Senior Managers Regime — definition for UK financial services

Senior Managers Regime (Senior Managers Regime (SMR))

The Senior Managers Regime (SMR) is the element of SM&CR that applies to the most senior decision-makers in a regulated firm. It requires FCA or PRA pre-approval for individuals performing a Senior Management Function, a Statement of Responsibilities for each, allocation of Prescribed Responsibilities, and imposes a statutory duty of responsibility.

The Senior Managers Regime (SMR) is the first of the three pillars of the Senior Managers and Certification Regime (SM&CR), and it targets the individuals with the greatest influence over a regulated firm. Anyone performing a Senior Management Function (SMF) must obtain FCA or PRA approval before taking up the role, and remains subject throughout to enhanced accountability requirements. The regime is designed so that responsibility for every key area of a firm can be traced to a named, approved individual.

Statements of Responsibilities and Prescribed Responsibilities

Each senior manager must have a Statement of Responsibilities (SoR), required by section 60(2A) of FSMA 2000, setting out exactly what they are accountable for. Firms must also allocate a defined list of Prescribed Responsibilities (specific regulatory responsibilities, such as performance of the firm’s obligations under the Certification Regime) among their senior managers. Enhanced firms must additionally maintain a responsibilities map showing how responsibilities are allocated across the management body, leaving no gaps or unclear overlaps.

The duty of responsibility

The defining feature of the SMR is the statutory duty of responsibility in section 66A(5) of FSMA. If a firm breaches a regulatory requirement, a senior manager responsible for the relevant area can face personal enforcement action unless they took the steps a person in their position could reasonably be expected to take to avoid the breach. The FCA must prove that failure, but the regime focuses minds at the top of regulated firms.

Who it applies to

The SMR applies to individuals holding SMFs across all SM&CR firms, with the number and type of SMFs scaled by firm category: enhanced, core or limited-scope.

SM&CR, Senior Manager Function and Conduct Rules.

Frequently asked questions

What is the Senior Managers Regime?

The Senior Managers Regime (SMR) is the part of SM&CR covering individuals in the most senior roles, known as Senior Management Functions (SMFs). Anyone performing an SMF must be approved by the FCA or PRA before starting, must have a Statement of Responsibilities setting out what they are accountable for, and is subject to the duty of responsibility. Enhanced firms must also maintain a firm-wide responsibilities map and allocate Prescribed Responsibilities.

What is the duty of responsibility?

Under section 66A(5) of FSMA 2000, a senior manager can be held personally accountable if a firm breaches a regulatory requirement in an area for which they were responsible and they did not take such steps as a person in their position could reasonably be expected to take to avoid the breach. The FCA bears the burden of proving the senior manager failed to take reasonable steps.

What is a Statement of Responsibilities?

A Statement of Responsibilities (SoR) is a single document required by section 60(2A) of FSMA 2000 that sets out the aspects of the firm's affairs a senior manager is responsible for managing. It must be submitted with the SMF approval application and resubmitted whenever there is a significant change. Together with the firm's responsibilities map, the SoR makes individual accountability transparent to the regulator.