As regulatory reform takes shape through CP25/21, now is the time to modernise SM&CR, not walk away from it.
Rebuilding trust, not just rewriting rules
When SM&CR was first introduced in the wake of the 2008 financial crisis, it wasn’t just another compliance tool—it was a direct response to the cultural and accountability failures that had eroded public trust in the financial sector.
At its heart, SM&CR is about one thing: restoring confidence in the people who lead financial services firms.
Over the years, as it expanded from banks to solo-regulated firms, that core mission has held steady. And it’s worked. Most stakeholders—from regulators to firm leadership—agree that SM&CR has brought real value by:
- Clarifying roles and responsibilities
- Strengthening senior accountability
- Fostering a more joined-up culture of risk and ethics
CP25/21: Regulatory evolution, not revolution
Enter CP25/21 and CP18/25–the FCA and PRA’s response to industry feedback and HM Treasury’s 2023 Call for Evidence. These consultations are an extension of the broader Edinburgh Reforms, aimed at making the UK’s financial regulatory framework more growth-oriented, agile, and fit for the future.
But here’s the key takeaway: The reforms aren’t about dismantling SM&CR. They’re about modernising it.
Key changes proposed include:
- More flexibility in the 12-week rule, giving firms breathing space to fill senior vacancies
- Streamlining certification roles, cutting overlap and admin by up to 15%
- Simplified fitness and propriety checks, to match actual risk
- Clearer guidance on “reasonable steps” and Statements of Responsibilities (SoRs)
These smart, proportionate updates aim to reduce unnecessary burdens while keeping the core principles of accountability and governance intact.
Evidence over assumptions: Governance in a measurable world
In our work supporting firms with governance and compliance, one theme is constant: intent is no longer enough to stand up to regulatory scrutiny—firms must collect, collate and provide evidence of measures and methods used to meet regulatory standards.
With increasing regulatory focus on conduct and culture—especially under SM&CR and the Consumer Duty—ambiguity around responsibilities or “reasonable steps” doesn’t just create operational risk; it weakens a firm’s ability to stand up to scrutiny.
Effective governance today is about disciplined execution and transparent accountability.
The proposed reforms offer an opportunity – and arguably a requirement – to embed stronger, more consistent governance. When firms can demonstrate who was responsible, what they did, when they did it, and how decisions were made, they not only meet regulatory expectations – but they also build stronger leadership and reduce risk.
Conclusion: A stronger, smarter SM&CR
CP25/21 isn’t about softening standards—it’s about making a good regime better.
It gives firms room to grow, innovate and respond to change, without losing sight of the need for strong governance and accountability.
And that leads on nicely to the next blog in our series, where we’ll explore one of the most powerful (and sometimes overlooked) enablers of effective SM&CR: Training & Competence—and how it works hand-in-hand with Consumer Duty and cultural values to deliver real business and customer outcomes.
Stay tuned for Part 2: “The role of training and competence in making SM&CR work”
Want to be notified when it’s published? Subscribe or follow us for updates.
Want to know more about how the latest RegTech solutions support a smarter and future proofed approach to SM&CR, managing and evidencing Governance.