SMF Appointments During FCA Authorisation: The Process

Individual SMF approvals run in parallel with the firm’s authorisation application but follow their own process and timeline — and delays in getting the right people approved are one of the most consistent causes of applications overrunning.

Under the Senior Managers and Certification Regime, every individual proposed to hold a Senior Manager Function at an FCA-regulated firm must be individually approved by the FCA before they can perform that function. For a firm going through its initial authorisation, this means the SMF approval applications for the founding management team must be submitted and determined before the firm can begin regulated activity — and the FCA will typically not grant the firm’s own authorisation until it is satisfied that all required SMF holders are fit and proper.

Which SMFs Are Required at Authorisation?

The minimum SMF requirements at authorisation depend on the type of firm and the activities it intends to carry on. For most solo-regulated FCA firms, the required functions at launch include: SMF1 (CEO or equivalent — the individual with overall management responsibility), SMF16 (Compliance Oversight — the individual accountable for FCA compliance), and SMF17 (MLRO — the Money Laundering Reporting Officer, required where the firm is subject to the Money Laundering Regulations). Depending on the firm’s size and structure, additional functions — SMF2 (CFO), SMF4 (CRO), SMF24 (COO) — may also be required or appropriate.

The FCA does not require every SMF to be held by a separate individual. At small firms it is common for the CEO to hold SMF1 and the compliance officer to hold both SMF16 and SMF17, with the CEO also holding SMF29 (the limited-scope function for smaller firms). What the FCA does require is that all functions relevant to the firm’s activities are covered, and that the individuals holding them have the capability and capacity to perform them adequately given the firm’s size and complexity.

The Form A Application

Individual SMF approval applications are made using Form A — the FCA’s standard application form for senior manager approvals. Form A requires disclosure of the individual’s: personal details and identity; employment history for the previous five years; regulatory history — including any previous FCA approvals, any refusals, withdrawals or regulatory sanctions; criminal record — including any spent convictions that the applicant is obliged to disclose; civil proceedings history relevant to financial conduct; and financial soundness — including any county court judgments, insolvency events or outstanding financial obligations.

Form A also requires the applicant to confirm their understanding of the SMCR obligations — the Conduct Rules, the reasonable steps requirement and the personal accountability that attaches to the SMF function they are seeking. The FCA treats Form A disclosures seriously: incomplete or inaccurate disclosure — even where the matter disclosed might not have prevented approval — is itself a fitness and propriety concern.

Statements of Responsibilities

Each SMF application must be accompanied by a Statement of Responsibilities — the document that defines what the individual will be accountable for at the firm. The SoR must be specific enough to allow the FCA to assess whether the individual has the capability to discharge those responsibilities, and to provide a clear allocation of accountability in any future enforcement context.

Drafting effective Statements of Responsibilities is one of the most commonly underestimated tasks in the authorisation process. Firms frequently submit SoRs that are too generic — describing high-level oversight without identifying the specific activities and decisions within the individual’s remit. The FCA will query SoRs that it considers inadequate, and the resulting back-and-forth extends the determination timeline. It is worth investing time in SoR drafting at the outset: the SoR is a live document that must be maintained throughout the firm’s authorised life, and a well-structured initial SoR makes ongoing maintenance easier.

Regulatory References

For individuals who have worked at other regulated firms in the previous five years, the FCA requires a regulatory reference — a structured disclosure from the previous employer covering whether the individual has been subject to any regulatory action, disciplinary action for conduct matters, or any finding relevant to fitness and propriety. The obligation to provide regulatory references rests on the previous employer, not the applicant.

Regulatory references take time to obtain. Some regulated firms — particularly large firms with significant compliance and HR infrastructure — have established processes for handling reference requests promptly. Others are slower, particularly where the individual left on difficult terms or where the reference request triggers a complex internal process. Firms seeking authorisation should initiate the regulatory reference process as early as possible — ideally before the formal application is submitted — to avoid this becoming a bottleneck in the SMF approval process.

Where a previous employer fails to provide a reference within a reasonable timeframe, the FCA may be prepared to proceed with the application on the basis of available information. However, this is typically only agreed on a case-by-case basis and adds complexity to the process. Documenting the steps taken to obtain the reference, and providing that documentation to the FCA proactively, is important in these situations.

Sequencing SMF Approvals with the Firm Application

The most efficient approach is to submit the firm authorisation application and the individual SMF approval applications simultaneously. The FCA processes them in parallel: the case officer for the firm application coordinates with the team assessing individual SMF approvals, and any queries raised about the firm’s management structure feed into the individual assessments and vice versa.

A common mistake is to submit the firm application before the proposed SMF holders are identified or before their Form A applications are ready to submit. This creates an artificial delay: the FCA assesses the firm application and identifies gaps in the management team that require resolution before it can proceed, and the firm then scrambles to identify suitable candidates under time pressure. The risk of this approach is compounded by the regulatory reference timeline: a candidate identified late in the process may not have their reference available for several weeks after their Form A is submitted.

What the FCA Assesses in Individual SMF Approvals

The FCA’s fitness and propriety assessment covers three dimensions. Honesty, integrity and reputation — assessed primarily through Form A disclosures and regulatory references, and focusing on any history of regulatory or disciplinary action, dishonest conduct, or adverse civil findings. Competence and capability — assessed by reference to the individual’s experience and qualifications for the specific SMF function they are seeking, their understanding of the regulatory environment, and whether they have the practical capability to perform the role effectively. Financial soundness — assessed by reference to any county court judgments, insolvency events or financial difficulties that could affect the individual’s judgment or create conflicts of interest in their SMF role.

For the compliance officer (SMF16) and MLRO (SMF17), the competence and capability assessment is particularly focused. The FCA expects the compliance officer to have genuine regulatory knowledge of the framework applicable to the firm’s activities, not merely general compliance experience. The MLRO must have specific AML knowledge and practical experience of the DAML process and suspicious activity reporting. Individuals proposed for these functions without adequate sector-specific knowledge consistently attract queries.

Using Interim or Fractional SMF Holders

Where the firm’s permanent SMF candidates will not be available by the intended authorisation date — because they are serving notice periods at current employers or because a permanent search is still in progress — interim or fractional SMF holders offer a practical solution. An experienced compliance officer or MLRO placed on a fractional basis can hold the SMF16 and SMF17 functions from authorisation while the firm’s permanent hire is identified and their own FCA approval obtained. The FCA is accustomed to this approach and it does not create any structural issue with the firm’s governance, provided the interim holder has the required experience and the transition to the permanent holder is managed with an adequate handover process.

Key References

• FCA — Senior Managers Regime: approvals guidance
• FCA Handbook SUP 10C — Senior Managers Regime
• FCA Connect — for submitting Form A applications