SMF10–13 Committee Chair Functions: A Guide

The SMF10 to SMF13 functions designate the chairs of the four principal board committees at enhanced SMCR firms — bringing each committee chair within the personal accountability framework of the Senior Managers Regime and requiring individual FCA approval before they can perform their role.

Board committees are a critical element of governance at enhanced SMCR firms. The audit, risk, remuneration and nominations committees each perform a distinct oversight function that would otherwise be discharged — or not discharged adequately — by the full board. The SMCR recognises this by designating the chair of each committee as a Senior Manager: the individual who leads the committee’s work carries personal accountability for the adequacy of that work, not merely the committee as a collective body.

Which Firms Must Designate SMF10–13?

The SMF10 to SMF13 functions apply to enhanced SMCR firms. For core SMCR firms, the committee chair functions are not prescribed — their chairs operate under the Certification Regime and the Conduct Rules rather than the Senior Managers Regime. Whether a specific enhanced firm must have all four committees — and therefore all four committee chair SMFs — depends on the firm’s sector, its size and its governance obligations. UK banks and investment firms above certain thresholds, for example, are subject to governance requirements under the Capital Requirements Directive that require separate audit and risk committees as a matter of law.

Where an enhanced firm has a committee but the same individual chairs multiple committees — for example, the same non-executive director chairs both the audit and risk committees — that individual holds multiple SMFs simultaneously. Each SMF carries its own Statement of Responsibilities and is subject to independent FCA approval.

SMF10 — Chair of the Audit Committee

The SMF10 function attaches to the chair of the board’s audit committee. The audit committee at an FCA-regulated firm is responsible for: overseeing the integrity of the firm’s financial reporting; reviewing the effectiveness of internal controls and risk management systems (alongside the risk committee where one exists); overseeing the relationship with external auditors including their appointment, independence and the scope of their work; and overseeing the firm’s internal audit function and its relationship with the SMF5 Head of Internal Audit.

The SMF10 holder’s personal accountability focuses on the adequacy of the committee’s oversight — not the accuracy of the financial statements themselves, which is an executive accountability. The FCA’s reasonable steps expectation for an SMF10 holder includes ensuring the committee has adequate information to discharge its functions, that it provides genuine challenge to management and auditors, and that significant issues identified are escalated to the full board and addressed by management.

SMF11 — Chair of the Risk Committee

The SMF11 function attaches to the chair of the risk committee. The risk committee oversees the firm’s risk appetite, risk governance framework and the adequacy of the risk management function. At firms with a Chief Risk Officer (SMF4), the risk committee is the primary governance body through which the CRO’s work is reviewed and the firm’s risk profile is assessed by independent non-executives.

The SMF11 holder is accountable for the effectiveness of the risk committee’s oversight — including the quality of risk information presented to the committee, the robustness of the committee’s challenge of the firm’s risk appetite and risk management arrangements, and the adequacy of the committee’s engagement with the SMF4 and the compliance function on material risk matters. Where the audit and risk committee functions are combined — as is common at smaller enhanced firms — the same individual holds both SMF10 and SMF11.

SMF12 — Chair of the Remuneration Committee

The SMF12 function attaches to the chair of the remuneration committee. The remuneration committee oversees the firm’s remuneration policy — including the structure of variable remuneration for senior managers and material risk-takers, the application of malus and clawback provisions, and the overall adequacy of remuneration arrangements in the context of the firm’s risk management framework.

Remuneration governance is a significant area of FCA supervisory focus. The FCA’s remuneration codes — applicable to different firm categories — require that variable remuneration is structured to avoid creating incentives that conflict with sound risk management or with the interests of clients. The SMF12 holder is accountable for ensuring the remuneration committee’s decisions are consistent with these requirements and that the committee has adequate information about the firm’s risk profile when making remuneration determinations.

SMF13 — Chair of the Nominations Committee

The SMF13 function attaches to the chair of the nominations committee. The nominations committee oversees board composition, succession planning and the fitness and propriety of proposed board and senior management appointments. At enhanced SMCR firms, the nominations committee plays a particularly important role in managing the SMF approval pipeline — ensuring that proposed senior manager appointments are identified with sufficient lead time to allow the FCA approval process to be completed before the individual begins their function.

The SMF13 holder is accountable for the adequacy of the nominations process — including whether the committee applies a thorough assessment of fitness and propriety, whether diversity and skills balance are considered in the context of the board’s overall composition, and whether succession plans are in place for all key SMF roles. Inadequate succession planning that results in SMF vacancies — particularly at a time of business stress — is a governance failure that can attract FCA supervisory attention.

The Relationship with SMF9

The SMF9 Chair of the Governing Body and the committee chair functions are distinct but closely related. The SMF9 holder’s accountability is for the effectiveness of the full board’s governance; the SMF10–13 holders’ accountability is for the effectiveness of their respective committees. Where the board chair also chairs a committee — which is not recommended as a matter of governance best practice but does occur, particularly at smaller firms — they hold the relevant committee chair SMF in addition to SMF9.

FCA Approval and Statements of Responsibilities

Each committee chair must be approved by the FCA before performing their SMF function. The approval process follows the standard Form A procedure. The SUP 10C requirements apply in full: the individual’s fitness and propriety is assessed, a Statement of Responsibilities must be prepared for each SMF held, and a regulatory reference from any relevant previous employer must be obtained.

Statements of Responsibilities for committee chairs should clearly describe: the scope of the committee’s mandate; the SMF holder’s accountability for the adequacy of the committee’s oversight; the committee’s relationship with the full board; and any specific areas of the firm’s activities for which the committee and its chair have particular responsibility.

Key References

• FCA Handbook SUP 10C — Senior Managers Regime for FCA-authorised firms
• FCA — Senior Managers and Certification Regime
• FCA FG20/1 — Guidance on the responsibilities of board members