SMF16 or SMF17 resigned? What to do in the first 12 weeks

SMF16 or SMF17 resigned?

A resignation from your Head of Compliance or Money Laundering Reporting Officer is one of the most disruptive events an FCA-regulated firm can face. The SMF16 Compliance Oversight and SMF17 Money Laundering Reporting functions are required functions at Core and Enhanced firms, and the FCA expects them to be filled continuously. Suspicious activity reports still have to be made. Compliance monitoring still has to run. Regulatory deadlines do not pause while you recruit.

The FCA’s 12-week rule exists for exactly this situation. It lets a firm put a suitable individual into a senior management function to cover an absence without that person first being approved. In April 2026 the FCA reformed the rule, and it is now more practical than it was. This page explains how the rule works today, what you must notify and when, the realistic options for cover, and how to run the interim and permanent searches in parallel so that you are never without a credible SMF16 or SMF17.

FD Capital recruits interim, fractional and permanent SMF16 and SMF17 holders for FCA-regulated firms, and every search is led personally by Adrian Lawrence FCA. If your Head of Compliance or MLRO has just resigned, call 020 3287 9501 or use our contact page. For interim and fractional cover we aim to have a shortlist with you within 48 to 72 hours.

How the 12-week rule works after the 2026 reforms

The rule was formerly found at SUP 10C.3.13R. Following the FCA’s SM&CR review policy statement (PS26/6), it now sits in the new section SUP 10C.3A of the FCA Handbook, and the changes took effect on 24 April 2026.

What has changed. Under the old rule, a firm had 12 weeks in which to apply for and obtain approval for a replacement. Because approval can take up to three months, the window was often too short, and firms ended up either rushing a candidate through or leaving a function uncovered. Under the reformed rule, a firm has 12 weeks to submit an application. Once a valid and complete application is in, the individual covering the role can continue until the FCA determines it. A firm can also withdraw an application within the window and replace it with another.

What has not changed. The rule is still for covering an absence that is temporary or reasonably unforeseen. A sudden resignation is the classic case. A retirement you have known about for a year, or a vacancy left open for convenience, is not what the rule is designed for, and the FCA has said it expects firms to use the rule on a limited basis and to rely on good succession planning in most cases. PS26/6 added Handbook examples that illustrate appropriate use and misuse.

The person covering is still accountable. An individual covering an SMF under the 12-week rule is now treated as a senior conduct rules staff member, so the Senior Manager Conduct Rules apply to them. Breaches must be reported to the FCA under SUP 15 as soon as practicable. The firm must also be satisfied that the person is fit and proper. The assessment can take into account that they will be in post for a limited period, but it cannot be skipped. Our fit and proper guide sets out what that involves.

For a broader look at the rest of the reform package, see our article on what the SM&CR Phase 1 reforms actually change.

Your notification and documentation obligations

A departing senior manager triggers several obligations that run alongside the search for cover.

• Form C. Notify the FCA that the individual has ceased to perform the function, within seven business days of them ceasing. Good practice is to tell your supervisor earlier, as soon as the departure is known.
• Prescribed responsibilities. Any prescribed responsibilities held by the departing SMF16 or SMF17 must be reallocated, and the relevant Statements of Responsibilities updated. Under PS26/6, SMF18 holders at solo-regulated firms can now hold any prescribed responsibility, which gives smaller firms more flexibility.
• Management responsibilities map. Enhanced firms must update their map to reflect the change.
• Directory. Update the FCA Directory. Departures must be reported within seven business days.
• Regulatory references. You will need references for the replacement, and you must provide one for the departing individual when their next firm asks. PS26/6 shortened the deadline for providing references from six weeks to four.
• Handover. Secure a documented handover before the individual leaves. Our article on senior manager handover best practice lists what it should contain.

A practical timeline

Your options for cover

Reallocate to an existing senior manager

The quickest option is to ask an existing approved senior manager to cover. It works where that person has the relevant expertise and capacity. It is risky where it concentrates accountability. A CEO covering SMF16, for example, removes the independent challenge that compliance oversight exists to provide, and a CFO covering SMF17 may not have the financial crime depth the role needs. Consider the conflicts carefully and record your reasoning.

Promote a deputy

If you have a capable deputy Head of Compliance or deputy MLRO, the 12-week rule lets them step up straight away, and you can then apply for their approval if they prove themselves in the role. This is succession planning working as intended. Firms without a deputy should treat a resignation as the prompt to create one.

Bring in an interim SMF16 or SMF17

An experienced interim who has held the function before can take the seat within days, steady the function and give the FCA confidence. Many interims we place have held SMF16 or SMF17 approvals at several firms. The interim can cover while you recruit permanently, or can be the subject of the Form A application if the permanent search will run beyond 12 weeks. See our compliance recruitment and MLRO recruitment pages.

Appoint a fractional holder

For smaller firms, a fractional Head of Compliance or MLRO working one to three days a week can provide senior cover at a sustainable cost, and may become the permanent answer. The FCA will expect the time commitment to match the firm’s size and risk. Our article on outsourcing the MLRO function covers where this works and where it does not.

Why an SMF17 vacancy is more urgent than most

Every SMF vacancy matters, but an MLRO vacancy has an immediate operational consequence. Under the Proceeds of Crime Act 2002 and the Money Laundering Regulations 2017, your firm must have a nominated officer to receive internal suspicious activity reports and to decide whether to report to the National Crime Agency. Defence against money laundering requests are time-sensitive. If nobody with the authority and knowledge to make those decisions is in place on the day your MLRO leaves, the firm is exposed from that day.

Practical steps: confirm the deputy MLRO or cover individual has access to the firm’s SAR reporting arrangements with the National Crime Agency, review open investigations and pending reports during the handover, and make sure staff know who to report to. Our SMF17 guide and MLRO guide explain the role in full.

Combined SMF16/17: lose one person, lose two functions

At many smaller firms one individual holds both SMF16 and SMF17. When they resign, the firm loses both functions at once. That is the scenario where interim cover is most valuable. The firm may decide to cover both functions with one experienced interim, or to use the vacancy as a chance to split them. Splitting can strengthen the function but takes longer to recruit, and the 12-week clock applies to each. Our guides to SMF16 and the impact of the Consumer Duty on SMF16 help frame the decision.

Does the 12-week rule apply to your firm?

• Core and Enhanced SM&CR firms: yes, and SMF16 and SMF17 are required functions where the Money Laundering Regulations apply.
• Limited Scope firms: the rule applies to their senior management functions, which may be SMF29 only, or SMF16 and SMF17 depending on the firm type. See our guide to SM&CR for Limited Scope firms.
• Dual-regulated firms: the PRA has made equivalent changes for the functions it designates. Check the PRA’s rules for PRA-designated functions.
• Payment institutions and e-money institutions authorised only under the payments regulations are outside SM&CR, so the SMF designations and the 12-week rule do not apply. They must still keep a nominated officer in place and notify the FCA of changes to the individuals responsible for management. See our payments compliance recruitment page.

When the resignation comes at a difficult moment

Compliance and MLRO resignations often cluster around periods of regulatory pressure: a voluntary requirement, a skilled person review, a supervisory visit or an enforcement investigation. Cover in those circumstances has to satisfy the FCA as well as the board. Exec Capital’s guide to interim SMF16 and SMF17 cover during an FCA VREQ covers that scenario in detail.

Sector also matters. A consumer credit lender needs cover with CONC and collections experience; see our consumer credit compliance recruitment page. A wealth manager needs someone who understands suitability and client assets; see wealth management compliance recruitment. A cryptoasset firm needs someone who understands the new FSMA regime; see cryptoasset compliance recruitment.

How FD Capital helps when an SMF16 or SMF17 resigns

Two searches, one brief. We run the interim and permanent requirements together from the first call, so that the interim can hand over cleanly and the permanent appointee is ready for Form A within the window.

Speed where it counts. For interim and fractional cover we aim to put a shortlist in front of you within 48 to 72 hours. In our experience, that is the window in which the best interim candidates are still available.

Approval-ready candidates. We check SMF history on the FCA Financial Services Register, raise reference issues early, and prepare candidates for FCA interviews. Our guide to how long SMF approval takes helps you plan the timetable.

Sector depth. We recruit SMF16 and SMF17 holders across consumer credit, payments, wealth management, insurance, cryptoassets and investment firms, through our SM&CR compliance recruitment practice.

Frequently asked questions

Can the person covering under the 12-week rule hold the role for longer than 12 weeks?

Yes, provided the firm submits a valid and complete application within the 12 weeks. Since 24 April 2026 the individual can then continue until the FCA determines the application.

Does the cover individual need to be approved?

Not while they are covering under the rule. The firm must still be satisfied that they are fit and proper, and they are subject to the Senior Manager Conduct Rules for the period of cover.

Can our CEO cover the SMF16 role?

Technically it is possible, but it concentrates accountability and removes independent challenge. The FCA is likely to question it, particularly at a firm under supervisory pressure. A deputy, an interim or a fractional holder is usually a better answer.

When do we need to tell the FCA our SMF17 has left?

Form C must be submitted within seven business days of the individual ceasing to perform the function. Most firms also tell their supervisor informally as soon as the resignation is known.

Can we apply for the interim rather than the permanent candidate?

Yes. If the permanent search will take longer than 12 weeks, the FCA’s policy statement recognises that the application can be for an interim candidate.

How quickly can you provide an interim Head of Compliance or MLRO?

For interim and fractional mandates we aim to have a shortlist with you within 48 to 72 hours of a full brief. Start dates depend on the candidate’s availability, but experienced interims are often able to start within one to two weeks.