
Each firm’s Statement is different and should reflect the actual allocation of responsibilities. See our Statement of Responsibilities template.
Questions to Ask SMF2 Candidates
- Talk us through the capital position of your current firm and the biggest judgement in it.
- When did you last tell the board something about capital or liquidity it didn’t want to hear?
- Which regulatory returns are you accountable for, and how do you satisfy yourself they are right?
- How have you worked with the CRO and the compliance officer?
- What would your first 90 days here look like?
Candidates From Outside Financial Services
Strong CFOs from outside financial services are tempting, especially for fintechs. Some make excellent SMF2s; others struggle with prudential requirements and the weight of regulatory accountability. Test them on how quickly they have learned a new regulatory framework before, and plan support: a strong financial controller with regulatory experience, training, and early engagement with the compliance officer. The regulator will look closely at competence for this candidate profile. See hiring Senior Managers from different backgrounds.
How a Joint Search Runs
1. Brief. Agree the finance agenda for the next three years and the SMF2 responsibilities, so the role is defined by both.
2. Long-list. Draw on CFO networks inside and outside financial services, and on approved finance Senior Managers.
3. Assess. Test CFO capability and SMCR readiness separately, with case questions on the firm’s capital plan and reporting.
4. Reference. Request regulatory references early and verify employment history before the offer.
5. Approve. Draft the Statement of Responsibilities with the firm and prepare the candidate for any interview.
This takes no longer than a single-track search, and it avoids finding out after the offer that a strong CFO isn’t ready for approval, or that an approvable candidate can’t do the job.
Scenario: A fast-growing consumer lender becomes an Enhanced firm and needs its first SMF2. Its first search, run by a generalist governance recruiter, produces regulated-sector finance directors who know the rules well but have never raised debt or equity. The board needs both. Our sister practice FD Capital runs a CFO-led search, and we test the shortlist for SMCR readiness and consumer credit prudential knowledge. The appointee has led two debt raises at a regulated lender and is approved after an FCA interview on the firm’s capital plan.
Getting Both Halves Right
Firms that get SMF2 right combine CFO recruitment depth with SMCR fluency, either from one practice that does both or through close coordination. Within our group, FD Capital runs CFO and finance director recruitment as its core specialism, including SMF2 regulated CFO recruitment. SMF Capital brings the SMCR assessment and the wider Senior Manager team: compliance officer, MLRO, CRO and board. For SMF2 searches we work together from the brief onwards. See our SMF2 recruitment page and multi-SMF team builds.
SMF2 and Finance Leadership
CFO searches with SMCR rigour. Every SMF search is overseen by Adrian Lawrence FCA
Chief Finance
SMF2 searches.
→ Chief Financial Officer (SMF2) → Retained executive searchSMF2 explained →
Board
Executive and non-executive.
→ Executive director (SMF3) → Chair and committee chairsSMF10 and SMF11 →
Finance Team
The people behind the SMF2.
→ Fractional and interim SMF cover → Multi-SMF team buildFinancial controllers →
Prudential
Capital and reporting.
→ Chief Risk Officer (SMF4) → SMF authorisation supportICARA and IFPR →
Every SMF search is overseen by Adrian Lawrence FCA
Frequently Asked Questions
Which firms need an SMF2?
Banks, building societies, insurers and Enhanced solo-regulated firms. At Core firms, a finance director on the board is usually SMF3.
Why use a CFO recruiter for SMF2?
Because the job is CFO work first. A CFO specialist has the network and judgement to find strong CFOs, with SMCR readiness tested alongside.
Can an SMF2 come from outside financial services?
Yes, if they can learn the prudential framework and are well supported, but regulators will test competence closely.
Can we cover an SMF2 vacancy with an interim CFO?
Yes. Under the 12-week rule an interim can cover while the permanent application is prepared and submitted.
How long does SMF2 approval take?
Three months from a complete application is the statutory deadline, sometimes with an interview.
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.
Planning an SMF2 Search?
Tell us about your firm and the finance role. We’ll come back with a joint plan from FD Capital and SMF Capital 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.