SMCR for Limited Scope firms: what changes if you’re a Limited Scope firm

What Is a Limited Scope Firm Under SMCR?

When the Senior Managers and Certification Regime (SMCR) was extended to solo-regulated firms in December 2019, the FCA recognised that a single framework applied uniformly to every authorised firm would be disproportionate. The result was a three-tier structure: Enhanced firms, Core firms, and Limited Scope firms.

Limited Scope firms represent the lightest-touch tier. If your firm falls into this category, you are subject to SMCR but with significantly reduced obligations compared to Core and Enhanced firms. The challenge most Limited Scope firms face is not understanding that they have fewer obligations — it is understanding precisely which obligations remain, and ensuring those are met rigorously.

This guide sets out the SMCR framework as it applies to Limited Scope firms, covers the Senior Management Functions that still apply, and explains what this means in practice for hiring and accountability.

Which Firms Are Limited Scope?

The FCA defines Limited Scope firms by reference to the type of business they conduct. The principal categories include:

• Firms with a limited permission — including many consumer credit firms and mortgage intermediaries with narrow, specific permissions
• Internally managed AIFs (Alternative Investment Funds) — where the fund and manager are the same legal entity and no external management structure exists
• Oil market participants and energy market participants — with specific carve-outs in FCA rules
• Firms subject to the MiFID exemption — certain investment firms relying on Article 3 of MiFID II that are not subject to the full MiFID framework
• Appointed representatives that are also authorised firms — where the AR appointment limits the scope of direct FCA authorisation

If you are uncertain whether your firm is Limited Scope, Core, or Enhanced, the FCA’s SMCR categorisation guidance sets out the criteria in full. Firms that misidentify their category — particularly those who believe they are Limited Scope when they are in fact Core — carry a meaningful regulatory risk.

What SMCR Obligations Apply to Limited Scope Firms?

Limited Scope firms are subject to a reduced set of SMCR requirements. The key distinction from Core firms is the narrower range of mandatory Senior Management Functions and the absence of the Certification Regime as a formal obligation.

Senior Management Functions: What Applies

Limited Scope firms must identify and notify the FCA of anyone performing a Senior Management Function. However, the list of SMFs that apply to Limited Scope firms is shorter than for Core firms. Typically, Limited Scope firms must have the following SMFs where those roles exist within the business:

• SMF1 — Chief Executive: The person responsible for carrying out the day-to-day management of the firm
• SMF3 — Executive Director: Any director who is not SMF1 and who performs a significant influence function
• SMF9 — Chair: Where applicable (typically relevant to larger Limited Scope entities)
• SMF16 — Compliance Oversight: The individual responsible for overseeing the compliance function — see our SMF16 guide for a full breakdown of responsibilities
• SMF17 — Money Laundering Reporting Officer (MLRO): Mandatory where the firm is within scope of the Money Laundering Regulations — see our SMF17 MLRO guide

Crucially, Limited Scope firms are not required to designate an SMF2 (Chief Finance Officer) as a mandatory Senior Management Function, whereas Core firms are. However, if a finance director or CFO is also an executive director with significant influence, they may be required to hold SMF3. This distinction matters for firms recruiting at senior finance level — see our guidance on SMF2 CFO recruitment and how the position differs between Core and Limited Scope regulated firms.

The Certification Regime Does Not Apply

One of the most significant points of difference for Limited Scope firms is that the Certification Regime does not apply. Under the Certification Regime, Core and Enhanced firms must certify that certain employees (those performing Certified Functions such as client-facing advisory roles) are fit and proper — both on initial appointment and annually. Limited Scope firms have no equivalent formal obligation.

This does not mean fitness and propriety assessments are irrelevant for Limited Scope firms. The FCA’s Fit and Proper test applies to SMF holders at all tiers. The absence of the Certification Regime simply means that the regime-specific certification process, documentation and annual renewal cycle does not apply below Senior Manager level.

Conduct Rules Still Apply

The Conduct Rules apply to all SMCR firms including Limited Scope. All staff at a Limited Scope firm — not just Senior Managers — are subject to the Individual Conduct Rules (COCON). Firms must train all in-scope employees on the Conduct Rules and report material breaches to the FCA within appropriate timeframes.

The five Individual Conduct Rules are:

1. You must act with integrity
2. You must act with due skill, care and diligence
3. You must be open and cooperative with the FCA, the PRA and other regulators
4. You must pay due regard to the interests of customers and treat them fairly
5. You must observe proper standards of market conduct

Senior Managers at Limited Scope firms are additionally subject to the Senior Manager Conduct Rules — see our Senior Manager Conduct Rules guide for the full requirements.

For a comprehensive overview of the full Conduct Rules framework, see our FCA Conduct Rules guide.

Statements of Responsibilities at Limited Scope Firms

Limited Scope firms must maintain a Statement of Responsibilities (SoR) for each Senior Manager. The SoR maps the specific responsibilities of that individual — it is the document that establishes what the SMF holder is personally accountable for in the event of a regulatory issue.

Unlike Enhanced firms, Limited Scope firms are not required to prepare a Management Responsibilities Map (an organisation-wide governance document). The SoR alone is sufficient. However, firms that allow SoRs to be vague, generic, or out of date face meaningful risk: the accountability purpose of SMCR depends entirely on the SoR being accurate and current.

The Duty of Responsibility

The Duty of Responsibility applies to Senior Managers at all SMCR tiers including Limited Scope. Where a firm breaches FCA requirements in an area that falls within a Senior Manager’s stated responsibilities, the FCA may take action against that individual unless they can demonstrate they took all reasonable steps to prevent the breach.

This is the central accountability mechanism of SMCR and it applies fully to Limited Scope Senior Managers. It is not a lighter-touch regime in this regard — the personal accountability framework is the same regardless of firm size.

What Does Limited Scope SMCR Mean for Hiring?

For firms in the Limited Scope tier, senior hiring decisions carry regulatory weight that did not exist under the predecessor Approved Persons Regime. When you appoint someone to an SMF role, that individual must be pre-approved by the FCA before they can perform the function. The pre-approval process requires submission of Form A to the FCA, and approval cannot be assumed — the FCA may raise queries, request further information, or in rare cases decline.

Practical implications for Limited Scope hiring:

• Allow for FCA processing time: The FCA has a statutory target of three months to determine Form A applications. In practice, straightforward applications are often determined more quickly, but the process must start early — particularly for roles where the individual needs to be in place by a specific date
• Conduct a thorough fitness and propriety assessment before submission: The FCA will scrutinise criminal record, credit history, regulatory history and professional qualifications. Surfacing issues at the internal stage rather than during the FCA process reduces delay and reputational risk
• Obtain regulatory references: For any SMF appointment, regulatory references from previous regulated employers are required going back five years
• Ensure the Statement of Responsibilities is prepared before appointment: The SoR is a pre-approval document — it must be submitted with Form A, not drafted after the individual starts

FD Capital works with Limited Scope firms on SMF-level appointments — both permanent and fractional. Our candidates are experienced in FCA-regulated environments and understand the SMCR accountability framework. We can provide compliance-ready candidates for SMF16 (Compliance Oversight) and SMF17 (MLRO) roles where fractional or interim cover is required while a permanent appointment is progressed. Contact our SMCR compliance recruitment team to discuss your requirements.

Common Mistakes Limited Scope Firms Make Under SMCR

The reduction in obligations relative to Core firms sometimes leads Limited Scope firms to under-invest in their SMCR governance. The most common errors we see are:

1. Misidentifying the Firm’s Category

Some firms classify themselves as Limited Scope on the basis of a narrow initial permission when their actual regulatory footprint has grown since authorisation. If a firm has materially expanded its regulated activities, it may now fall into the Core category. Reclassification is not automatic — firms must self-assess and notify the FCA if their category changes.

2. Leaving SMF Roles Vacant

Where a firm is required to designate an SMF16 (Compliance Oversight) or SMF17 (MLRO) and that role becomes vacant — through departure, illness, or restructure — the firm must manage the regulatory gap immediately. The FCA does not permit SMF roles to remain vacant without a plan. Fractional or interim cover can bridge this gap lawfully while a permanent appointment is made. Our MLRO recruitment and CCO recruitment teams deal with precisely these situations.

3. Failing to Keep Statements of Responsibilities Current

SoRs must be updated whenever there is a material change in a Senior Manager’s responsibilities. Where a firm restructures, acquires a new permission, or changes its business model, existing SoRs may be out of date within weeks. This is a governance failure that is straightforward to avoid with a simple review process.

4. Inadequate Conduct Rules Training

The training obligation under SMCR requires firms to train all in-scope staff — not just Senior Managers. Limited Scope firms sometimes focus training exclusively on their SMF holders and neglect the broader workforce obligation. The FCA has been clear that this is a conduct rules breach in itself.

SMCR Reform and Limited Scope Firms

The FCA’s ongoing SMCR reform programme has focused primarily on the regime as it applies to banks and dual-regulated firms. The changes confirmed in the FCA’s 2024 and 2025 policy statements are largely directed at Core and Enhanced firms. However, Limited Scope firms should monitor the programme closely — the government’s wider review of the SMCR for non-bank firms may produce further changes affecting the Limited Scope tier specifically.

See our companion post on SMCR Phase 1 Reform 2026: what the FCA’s policy statement actually changes for a detailed breakdown of the current reform picture.

How FD Capital Helps Limited Scope Firms

FD Capital specialises in placing senior finance and compliance professionals into FCA-regulated businesses. For Limited Scope firms, the most common requirements we fulfil are:

• SMF16 (Compliance Oversight): Fractional and interim compliance leads for firms that need experienced oversight without a full-time appointment — available from two days per week
• SMF17 (MLRO): Qualified MLROs with FCA-regulated firm experience, including for firms requiring an MLRO as a condition of their permission — see our MLRO recruitment service
• SMF3 (Executive Director / CFO): Senior finance appointments where the individual will carry SMF3 accountability — see our fractional CFO service for how this works in practice
• Compliance and risk staffing below SMF level: Through our risk and compliance recruitment team

For a broader discussion of SMCR obligations and how they interact with your firm’s hiring strategy, contact our FCA regulated firm recruitment team or visit our main SMCR guide.

Related Reading

For further detail on the SMCR framework: SMCR Guide | SMCR vs the Approved Persons Regime | SMCR Phase 1 Reform 2026 | Interview Questions for Senior Managers | FCA Conduct Rules Guide | Individual Conduct Rules | Senior Manager Conduct Rules | Certification Regime Guide | SMF16 Guide | SMF17 MLRO Guide | FCA Regulated Firm Recruitment