The Chief Risk Officer role at a challenger bank or dual-regulated financial institution carries a set of demands that do not exist at FCA solo-regulated firms or at non-regulated businesses. Dual regulation by the FCA and PRA means the CRO must maintain constructive supervisory relationships with two regulators simultaneously, each of which has distinct priorities and supervisory approaches. The PRA’s prudential focus — on capital adequacy, credit quality, operational resilience, and the firm’s ability to withstand stress scenarios — sits alongside the FCA’s conduct focus on customer outcomes, market integrity, and the firm’s treatment of retail clients. The CRO must be credible in both registers.

At challenger banks specifically, the CRO appointment carries additional complexity. Challenger banks are typically at earlier stages of regulatory maturity than their established banking peers — their risk frameworks are still being built, their supervisory relationships are being established, and their risk culture is being formed under conditions of rapid commercial growth. The CRO at a challenger bank is not simply managing a mature risk framework. They are building one, often under time pressure and in a commercial environment where growth ambitions create significant internal pressure to accept risk that the regulatory framework may not permit.

The PRA’s Expectations of the CRO at a Dual-Regulated Firm

The PRA’s supervisory approach to the CRO function at banks and insurers is more intensive than the FCA’s approach at solo-regulated firms. The PRA’s supervisory statements on risk management governance set out specific expectations for the CRO’s role — including that the individual has direct access to the board and the PRA, that they have genuine authority to challenge business decisions that exceed the firm’s risk appetite, and that their remuneration is structured to support independence from the business lines they oversee rather than creating financial incentives to align with commercial outcomes.

The PRA pays close attention to the CRO’s appointment at significant banks and insurers, and for CEO, CFO and CRO appointments at complex firms, a PRA regulatory interview is a standard part of the approval process rather than a discretionary one. The interview focuses specifically on the candidate’s understanding of the firm’s prudential risk profile — their knowledge of the credit book, capital model, funding structure, and the specific regulatory capital requirements that apply to the firm’s activities. A CRO candidate who has strong conduct risk credentials but limited experience of prudential risk management will face significant scrutiny in a PRA interview, and the outcome may affect the firm’s supervisory relationship with the regulator if the appointment proceeds with residual concerns unaddressed.

Challenger Bank CRO: The Build vs Manage Distinction

One of the most important questions in a challenger bank CRO search is whether the firm needs a risk builder or a risk manager. These are genuinely different profiles, and the best risk managers are not always the best risk builders — and vice versa.

The risk builder profile is appropriate for challenger banks at early regulatory maturity stages — firms that need to establish their risk appetite framework, build their credit risk assessment methodology, create their operational risk and control environment, and develop the management information and reporting infrastructure that will allow the board to oversee the firm’s risk position meaningfully. The risk builder candidate typically has experience of standing up risk functions from scratch, of navigating the PRA’s model approval and Internal Capital Adequacy Assessment Process (ICAAP) requirements for the first time at a growing firm, and of managing the PRA supervisory relationship during the critical period when a challenger bank’s risk infrastructure is being evaluated against the regulatory standard for the first time.

The risk manager profile is appropriate for challenger banks that have built their core risk infrastructure and need sustained operational excellence in risk oversight. The risk manager candidate has deep expertise in running a mature risk function — managing credit concentrations, monitoring the firm’s risk appetite utilisation on an ongoing basis, chairing the risk committee effectively, and maintaining the PRA’s confidence in the firm’s risk management quality over multiple supervisory cycles. The two profiles overlap, but the balance between strategic infrastructure building and operational risk management capability is different, and appointing a risk manager profile when the firm needs a builder, or a builder profile when the firm needs a manager, produces predictable and avoidable governance problems.

The ICAAP and ILAAP: CRO Accountability at Challenger Banks

The Internal Capital Adequacy Assessment Process (ICAAP) and the Internal Liquidity Adequacy Assessment Process (ILAAP) are among the most significant regulatory deliverables for any PRA-regulated bank, and the CRO’s role in both is central. The ICAAP requires the bank to demonstrate to the PRA that it has identified all material risks, assessed its capital requirements under a range of stress scenarios, and maintains a capital buffer adequate to absorb those stressed losses. The ILAAP requires a parallel assessment for liquidity risk. Together, the two documents are the primary mechanism by which the PRA evaluates whether the bank is managing its prudential risks adequately.

For a challenger bank CRO, responsibility for the ICAAP and ILAAP is one of the most demanding aspects of the role. The PRA reviews these documents intensively and will challenge the bank’s stress assumptions, model methodology, and conclusions where it believes the firm’s self-assessment is too optimistic. A CRO who cannot defend the ICAAP to the PRA in a Supervisory Review and Evaluation Process (SREP) meeting — who cannot articulate the firm’s credit concentration analysis, explain the capital model’s key assumptions, or engage credibly with the PRA’s questions about the firm’s liquidity risk management — is creating a supervisory relationship problem that the bank’s senior leadership will find difficult to manage.

The SMF4 Approval Process at Challenger Banks: PRA and FCA Dimensions

SMF4 approval at a dual-regulated bank requires approval from both the PRA and the FCA. The two regulators assess the candidate against their respective supervisory priorities — the PRA against prudential risk management capability and the FCA against conduct risk oversight. For most CRO candidates at challenger banks, the PRA assessment is the more intensive and the more likely to involve a regulatory interview.

The combined PRA/FCA approval process typically takes longer than FCA-only approval. A realistic timeline for a CRO appointment at a growing challenger bank — accounting for the more intensive PRA assessment of a building-stage institution — is twelve to twenty weeks from Form A submission to approval. Boards should build this timeline into the search process from the outset, with interim risk coverage arrangements confirmed before the search begins rather than addressed reactively when the vacancy arises.

The regulatory references required for the Form A submission add complexity for CRO candidates who have worked at multiple regulated firms over the previous six years, which is typical for senior risk professionals with the career progression profile the PRA expects. Managing the collection and review of multiple regulatory references simultaneously, in a way that allows the board to understand their full content before submitting the Form A, requires dedicated process management that Exec Capital provides as part of every regulated firm search.

What the Challenger Bank CRO Profile Looks Like

The candidate profile for a challenger bank CRO appointment combines elements that are individually not rare but whose combination is genuinely scarce. Banking prudential risk expertise — direct experience of credit risk management, capital framework oversight, and ICAAP/ILAAP responsibility — is the technical threshold. Without it, the candidate will not pass the PRA’s approval assessment and will not have credibility with either the PRA supervisory team or the bank’s risk function.

Challenger bank or high-growth environment experience — having operated in a context where the commercial growth agenda creates persistent pressure on the risk function, where the risk infrastructure is being built or improved under time pressure, and where the CRO must balance the regulatory requirement for independence with the commercial reality of being part of a leadership team trying to build a competitive banking business. Candidates whose entire risk career has been at large, established banks may find the challenger bank environment, with its higher volatility and more intense commercial pressure, significantly different from what they have experienced.

PRA supervisory relationship experience — having managed the PRA relationship as the named CRO, including SREP meetings, capital dialogue, and the management of supervisory concerns where they have arisen. This experience is a significant differentiator among challenger bank CRO candidates because it cannot be easily developed in a second-line advisory role — it requires having been the individual in the room when the PRA is challenging the bank’s risk assessment, and having managed that interaction successfully.

Working with Exec Capital

Exec Capital places Chief Risk Officers at challenger banks and dual-regulated financial institutions — permanent and interim, with a specific understanding of the PRA/FCA dual approval process and the prudential risk management capability requirements that distinguish the CRO role at regulated banks from the same function at other firm types. Call Adrian Lawrence FCA on 0203 834 9616 to discuss your CRO search.

The CRO’s Role in Capital Planning at Growing Banks

Capital planning is one of the most consequential dimensions of the CRO’s role at a challenger bank, and it is one where the tension between commercial ambition and regulatory prudence is most directly felt. A growing bank that is expanding its loan book, launching new products, or entering new markets is consuming regulatory capital at a rate that requires continuous forward planning to ensure the bank maintains adequate buffers above its minimum capital requirements. The CRO is responsible for ensuring that the board and the PRA have a clear and honest assessment of the bank’s capital position under both base case and stress scenarios — and for escalating concerns when the commercial growth plan would result in capital consumption that the bank’s current capital base cannot comfortably absorb.

At challenger banks that are pre-profitability or in the early stages of profitability, capital planning is complicated by the limited internal capital generation available to fund growth. The CRO must balance the commercial case for continued growth investment against the prudential requirement to maintain capital adequacy — and must be prepared to present an honest view to both the board and the PRA, including where that view is that the current growth plan is inconsistent with maintaining adequate capital buffers under stress. This is the kind of independent challenge that the SMF4 designation is designed to mandate, and it is precisely the kind of challenge that commercial pressure creates the strongest incentive to avoid.

Managing the PRA Supervisory Relationship as a Challenger Bank CRO

The PRA’s supervisory approach to challenger banks reflects its assessment of the prudential risks specific to early-stage banking businesses — concentrated loan books, limited track record of credit performance through a full credit cycle, funding models that may be less diversified than established banks, and governance frameworks that are still maturing. The CRO at a challenger bank is the primary management interface with the PRA on prudential risk matters, and the quality of that relationship directly affects the bank’s supervisory risk profile and its ability to execute its commercial strategy without regulatory friction.

CROs who build constructive, transparent relationships with the PRA supervisory team — who proactively communicate material risk developments before they appear in regulatory data, who engage substantively with the regulator’s questions about the bank’s risk model, and who demonstrate that the bank’s risk governance is genuinely independent rather than commercially compromised — consistently produce better supervisory outcomes than those whose relationship with the PRA is reactive and information-limited. Building this relationship requires both the personal credibility that comes from a strong technical risk background and the interpersonal skills to manage a supervisory relationship that is inherently asymmetric in the regulator’s favour.

The Chief Risk Officer at an FCA-regulated firm occupies a governance position that is structurally different from every other member of the executive leadership team. Every other C-suite executive — the CEO, CFO, COO, CMO — is accountable for delivering commercial outcomes within the firm’s risk appetite. The CRO is accountable for defining what that appetite is, for ensuring the firm understands and manages its exposure relative to it, and for providing independent challenge when business decisions carry risk that the organisation is inadequately assessing or mispricing. This independence is not a governance preference — at FCA-regulated firms, it is a regulatory requirement.

The governance positioning of the CRO — how the role is structured relative to the CEO, the board, and the Risk Committee — determines whether this independence is real or nominal. A CRO who reports solely to the CEO, whose budget is controlled by the business lines they oversee, and who attends the Risk Committee only by invitation is not structurally positioned to provide independent oversight regardless of their personal capability. Getting the governance positioning right before making the appointment is as important as getting the appointment right.

The SMF4 Designation: What It Adds to the CRO Role

At FCA-regulated firms, the CRO holds the SMF4 designation — the Chief Risk Officer Senior Management Function. The designation requires FCA approval via Form A before the individual can begin exercising their SMF4 responsibilities, imposes the Duty of Responsibility for risk management failures within the CRO’s area of accountability, and requires the individual to maintain a Statement of Responsibilities that accurately describes their specific risk oversight obligations.

The SMF4 designation does not automatically attach to all CRO-equivalent roles at all firms. Some firms have a Head of Risk or Group Risk Director who performs the risk oversight function but is not designated as SMF4 — typically because the firm has assessed that the individual’s role falls within the Certification Regime rather than the Senior Managers Regime. Boards should confirm with their compliance function which specific designation applies to the risk oversight function at their firm type before opening the appointment process, because the regulatory requirements and the approval process differ significantly between the two.

Where the SMF4 designation applies, the CRO is a personally accountable senior manager in the full regulatory sense — not simply a senior executive with risk oversight responsibilities. The personal accountability dimension changes what the role requires of the individual and what the appointment process needs to assess.

Governance Positioning: The CRO’s Reporting Line and Authority

The FCA expects the Chief Risk Officer at a regulated firm to have a reporting line that protects their independence from the business lines they oversee. At most regulated firms, this means the CRO has a primary reporting line to the CEO (to ensure operational integration) and a secondary reporting line directly to the board or the Risk Committee (to ensure governance independence). The secondary reporting line is the structural mechanism by which the board maintains oversight of the risk function independently of the CEO’s filter.

The FCA pays attention to whether this secondary reporting line is genuine or merely documentary. A CRO who attends Risk Committee meetings but whose written reports to the committee are reviewed and edited by the CEO before submission, whose access to the committee Chair is mediated through the CEO’s office, or who is unable to escalate a material risk concern directly to the board without the CEO’s knowledge and consent, does not have a genuine independent reporting line regardless of what the governance documents say.

The board’s role is to actively maintain the CRO’s independence by ensuring that the secondary reporting line is structured and exercised in a way that gives the CRO genuine access to the board, genuine authority to challenge business decisions, and genuine protection from commercial pressure. This requires the Risk Committee Chair (SMF10) to take an active role in managing the CRO relationship — meeting privately with the CRO before formal Risk Committee meetings, ensuring the CRO’s assessment of the firm’s risk position is heard independently of management’s presentation, and being willing to raise governance concerns about the CRO’s independence directly with the Chair and CEO where necessary.

The CRO’s Relationship with the Risk Committee

The Risk Committee is the primary governance body through which the board maintains oversight of the firm’s risk management. The CRO’s relationship with the Risk Committee Chair (SMF10) is one of the most important governance relationships in a regulated firm, and its quality directly affects the board’s ability to perform its regulatory oversight function. A Risk Committee Chair who does not engage proactively with the CRO between meetings — who receives the CRO’s formal committee report without prior discussion, without context, and without the informal briefings that allow genuine engagement with the issues — is not performing the oversight function the board requires.

Best practice for the CRO-Risk Committee Chair relationship includes: regular bilateral meetings between the CRO and the SMF10 Chair outside the formal committee cycle; the CRO’s involvement in setting the committee’s agenda, including the right to raise matters for the committee’s attention without the CEO’s prior approval; private sessions at Risk Committee meetings where the CRO can discuss the risk environment with NEDs without management present; and an agreed escalation protocol for material risk events that gives the CRO a direct path to the committee Chair when immediate governance attention is required.

SMF4 Approval: What the FCA Assesses

The FCA’s assessment of an SMF4 applicant focuses specifically on the individual’s understanding of the risk management obligations of the role and their capability to exercise genuine independence in a commercial environment that may create pressure to minimise risk concerns. The regulatory interview, which is more likely for CRO appointments at complex or higher-risk firms, typically explores: the candidate’s understanding of the firm’s specific risk profile; their approach to managing the tension between risk oversight and commercial relationships; their experience of situations where they have provided challenge that was unwelcome but necessary; and their understanding of the personal regulatory accountability the SMF4 designation carries.

A CRO candidate who cannot describe a specific situation in which they provided material challenge to a business decision — whose risk oversight track record is characterised by alignment with business line conclusions rather than independent assessment — will leave a regulatory interview with a poor impression that affects both the approval decision and the ongoing supervisory relationship. Boards should assess their preferred CRO candidate against this dimension specifically, rather than assuming that technical risk expertise and a positive professional reputation are sufficient to navigate the FCA approval process.

The CRO’s Statement of Responsibilities

The Statement of Responsibilities for an SMF4 holder requires particular care to ensure it accurately reflects the genuine scope of the CRO’s authority and oversight, not simply the formal risk management responsibilities that appear in the job description. A CRO who is accountable for the firm’s risk appetite framework but who does not have the authority to challenge business decisions that threaten to exceed that appetite without CEO approval has a governance accountability that outstrips their actual authority — and an SoR that describes the accountability without reflecting the authority gap creates personal regulatory risk for the individual.

Boards should review the CRO’s Statement of Responsibilities specifically against the question of whether the governance authority documented is consistent with the governance authority actually exercised. Where a gap exists, the resolution is either to expand the CRO’s authority to match the documented accountability, or to revise the SoR to accurately reflect the actual scope of the CRO’s governance role. An SoR that describes accountability beyond the individual’s real authority is not a safeguard — it is a regulatory risk.

Working with Exec Capital

Exec Capital places Chief Risk Officers at FCA-regulated firms — permanent, interim and fractional — including SMF4 approval support and governance positioning advice as part of every assignment. We advise on the CRO’s reporting line structure, Statement of Responsibilities scope, and the regulatory interview preparation process. Call Adrian Lawrence FCA on 0203 834 9616.

The CRO’s Authority to Challenge Business Decisions

One of the most consequential questions in structuring the CRO’s board-level governance positioning is the extent of their formal authority to challenge and, where necessary, block or escalate business decisions that carry risk exceeding the firm’s appetite. At firms with mature risk governance, this authority is typically documented in the risk governance framework and the CRO’s terms of reference — the CRO can formally object to a business decision, require it to be escalated to the Risk Committee, and in extremis to the full board, before it is executed. This formal escalation right is what makes the CRO’s independence meaningful rather than advisory.

At challenger banks and growth-stage regulated firms, the CRO’s formal authority is often less clearly defined — not because the regulatory requirement for independence is absent, but because the governance framework is still being developed and the cultural norms around executive challenge are still being established. A CRO at a growth-stage regulated firm who does not have a documented escalation right — whose ability to challenge a credit or underwriting decision depends on their personal relationship with the CEO rather than on a formal governance mechanism — is in a structurally weaker position than the regulatory framework intends, regardless of how strong their personal risk judgment is.

Boards making a CRO appointment at an early-stage regulated firm should consider the governance positioning question as part of the appointment process — confirming that the risk governance framework is adequate before the CRO takes the role, rather than asking the incoming CRO to negotiate their own governance authority after they arrive. An incoming CRO who must negotiate the terms of their independence with the CEO is not starting the role from the position of strength the SMF4 designation requires.

Interim CRO Coverage at Regulated Firms

When a CRO vacancy arises at a regulated firm — whether through resignation, departure or performance management — the firm faces an immediate regulatory exposure. The CRO function cannot remain unfilled for an extended period without the FCA and PRA (where applicable) taking notice, and the temporary appointment provisions of SUP 10A have a twelve-week maximum that may not accommodate a full permanent search and approval process at a complex regulated firm. Interim CRO coverage from an experienced individual who has previously held the SMF4 designation is frequently the most effective bridge solution — allowing the permanent search to be conducted properly without operational and regulatory pressure.

Exec Capital maintains relationships with experienced risk executives who have held SMF4 designations and who can provide genuine interim CRO coverage at regulated firms. These individuals bring the regulatory credibility and technical risk expertise to engage substantively with the FCA or PRA during the interim period — not simply holding a designation on paper while the permanent search progresses, but providing real risk governance oversight while it does so. Boards that structure the CRO role properly from the outset — with clear reporting lines, documented escalation rights, a genuine secondary reporting line to the board, and a Risk Committee Chair who actively manages the CRO relationship — create the governance conditions in which a strong CRO can succeed. Those that treat the CRO appointment as filling a regulatory requirement without creating the structural authority the function needs will find that even an excellent candidate cannot deliver effective risk governance against a structurally compromised mandate.

The Chair of the Nominations Committee at an FCA-regulated firm holds a designation that is structurally different from the other committee chair functions under SMCR. The SMF13 holder is not primarily accountable for a functional risk or governance domain — they are accountable for the quality of the process by which the firm’s senior leadership and board are selected, developed, and succeeded. In a regulatory framework that places personal accountability on named individuals, the quality of that selection process is not a governance nicety — it is one of the primary determinants of whether the firm will be governed well or badly over time.

Yet the SMF13 appointment frequently receives the least structured attention of any committee chair function at regulated firms. Nomination committees are often chaired by the board Chair (SMF9) who doubles as SMF13, the designation is sometimes held by whichever NED happens to have the most seniority, and the committee’s work is frequently reduced to a formal annual review of the board composition matrix. This guide addresses what the SMF13 role actually requires and what strong appointments to this function look like.

The SMF13 Designation: What Personal Accountability Covers

The SMF13 designation covers the Chair of the Nominations Committee function at FCA-regulated firms required to maintain a Nominations Committee. The SMF13 holder is personally accountable for the committee’s oversight of the firm’s board and senior management succession planning — including the identification of succession candidates for all Senior Management Functions, the assessment of the board’s collective competence against the regulatory and commercial requirements of the firm’s activities, and the management of the appointment process when an SMF vacancy arises.

Under the FCA Handbook SUP 10A and the associated governance requirements, the Nominations Committee is the primary governance body responsible for ensuring that the firm has a credible succession plan for its senior management functions. The FCA expects this plan to be genuine — identifying specific potential successors, assessing their readiness, and considering the interim coverage arrangements that would apply if a vacancy arose unexpectedly. The SMF13 holder is the individual most directly accountable for whether this standard is met.

The NomCo’s Regulatory Role Beyond Succession

The Nominations Committee’s responsibilities at a regulated firm extend beyond the appointment and succession planning functions that the designation most obviously implies. The committee also typically has a role in the ongoing fitness and propriety assessment of the board and senior management, in the annual board effectiveness review, in the oversight of diversity and inclusion governance, and in the assessment of whether the board’s collective knowledge, skills and experience meet the requirements of the firm’s current and planned regulatory permissions.

The fitness and propriety dimension is particularly significant. At regulated firms, the Nominations Committee should be reviewing whether each board member and SMF holder continues to meet the FCA’s fitness and propriety standards on an ongoing basis — not only at the point of initial appointment. This includes monitoring for changes in individual directors’ financial positions, conducting regulatory reference checks when new information about a director’s previous conduct becomes available, and managing the process when a fitness and propriety concern arises in respect of an existing board member.

This ongoing fitness monitoring function is one of the most underperformed aspects of Nominations Committee governance. Most regulated firms conduct a formal fitness and propriety assessment at appointment and annually certify its outcome, but few have a genuinely active monitoring process that would identify a fitness and propriety concern arising between certification cycles. The SMF13 holder is the individual who should be asking whether such a process exists and whether it is functioning adequately.

Succession Planning: What the FCA Expects the NomCo to Deliver

The FCA’s expectation of succession planning at regulated firms is substantially higher than what most Nominations Committees are currently delivering. The regulator expects to see evidence of genuine succession planning in board minutes and committee papers — not policy statements, but actual assessments of which individuals could succeed each SMF holder, what their development needs are, and what the firm would do if a vacancy arose unexpectedly in the next six months.

The SMF13 Chair is responsible for ensuring this work happens and is recorded. This means leading an annual succession planning review that assesses each SMF function specifically, identifying whether internal candidates are development-ready or whether an external search would be required, and ensuring that the board as a whole understands the succession risks associated with the firm’s current senior management profile — including concentration risks where multiple SMF functions depend on a small number of individuals.

At smaller regulated firms where the Nominations Committee Chair may also be the board Chair, this succession planning responsibility includes the Chair’s own succession — which requires particular care to ensure that the process is not managed in a way that gives the incumbent Chair excessive influence over the selection of their successor. Best practice is for the Senior Independent Director (SMF14) to lead the Chair succession process rather than the incumbent Chair, precisely to manage this governance risk.

Diversity and Inclusion: The NomCo’s Governance Responsibility

The FCA has made clear its expectations regarding diversity and inclusion at regulated firm boards. The regulator expects boards to have target-setting processes for board composition, to report transparently on progress against those targets, and for the Nominations Committee to be the governance body responsible for ensuring that diversity considerations are integrated into the appointment process rather than addressed as an afterthought. The FCA’s diversity and inclusion rules for listed companies and larger regulated firms have formalised this expectation, and the SMF13 holder is the individual most directly accountable for the firm’s compliance with its D&I governance obligations.

This creates a specific capability requirement for the SMF13 appointment. A Chair of the Nominations Committee who does not have experience of structuring appointment processes to attract diverse candidate pools, of managing board composition against diversity targets, and of reporting on D&I governance in a way that meets the FCA’s disclosure requirements is bringing a gap to a regulatory responsibility that has become more prominent and more scrutinised over the past three years.

What Makes a Strong SMF13 Candidate

The SMF13 candidate brief should assess capability across three dimensions. Succession governance experience — direct experience of leading a board-level succession planning process, at a regulated firm or at a comparable governance complexity level, that has demonstrated genuine engagement with succession risk rather than procedural compliance. Ideally the candidate will have led at least one significant executive appointment process as the Chair of the appointing committee, giving them direct experience of what a well-run search process requires.

Regulatory fitness and propriety expertise — an understanding of the FCA’s fitness and propriety standards and of the ongoing monitoring obligations that apply to SMF holders, sufficient to lead the Nominations Committee’s fitness and propriety oversight function with genuine rather than nominal rigour. At dual-regulated firms, this requires familiarity with the PRA’s fitness and propriety expectations as well as the FCA’s, which may be more intensive for certain designations at banks and insurers.

Independence — the SMF13 Chair must be genuinely independent in their oversight of the appointment process. At boards where the CEO has significant influence over NED appointments, the SMF13 Chair’s independence is the primary safeguard against a management-dominated board composition developing over time. A Chair of the Nominations Committee who defers to the CEO on appointment decisions is not providing the governance the designation requires.

The Form A Process for SMF13

The SMF13 designation requires FCA approval via Form A in the same way as other Senior Management Functions. The approval timeline of six to twelve weeks applies, and the candidate must complete the FCA’s fitness and propriety assessment before taking up the SMF13 responsibilities. For candidates with an established FCA approval history in other SMF designations, the Form A for an additional SMF13 designation at the same firm (where they are adding the NomCo chair function to existing committee chair responsibilities) may be processed more quickly. For external appointments where the candidate is new to the firm, the standard timeline applies.

Working with Exec Capital

Exec Capital places Nominations Committee Chairs and board-level NEDs at FCA-regulated firms. We assess SMF13 candidates against their succession governance track record, their regulatory fitness and propriety expertise, and their independence profile — and support the Form A approval process as part of every assignment. Call Adrian Lawrence FCA on 0203 834 9616.

The NomCo’s Role in Board Effectiveness Reviews

The annual board effectiveness review is one of the Nominations Committee’s core governance responsibilities at regulated firms. At listed companies and larger regulated firms, external board effectiveness reviews are a corporate governance code requirement at periodic intervals, and the Nominations Committee is typically responsible for commissioning the review, managing the process, and overseeing the board’s response to the findings. For the SMF13 Chair, the board effectiveness review is both a governance deliverable and a succession planning tool — the review’s findings on the board’s collective capability gaps inform the NomCo’s assessment of what the next NED or committee chair appointment needs to address.

The FCA is increasingly interested in the quality of board effectiveness processes at regulated firms, particularly in the context of Consumer Duty and operational resilience governance. A board effectiveness review that identifies no governance improvement opportunities, that generates no meaningful change in the board’s composition or working practices, or that produces a report that is filed rather than acted upon, is not demonstrating the board self-assessment quality that the FCA expects. The SMF13 Chair should ensure that the board effectiveness review process is genuinely substantive — that it produces honest findings, that those findings are discussed and acted upon, and that the NomCo’s succession planning responds to the capability gaps the review identifies.

Regulatory Expectations on Board Composition and Diversity

The FCA’s expectations on board composition have evolved significantly with its diversity and inclusion supervisory agenda. At in-scope regulated firms, the FCA expects boards to set specific targets for gender and ethnic diversity, to report transparently against those targets, and for the Nominations Committee’s appointment process to demonstrate that diverse candidate pools have been considered seriously rather than token inclusion achieved through a restricted search. The SMF13 Chair is the governance officer most directly accountable for whether this standard is met — they set the tone for how diversity is integrated into the appointment process, and they are the individual who must explain to the FCA, if asked, why a board composition is what it is and what the firm is doing to develop it.

The practical challenge for nomination committees is that genuine diversity in candidate pools at regulated firm board level requires a search approach that goes beyond the established networks that most board-level searches naturally draw on. The talent pool of diverse candidates with the regulatory track record, governance experience, and technical expertise that regulated firm NED appointments require is real but requires active engagement to access. The NomCo Chair’s role is to ensure that the search brief, the search firm briefing, and the longlist assessment criteria are all structured in a way that genuinely expands the candidate pool rather than simply adding diversity as a criterion against which a traditional pool is assessed. Nomination committees led by an effective SMF13 Chair will have a specific diversity plan for each appointment, with sourcing channels that reach beyond established governance networks and assessment criteria that allow diverse candidates to demonstrate their capability against the full range of the role’s requirements rather than against a traditional board experience template.

Chair of Remuneration Committee (SMF12) at FCA-Regulated Firms: Governance and Pay

The Chair of the Remuneration Committee at an FCA-regulated firm is one of the most technically demanding committee chair roles in the regulated financial services governance landscape. The SMF12 designation carries personal accountability for the firm’s remuneration governance — a governance domain that is simultaneously subject to detailed FCA and PRA regulatory requirements, commercially sensitive in ways that create pressures on committee independence, and technically complex in ways that require the Chair to have a genuine understanding of remuneration code provisions that most NED candidates have never needed to engage with in depth.

The result is that SMF12 appointments frequently receive less rigorous attention from nomination committees than the Chair (SMF9), the Audit Committee Chair (SMF11) or the Risk Committee Chair (SMF10). This is a governance mistake — and one the FCA is increasingly likely to identify in the multi-firm reviews and supervisory interactions through which it assesses the quality of regulated firm governance.

The SMF12 Designation: What Personal Accountability Means for Pay Governance

The SMF12 holder is personally accountable for the firm’s remuneration governance. Under the Duty of Responsibility, if a remuneration governance failure occurs within the committee’s remit — an award structure that does not comply with the applicable remuneration code, a performance assessment that does not reflect risk-adjusted outcomes, a deferral arrangement that is applied incorrectly — the SMF12 holder must demonstrate they took reasonable steps to prevent it. This is not the committee’s collective accountability — it is the Chair’s personal regulatory exposure.

This changes the character of the SMF12 appointment fundamentally. The Chair is not simply a skilled governance professional who happens to chair the firm’s pay committee. They are a designated senior manager with a personal regulatory track record that the FCA will assess on its own terms — including through supervisory meetings, Form A approval, and in enforcement action if a remuneration governance failure is sufficiently serious. Nomination committees that treat the SMF12 appointment as a governance role with a remuneration specialism are underestimating its regulatory dimension.

The Applicable Remuneration Code: What the Chair Must Understand

The specific remuneration code that applies depends on the firm’s regulatory category. FCA solo-regulated investment firms are subject to the MIFIDPRU Remuneration Code. Banks and large investment firms are subject to the FCA and PRA’s Dual Regulated Firms Remuneration Code. Insurers are subject to Solvency II remuneration requirements. UCITS management companies and AIFM firms have their own specific remuneration requirements. Each code has different provisions on deferral percentages, minimum deferral periods, malus and clawback triggers, and the treatment of material risk takers and senior management function holders.

The SMF12 Chair must have sufficient working knowledge of the specific code applicable to their firm to assess whether proposed remuneration structures are compliant — not simply whether they are commercially appropriate. An SMF12 Chair who does not understand the difference between the MIFIDPRU Code’s basic and standard requirements, who cannot assess whether a proposed deferral structure meets the minimum deferral period requirements, or who is unaware of the specific malus trigger conditions that the firm’s remuneration policy must include, is not meeting the governance standard the FCA expects.

Variable Pay, Deferral and Malus: The Chair’s Technical Obligations

The practical governance work of the Remuneration Committee Chair involves three recurring technical areas. Variable pay design — assessing whether proposed incentive structures for material risk takers and senior management function holders are compliant with the applicable code and are properly calibrated to reflect risk-adjusted rather than gross commercial performance. Deferral compliance — ensuring that the proportion of variable pay subject to deferral, and the deferral period, meet the applicable code’s requirements for each category of staff within the committee’s remit. And malus and clawback governance — ensuring that the firm’s malus and clawback policies are robust, that trigger events are clearly defined, and that the committee has a credible process for reviewing whether malus or clawback should be applied when a trigger event occurs.

The FCA’s supervisory record on remuneration governance identifies a consistent failure across the regulated population: malus provisions that exist in policy documents but are never actually applied. A regulated firm that has experienced conduct failings, risk management breaches, or material financial misstatements but has never applied malus to any individual’s variable award is demonstrating, in practice, that its malus governance is nominal rather than genuine. The SMF12 Chair is the person primarily accountable for ensuring this does not happen — and the FCA expects to see evidence that the committee’s malus governance is substantive, not documentary.

Independence and the Chair’s Relationship with Management

The independence of the Remuneration Committee from management is not simply a governance principle — it is a regulatory requirement. The FCA expects the committee to be constituted with sufficient independent NEDs to ensure its conclusions reflect independent judgment rather than management interests. The Chair must be genuinely independent and must be seen to be so by the FCA, by the firm’s employees, and by any institutional investors or other stakeholders who scrutinise the firm’s remuneration governance.

Independence is most easily compromised in practice through the management of information and agenda. A CEO who presents remuneration proposals to the committee in a format that makes the compliance conclusion appear straightforward, who does not provide the committee with independent expert advice as a matter of course, or who manages the committee’s access to the risk function’s input into the performance assessment process is undermining the committee’s independence through information control rather than through direct influence. The Chair is responsible for recognising and preventing this — which requires both the governance experience to understand how independence can be eroded and the interpersonal confidence to manage the relationship with the CEO from a position of genuine authority.

The Remuneration Committee at Dual-Regulated Firms

At banks and insurers subject to both FCA and PRA regulation, the Remuneration Committee Chair’s role is more demanding than at FCA solo-regulated firms. The PRA’s remuneration requirements in SS2/17 add a prudential overlay to the FCA’s conduct-focused requirements, and the committee must navigate both frameworks when designing and reviewing pay structures for the firm’s senior population. The PRA pays particular attention to the remuneration of the CRO and other risk function leaders — specifically to whether they are compensated in a way that supports independence from the business lines they oversee rather than creating financial incentives to align with business line interests.

The SMF12 Chair at a dual-regulated firm should be prepared to engage directly with the PRA on remuneration matters. The regulator may request information about the firm’s remuneration arrangements, ask the firm to justify the compliance of specific structures, or require modifications to arrangements it considers inconsistent with sound risk management. The Chair’s ability to engage substantively in these interactions — to explain and defend the committee’s decisions rather than deferring entirely to management or legal advisers — is a factor in the PRA’s assessment of the quality of the firm’s pay governance.

What Makes a Strong SMF12 Candidate

The candidate profile for an SMF12 appointment has three required dimensions. Remuneration expertise — direct experience of remuneration governance at a regulated firm, as a board member, a remuneration adviser, or an executive with senior HR or reward responsibility in a regulated environment. The expertise must be substantive, not generic: a NED with broad financial services governance experience but no specific engagement with remuneration code requirements has not demonstrated the technical competence the role requires.

Regulatory credibility — a track record of operating effectively in a supervisory context, ideally with prior SMF designation experience that has established a positive regulatory relationship. An SMF12 candidate with no prior FCA approval history is a first-time applicant whose regulatory interview will explore their understanding of the SMF12 obligations specifically — including their knowledge of the applicable remuneration code and their approach to managing committee independence.

Independence — genuine independence from management, from the CEO, and from the firm’s principal investors. An SMF12 candidate with close personal or commercial relationships with the firm’s senior management team will face both regulatory scrutiny in the Form A process and practical governance challenges in the committee chair role. Nomination committees should assess independence rigorously rather than treating it as a formal criterion satisfied by the absence of formal conflicts.

Working with Exec Capital

Exec Capital places SMF12 Remuneration Committee Chairs at FCA-regulated firms across all regulatory categories — MIFIDPRU investment firms, dual-regulated banks and insurers, and UCITS and AIFM firms with specific remuneration obligations. We assess candidates against all three dimensions of the SMF12 profile and support the Form A approval process as an integrated part of every assignment. Call Adrian Lawrence FCA on 0203 834 9616.

The SMF12 Appointment Process: Form A and the Regulatory Interview

The Form A approval process for an SMF12 holder follows the same structure as other Senior Management Functions — personal disclosure requirements, regulatory references from previous regulated firm employers, fit and proper self-certification, and the firm’s own fitness and propriety assessment. For SMF12 candidates, the FCA’s assessment of competence and capability focuses specifically on their understanding of the remuneration code requirements applicable to the firm and their experience of remuneration governance in a regulated context. A candidate with strong general governance credentials but no specific remuneration code knowledge may face challenge in the FCA’s assessment that a more specialist candidate would not.

The regulatory interview for an SMF12 appointment — more likely at larger or more complex regulated firms — will typically explore the candidate’s understanding of the applicable remuneration code’s deferral and malus requirements, their approach to managing committee independence, and their track record of providing genuine challenge on remuneration matters rather than ratifying management proposals. Candidates who have chaired remuneration committees that have applied malus, who have required structural changes to proposed award arrangements on compliance grounds, or who have led a committee through a significant pay governance challenge are significantly better prepared for this assessment than those whose remuneration governance experience has been primarily procedural.

Exec Capital supports SMF12 candidates through the Form A preparation process as part of every regulated firm Remuneration Committee Chair search. This includes a briefing on the FCA’s current supervisory approach to remuneration governance, a review of the specific remuneration code requirements applicable to the firm, and preparation for the regulatory interview if one is anticipated. This preparation consistently produces better approval outcomes and better first supervisory impressions than leaving candidates to navigate the process without support.

Remuneration Governance and the Board’s Broader Culture

The quality of a regulated firm’s remuneration governance is a proxy the FCA uses when assessing the quality of the board’s governance culture more broadly. A board whose Remuneration Committee operates with genuine independence, rigorous code compliance, and substantive malus and clawback governance is demonstrating a governance culture that extends beyond pay — one that takes the FCA’s requirements seriously, that maintains the independence of oversight functions, and that does not allow commercial pressures to override regulatory obligations. Conversely, a board whose remuneration governance is nominal — where the committee ratifies management proposals without genuine scrutiny and malus has never been applied despite conduct issues arising — is demonstrating a governance culture that the FCA will assess as inadequate across all dimensions. The SMF12 Chair is not simply managing the firm’s pay governance. They are contributing to the board’s overall governance standing with the regulator. Nomination committees that invest in finding a genuinely qualified SMF12 candidate — rather than appointing the most available NED to fill the designation — consistently produce better remuneration governance outcomes and better FCA supervisory relationships than those that treat the appointment as administrative.

Consumer Duty has changed what a Chair needs to bring to a retail-facing regulated firm board. Not incrementally — the change is structural. Under the previous conduct framework, the Chair’s accountability for conduct outcomes was largely mediated through the board’s oversight of management. Under Consumer Duty, the board must annually confirm, in writing, that it has assessed the firm’s delivery of good outcomes for retail clients and is satisfied with what it has found. That confirmation is not a board resolution proposed by management and approved with minimal scrutiny. It is a governance judgment that requires the Chair to have led a process of genuine, evidence-based board assessment.

The hiring implication is direct: the Chair candidate brief at a retail-facing regulated firm must now include a specific assessment of whether the individual has the capability to lead this process effectively. A Chair who lacks the consumer-facing financial services expertise to evaluate management’s Consumer Duty assessment — who cannot read and challenge a fair value analysis, who cannot assess whether a consumer understanding test methodology is credible, who has never governed a business where the FCA’s conduct oversight was substantive rather than procedural — is bringing a gap to the role that will become visible in supervisory interactions and in the quality of the annual board report.

What the FCA Expects the Chair to Do Under Consumer Duty

The FCA’s Consumer Duty Policy Statement PS22/9 is explicit about the board’s role: the annual board report must be reviewed and approved by the board, and it must reflect genuine board oversight of the firm’s Consumer Duty compliance. The FCA expects to see evidence that the board has engaged substantively with the management information underpinning the report — that directors have asked challenging questions, required additional evidence where the initial presentation was insufficient, and been prepared to record their concerns in the report where the evidence revealed gaps in performance.

The Chair’s specific role in this process is to ensure that the board’s collective engagement is genuine rather than nominal. This requires setting an agenda that gives Consumer Duty adequate time and attention, ensuring that the management information presented is disaggregated to a level that allows meaningful scrutiny rather than presented as a high-level summary that precludes challenge, and being willing to require management to return with additional evidence where the board’s initial assessment is that the data does not support the conclusions management has drawn.

The FCA has been clear in its multi-firm reviews that it views a Consumer Duty annual board report that acknowledges no areas of weakness — for any firm of any complexity — as a governance quality indicator of the wrong kind. A Chair who chairs a board that produces such a report is either not exercising genuine oversight or is not creating the governance environment in which directors feel they can raise concerns. Neither reflects well on the Chair’s effectiveness, and both create a supervisory relationship problem.

The Four Outcome Areas: What the Chair Needs to Understand

Each of the four Consumer Duty outcome areas — products and services, price and value, consumer understanding, and consumer support — requires the Chair to bring different dimensions of knowledge to the oversight process. The Chair does not need to be a technical expert in each area, but needs sufficient understanding to assess whether management’s evidence for each outcome is credible and sufficient.

For products and services, the Chair needs to understand the firm’s product portfolio well enough to assess whether the products are designed to meet the needs of the target market, and to identify where legacy products may be delivering outcomes that would not be acceptable if the products were designed today. Chairs who have never led a product oversight process — who are unfamiliar with the concept of target market assessment, distribution strategy review, and product governance committee structure — will struggle to evaluate this section of the annual board report credibly.

For price and value, the Chair needs to understand the analytical methodology underpinning the fair value assessment. This is technically demanding — it requires an assessment of whether the total cost of the product, across all distribution layers, represents genuine value for the outcomes delivered to retail clients. A Chair without financial services product experience may find this assessment opaque without adequate preparation, and preparation alone may not be sufficient if the underlying methodology is genuinely complex.

For consumer understanding, the Chair should be able to assess whether the consumer testing methodology used to evaluate client communications is rigorous — whether the sample is representative, the testing conditions realistic, and the conclusions drawn proportionate to the evidence. And for consumer support, the Chair should be able to read call handling data, complaint root cause analysis, and vulnerable customer outcomes data in a way that enables genuine scrutiny rather than simple acceptance of management’s summary.

What This Means for the Chair Appointment Brief

The practical implication for nomination committees making a Chair appointment at a retail-facing regulated firm is that Consumer Duty literacy must appear in the brief explicitly — not as a desirable quality but as a threshold requirement alongside the FCA’s governance expectations. The brief should specify:

Direct experience of governance oversight of a Consumer Duty-compliant business, ideally at board level but potentially at senior executive level if the individual’s executive career included substantive consumer conduct responsibility. Experience of reviewing and challenging fair value assessments — either as a board member, an executive, or a professional adviser with relevant regulatory expertise. Familiarity with the FCA’s supervisory approach to Consumer Duty — which means having been present at, or having read and engaged with, the FCA’s multi-firm review findings, Dear CEO letters, and supervisory feedback on Consumer Duty quality across the regulated population.

The nomination committee should also assess whether the candidate understands how Consumer Duty has changed the board’s liability exposure. A Chair who does not appreciate that the annual board report is a live regulatory document that the FCA can request and that directly affects the firm’s supervisory risk profile is not adequately informed about the nature of the accountability they are accepting.

The Chair’s Role in Building Board Capability for Consumer Duty

Beyond the Chair’s own expertise, the Chair has a governance responsibility to ensure that the board collectively has adequate Consumer Duty capability. This means considering Consumer Duty competence when assessing the board composition, identifying where gaps exist in the board’s collective ability to oversee the firm’s Consumer Duty performance, and addressing those gaps through NED appointments, board education, or the use of specialist advisers to support the board’s work.

A board of six or seven non-executive directors at a retail-facing regulated firm should include at least one or two members with direct experience of consumer-facing financial services operations — at a level that goes beyond strategic oversight to include genuine familiarity with the day-to-day reality of how retail clients interact with financial products. The Chair is responsible for identifying whether this expertise exists on the current board and for raising the succession planning implications where it does not.

Consumer Duty and Chair Succession Planning

Chair succession planning at retail-facing regulated firms must now explicitly consider Consumer Duty capability as a succession criterion. A firm whose incoming Chair lacks the consumer conduct expertise that the outgoing Chair brought to the role — or whose incoming Chair is being selected primarily on the basis of financial services sector credentials without specific assessment of Consumer Duty capability — is creating a governance gap that the FCA will identify in the transition period.

The nomination committee’s succession planning process should include a specific skills matrix assessment against Consumer Duty competence, and any identified gap should inform both the incoming Chair appointment brief and the board’s NED succession planning. A Chair who arrives without Consumer Duty expertise can develop it — but the development timeline must be realistic, and the board’s Consumer Duty oversight capacity during the transition period must be maintained through the expertise of other directors while the Chair is building familiarity with the specific requirements of the firm’s retail conduct position.

The FCA’s Assessment of Consumer Duty Governance at Chair Level

In supervisory meetings with regulated firm chairs, the FCA’s Consumer Duty questions have become increasingly specific. The regulator no longer asks only whether the firm has a Consumer Duty programme — it asks whether the board is satisfied that the programme is delivering good outcomes, what evidence the board has reviewed to reach that conclusion, and what the Chair’s own assessment is of the areas where further improvement is needed. A Chair who cannot answer these questions with reference to specific evidence from the annual board report assessment process is demonstrating an oversight approach that the FCA regards as inadequate.

Exec Capital advises boards making Chair appointments at retail-facing regulated firms on how to structure the Consumer Duty capability assessment within the overall brief. We assess candidates against their specific Consumer Duty governance experience and advise nomination committees on how to evaluate whether a candidate’s retail conduct background is sufficient for the specific oversight requirements of their firm. Every Chair search at a regulated firm is led personally by Adrian Lawrence FCA on 0203 834 9616.

Consumer Duty and the Chair’s Relationship with the FCA

Consumer Duty has changed the nature of the FCA’s supervisory engagement with regulated firm Chairs in a material way. The regulator’s supervisory meetings with chairs at retail-facing firms now routinely include discussion of the Consumer Duty annual board report — its methodology, its conclusions, and the board’s own assessment of where performance gaps remain. A Chair who arrives at a supervisory meeting unable to speak to the specific content of their firm’s annual board report — who defers entirely to management on questions about the fair value methodology or the consumer support outcome data — is demonstrating a level of board engagement with Consumer Duty that the FCA will regard as inadequate.

This has a direct bearing on the Chair appointment decision. The FCA’s assessment of a proposed SMF9 holder includes an assessment of whether the individual has the regulatory engagement capability to manage the supervisory relationship that the role requires. At a retail-facing firm, that means being able to engage substantively with the FCA on Consumer Duty outcomes — not simply confirming that the board has approved an annual board report, but being able to speak to its content with genuine understanding. Boards should assess their Chair candidates against this specific capability, ideally through a scenario-based discussion that tests their familiarity with Consumer Duty governance rather than simply accepting general financial services governance experience as a proxy.

The incoming Chair at a retail-facing regulated firm should make Consumer Duty oversight a specific agenda item in their first six months — reviewing the most recent annual board report with fresh eyes, meeting with the compliance function and the management Consumer Duty lead to understand the current state of delivery, and assessing what changes to the board’s Consumer Duty oversight process they would recommend. This investment in the early months establishes the Chair’s credibility on Consumer Duty with both the board and the FCA, and provides a foundation for the quality of supervisory engagement that the annual board report process requires.

The Chair’s Role in Vulnerable Customer Governance

Consumer Duty’s requirements in relation to vulnerable customers deserve specific attention in the context of the Chair’s oversight role. The FCA expects regulated firms to identify and respond to customers in vulnerable circumstances — those affected by low financial resilience, low financial capability, life events such as bereavement or relationship breakdown, and health conditions that affect their ability to engage with financial products and services. The board’s oversight of how the firm identifies and supports vulnerable customers is part of the Consumer Duty annual board report assessment and is an area where the FCA has been explicit that it expects genuine governance engagement rather than policy compliance.

The Chair’s specific role is to ensure that the board receives sufficient management information about vulnerable customer outcomes to assess whether the firm’s approach is adequate — and to challenge management where the information suggests that vulnerable customers are receiving worse outcomes than other customer segments. This requires both the governance experience to structure the board’s information requirements and the consumer-facing financial services knowledge to assess whether the management information provided is adequate to the task. Exec Capital specifically assesses Chair candidates at retail-facing regulated firms against their track record in vulnerable customer governance, as part of our Consumer Duty capability evaluation.

Chair succession at a PE-backed financial services firm involves a set of competing pressures that do not arise in the same combination anywhere else in the regulated financial services governance landscape. The private equity investor has defined expectations about the chair’s role — typically as a value creation partner with a specific commercial mandate alongside the governance oversight function. The FCA has defined expectations about the chair’s role under SMCR — as an SMF9 holder with personal accountability for the firm’s regulatory governance. And the board has its own expectations about what the chair needs to deliver for the business, the management team and the NED community. Aligning these three sets of expectations in a single appointment, and managing the succession process in a way that satisfies all three, is the central challenge.

The Chair’s Role in a PE-Backed Regulated Firm

The Chair at a PE-backed financial services firm is a more operationally engaged position than the chair at a listed financial services business. Private equity governance models typically involve the chair more directly in strategic decision-making, in investor engagement, and in the oversight of management — reflecting the investor’s expectation that the chair will actively support the management team’s delivery of the investment thesis. This operational engagement sits alongside, and sometimes in tension with, the regulatory governance obligations of the SMF9 designation.

Under SMCR, the Chair holds a Senior Management Function (SMF9) with personal accountability for the firm’s overall governance and for the effectiveness of the board’s oversight of the firm’s regulated activities. The Chair must be approved by the FCA before taking up the role, must maintain their own Statement of Responsibilities, and is personally subject to the FCA’s conduct rules and the Duty of Responsibility in the same way as the CEO and other SMF holders. The FCA does not distinguish between the Chair at a PE-backed firm and the Chair at any other regulated firm — the regulatory obligations apply in full regardless of the firm’s ownership structure.

The tension between the PE governance model and the regulatory governance model is most visible in the area of independence. The FCA expects the Chair at a regulated firm to be genuinely independent in their oversight of the executive team — able to challenge management decisions without commercial pressures compromising their judgment. The PE investor, by contrast, may expect the Chair to function as part of an integrated governance and management structure in which the boundaries between oversight and operational involvement are more fluid. Navigating this tension requires a Chair who understands both models and can operate effectively within both, rather than defaulting to one at the expense of the other.

When Chair Succession Arises in PE-Backed Firms

Chair succession at PE-backed financial services firms arises in a number of specific contexts. The most common is the end of a PE holding period — when the investor is approaching an exit and needs to ensure that the governance structure will survive a change of ownership, or alternatively is specifically seeking to install a chair whose credentials will support a trade sale, management buyout, or IPO process. In each case, the succession has a specific commercial objective alongside the governance rationale, and the chair candidate profile needs to reflect both.

A second common context is the management of underperformance. PE investors who acquire a financial services business and find that the existing governance structure is not adequate to support the value creation plan frequently make an early change of chair — installing an individual with the specific capabilities needed to address the performance gap. This may be an operational turnaround specialist, a regulatory rehabilitation expert where there are FCA concerns, or simply a chair with deeper financial services sector expertise than the incumbent.

A third context is the resolution of a conflict between the existing chair and the PE investor or management team. Chair succession in this context is delicate — the FCA will take note of a Chair departure that appears to have been involuntary, and the regulatory reference from the departing chair’s tenure at the firm must be completed honestly regardless of the circumstances of the departure. Boards and investors managing chair succession in this context should take specific legal and regulatory advice on how to handle the process.

The FCA’s Expectations of Chair Succession

The FCA takes a particular interest in Chair succession at regulated firms because the Chair is the SMF holder who is most directly accountable for the effectiveness of the board’s regulatory governance. A chair who is being succeeded — whether in a planned or unplanned transition — leaves a gap in the firm’s SMF coverage that must be addressed promptly. The FCA expects the firm to have a succession plan for the Chair and to manage the transition with the same regulatory rigour it applies to CEO succession.

Chair succession at PE-backed firms frequently involves a tension between the PE investor’s commercial timeline and the FCA’s regulatory approval timeline. The investor may want a new chair in place quickly — to support a pending transaction, to resolve a governance issue, or simply to maintain the momentum of the value creation plan. The FCA’s Form A approval process — typically six to ten weeks for a straightforward application — may not accommodate the commercial timeline without interim coverage arrangements.

Temporary SMF9 coverage during a chair transition is possible under the FCA’s temporary appointment provisions, but the temporary chair must be a credible individual who can genuinely exercise the chair’s governance responsibilities — not a non-executive director who is asked to hold the designation until the new appointment is approved. PE investors should plan for a minimum of ten to twelve weeks from the decision to replace the chair to the new individual being in post and approved, with appropriate interim coverage arranged from the outset.

The Investor’s Expectations of the Chair

The PE investor’s expectations of the chair at a regulated firm have several components that influence the succession brief. Commercial credibility is typically the first — the chair needs to be someone who commands the respect of the management team, can challenge strategic decisions with authority, and can represent the firm credibly to potential acquirers, lending banks, and institutional counterparties. At firms approaching an exit, this commercial credibility may be more important to the investor than the chair’s regulatory background.

Transaction experience is frequently on the brief. A chair who has led a business through a trade sale, an IPO or a secondary buyout brings specific capability to the role that the investor values highly — particularly in the period before an exit. The combination of transaction experience and financial services sector credentials narrows the candidate pool considerably, and chairs with both tend to be sought after and well compensated.

Regulatory credibility must also be on the brief for any PE-backed firm that is FCA-regulated. A chair who has no previous experience of regulated firm governance — who has not held an SMF designation, who has not managed a supervisory relationship with the FCA, and who is unfamiliar with the personal accountability framework the designation carries — presents a regulatory risk that the investor should consider carefully. The FCA’s assessment of the chair’s fitness and propriety will explore their understanding of the SMF9 obligations, and a chair who cannot engage credibly on this point in a regulatory interview will create a poor start to the firm’s supervisory relationship.

The Chair Search at a PE-Backed Financial Services Firm

The search for a Chair at a PE-backed regulated firm requires a triangulated brief that reflects the PE investor’s commercial requirements, the FCA’s governance expectations, and the board and management team’s preference for a chair who can work effectively with both. In practice, this means the brief must be agreed in explicit terms with the PE investor at the outset — not developed by the nomination committee and ratified by the investor at a later stage, which frequently results in a brief that does not reflect the investor’s actual preferences and a search that produces candidates the investor cannot support.

The search itself draws on a candidate pool that sits at the intersection of financial services governance experience, PE-backed company board experience, and FCA approval track record. This intersection is genuinely narrow, and chairs who meet all three criteria are typically already serving on boards and not actively seeking a new mandate. Discreet market engagement — approaching known candidates through trusted relationships rather than formal advertising — is the primary mechanism for identifying candidates for this type of role.

The timing of the search relative to the FCA approval process must be managed carefully from the outset. The PE investor’s commercial timeline and the regulatory approval timeline must be reconciled in the search plan, and the interim coverage arrangements must be confirmed before the search begins rather than addressed reactively when the incumbent chair departs. Exec Capital has experience of managing chair searches at PE-backed regulated firms in a way that accommodates both the commercial and regulatory timelines. Call Adrian Lawrence FCA on 0203 834 9616 to discuss your chair search.

Compensation and Commercial Terms

Chair compensation at PE-backed financial services firms sits at a level that reflects both the commercial complexity of the PE governance model and the regulatory accountability of the SMF9 designation. Day rates for PE-backed chair roles typically range from £1,500 to £3,000 per day at mid-market firms, with total annual fees reflecting the expected time commitment — typically sixty to ninety days per year for an active PE-backed board chair, rising to considerably more during transaction periods. At larger PE-backed financial services businesses, chair fees are typically structured as annual retainers in the range of £120,000 to £250,000.

Equity participation is common at PE-backed firms and is one of the principal attractions of the role for commercially motivated chairs. The structure of the equity arrangement — whether through co-investment, management equity plan participation, or a separate chair equity pool — varies by firm and by investor preference. Exec Capital advises on market-rate chair compensation structures at PE-backed regulated firms and on how to structure equity arrangements that attract the right candidates within the constraints of the applicable remuneration framework.

The Chair’s Relationship with the FCA During a PE Holding Period

The Chair at a PE-backed regulated firm must navigate a supervisory relationship with the FCA that differs in one important respect from the relationship at a listed or privately-owned firm: the FCA is aware that the firm’s governance is shaped by a private equity investor whose interests and timeline may differ from those of the firm’s regulated activities. The regulator does not object to private equity ownership of regulated firms — it is a common and legitimate ownership model across the sector. But it does pay particular attention to whether the PE investor’s commercial objectives are being pursued in a way that is consistent with the firm’s regulatory obligations, and the Chair is the primary individual through whom the FCA assesses this.

A Chair who can credibly demonstrate to the FCA that the board exercises genuine independent oversight of the executive team — that governance is not simply a function of the investor’s requirements — provides a positive supervisory signal that reduces the FCA’s concern about PE ownership. A Chair whose communications with the FCA reveal a board that is primarily focused on investor returns rather than regulatory outcomes, or who defers to the PE investor on matters that should be board-level governance decisions, will attract more intensive supervisory engagement and potentially regulatory concern.

The incoming Chair at a PE-backed regulated firm should therefore make an early investment in the FCA relationship — meeting the supervisory team shortly after appointment, presenting a clear account of the board’s governance agenda and their personal commitment to the regulatory relationship, and establishing from the outset that they intend to provide genuine independent oversight of the firm’s regulated activities. This investment in the supervisory relationship at the start of a tenure typically pays dividends throughout the holding period in the form of a more constructive and less intensive supervisory engagement.

Managing the Exit: Chair Succession at the End of a Holding Period

One of the most practically demanding aspects of chair succession at PE-backed regulated firms is managing the transition at the point of exit. Whether the exit is a trade sale, a secondary buyout, or an IPO, the incoming owner or public market will have their own views about board composition — and the existing chair may or may not fit those views. Managing this transition requires both commercial sensitivity and regulatory compliance.

At a trade sale, the acquiring firm will typically want to review the board composition early in the transaction process and may identify the chair succession as part of their integration planning. The regulatory implications of a chair succession that is driven by transaction requirements rather than governance needs are the same as for any other chair succession — the Form A process applies, the notification obligations apply, and the temporary appointment provisions apply if there is a gap between the departure and the new appointment’s approval. The transaction timeline and the regulatory approval timeline must be managed in parallel from the point at which a change of chair is identified as part of the deal terms.

At an IPO, the chair succession question is typically addressed in the pre-IPO governance restructuring that all PE-backed businesses undertake before coming to market. The incoming chair for a listed financial services firm must meet both the FCA’s regulatory approval requirements and the UK Corporate Governance Code’s independence and governance expectations, and finding a chair who satisfies both within the compressed timeline of a pre-IPO restructuring is one of the more demanding governance challenges in the PE-backed regulated firm lifecycle. Exec Capital advises on pre-IPO chair succession at regulated firms and maintains relationships with chairs who are experienced in both listed company governance and FCA regulatory accountability.

The Chair at a PE-backed regulated firm carries a distinctive dual accountability that few governance roles in financial services demand simultaneously. Being clear-eyed about this duality from the outset of a tenure — and managing the investor relationship and the regulatory relationship with equal seriousness — is the defining characteristic of an effective PE-backed regulated firm chair. Exec Capital places chairs who understand this balance and can navigate it successfully throughout a PE holding period and into the exit process.

Executive Director appointments at wealth management firms sit at the intersection of several distinctive governance pressures. Wealth management is a sector where client relationships are deeply personal, regulatory obligations have intensified significantly under Consumer Duty, and the profile of the individuals who lead business divisions has become more scrutinised — by the FCA, by clients, and increasingly by the institutional investors and private equity firms who hold interests in the sector’s larger businesses. Appointing an Executive Director who holds the SMF3 designation is not simply a senior hire — it is a governance decision with regulatory, commercial and reputational dimensions that the appointment process must address simultaneously.

The SMF3 Designation at Wealth Management Firms

Executive Directors at FCA-regulated wealth management firms hold the SMF3 designation — Executive Director — which covers board-level executives whose role does not correspond to one of the more specifically defined SMF functions. The SMF3 holder at a wealth manager may be responsible for a specific business line (discretionary portfolio management, financial planning, investment advisory services), a client segment, a geographic region, or a functional area such as investment strategy or client experience. The Statement of Responsibilities for the role must accurately reflect the actual scope of accountability — not a generic description of “senior executive responsibilities.”

The SMF3 designation requires FCA approval via Form A. The approval process — typically six to ten weeks for a straightforward application — applies in full, and the individual cannot exercise their Executive Director responsibilities until the FCA has confirmed approval. Wealth management firms that are making time-sensitive appointments — typically in response to a business development opportunity, a team lift-out from a competitor, or a client relationship transition — frequently underestimate the regulatory approval timeline and find themselves managing a gap between an employment start date and a regulatory approval date that creates both compliance and operational complications.

Consumer Duty and the Executive Director’s Accountability

Consumer Duty has materially changed the accountability framework for Executive Directors at retail-facing wealth management firms. The FCA’s requirement that firms demonstrate they are delivering good outcomes for retail clients — across the four outcome areas of products and services, price and value, consumer understanding, and consumer support — creates specific governance obligations for the individuals who are responsible for the business areas that deliver those outcomes.

An Executive Director at a wealth management firm who is responsible for the discretionary portfolio management business is personally accountable, within their Statement of Responsibilities, for ensuring that the portfolios they oversee are managed in a way that delivers good outcomes for the retail clients whose assets they hold. This is not a compliance function responsibility that the Executive Director can delegate to the chief compliance officer — it is a line management accountability that sits with the business leader, overseen by the board and its Consumer Duty compliance framework.

The implication for the Executive Director appointment brief is that Consumer Duty literacy is now a threshold requirement for senior appointments at retail-facing wealth management firms — not a desirable quality but a governance necessity. The FCA expects the individuals leading client-facing businesses at wealth managers to have a genuine understanding of what good consumer outcomes look like in their specific business context, and to be able to demonstrate that understanding in supervisory interactions. An Executive Director who cannot articulate how their business is meeting the Consumer Duty standard, or who delegates this to compliance without genuine engagement, represents a governance risk that the FCA will identify.

The Candidate Profile for Wealth Management Executive Directors

The Executive Director candidate at a wealth management firm needs to combine several qualities that do not always coexist. Deep expertise in the specific business area they will lead — whether in discretionary investment management, financial planning, or client relationship management — is a threshold requirement, and it must be genuine expertise rather than generalist financial services experience. Clients at wealth management firms have long memories and strong networks; an Executive Director who is not credible to the investment team they lead or the client base they serve will create problems that no amount of leadership skill can fully offset.

Regulatory credibility is increasingly a parallel requirement. The FCA’s supervision of wealth management firms has intensified significantly in recent years, and Executive Directors who are visible in supervisory interactions — who attend FCA meetings, who are named in regulatory correspondence, and who are known to the supervisory team — need to present as individuals who understand and take seriously their regulatory accountability. The FCA pays attention to the quality of the individuals leading business divisions at the firms it supervises, and an Executive Director who is seen as commercially focused to the exclusion of regulatory seriousness will create a supervisory relationship problem for the firm.

Leadership and people management capability is the third dimension. Wealth management Executive Directors typically lead teams that include senior investment professionals, client relationship managers, and specialist support functions — all of whom may have strong views about how the business should be run. The ability to lead a high-performing team of specialists, to manage the commercial and interpersonal dynamics of a relationship-intensive business, and to attract and retain talent in a competitive market is a genuine capability requirement, not a generic leadership quality.

Team Lift-Outs and the Regulatory Implications

A specific context in which Executive Director appointments arise at wealth management firms is the team lift-out — where a wealth manager recruits an Executive Director from a competitor, with the expectation that a team of investment professionals or client relationship managers will follow. Team lift-outs in wealth management are commercially powerful but legally and regulatorily complex, and the Executive Director appointment sits at the centre of the complexity.

From a regulatory perspective, the lift-out involves multiple simultaneous SMF3 applications (if more than one SMF holder is moving), multiple regulatory reference requests to the previous employer, and the management of the competitive and reputational dynamics that arise when a significant client-facing team moves between firms. The previous employer may attempt to slow the regulatory reference process, may raise conduct or performance concerns in the regulatory reference that the individuals believe are retaliatory, or may seek injunctive relief that affects the timing of the transition.

The FCA is generally aware of how team lift-outs work in the wealth management sector and does not treat lift-outs as inherently problematic — but it does expect both the receiving and the departing firm to manage the process in accordance with their regulatory obligations. This means the receiving firm must complete its fit and proper assessment properly regardless of the commercial pressure to move quickly, and the departing firm must provide accurate and complete regulatory references regardless of the commercial motivation to create delay.

Compensation and Market Context

Executive Director compensation at wealth management firms varies significantly by the type of firm, the seniority of the role, and the extent to which variable compensation is linked to business performance or client retention. At larger wealth managers — the major private banks, multi-family offices and scale advisory businesses — Executive Director base salaries typically range from £150,000 to £350,000 with variable compensation that may significantly exceed the base for individuals responsible for substantial AUM or client relationships. At smaller boutique wealth managers and independent advisory firms, the total compensation package is typically lower but may include equity or profit participation that reflects the individual’s contribution to the firm’s overall value.

The regulatory framework applicable to the firm affects how variable compensation can be structured for SMF holders. Firms subject to the MIFIDPRU Remuneration Code must apply deferral requirements to variable awards for material risk takers and senior management function holders — including, typically, Executive Director-level appointments. Boards should ensure that compensation offers to incoming SMF3 holders are structured in compliance with the applicable remuneration code from the outset, rather than discovering a compliance issue after an offer has been accepted and disclosed.

The Search Process for Wealth Management Executive Directors

The search for an Executive Director at a wealth management firm requires a combination of deep sector network and regulatory process understanding that generalist executive search firms frequently cannot provide. The candidate pool for senior wealth management appointments is relatively small — the number of individuals who combine investment expertise, client relationship credentials, regulatory track record and leadership capability at the required level is limited — and many of the most credible candidates are not actively seeking a new role.

Exec Capital’s approach to wealth management Executive Director searches begins with a precise brief that separates the operational requirements of the role from the succession and governance considerations. We advise on the SMF3 designation and the Statement of Responsibilities scope, integrate the Form A approval timeline into the search plan, and maintain active relationships with senior wealth management professionals across the sector. Every wealth management executive search is led personally by Adrian Lawrence FCA. Call us on 0203 834 9616.< We maintain active relationships with Executive Directors across the wealth management sector — at discretionary managers, financial planners, multi-family offices and advisory businesses — and we conduct searches on a retained and contingency basis depending on mandate complexity. Our assessment process specifically evaluates Consumer Duty literacy, regulatory track record and client relationship credibility alongside the commercial and leadership dimensions of the profile./p>

Retention and Non-Compete Considerations

Retention of Executive Directors at wealth management firms is a significant commercial concern, given that the value of many wealth management businesses is closely linked to the client relationships and investment expertise held by their most senior people. Boards and investors at PE-backed wealth managers in particular pay close attention to the retention arrangements for Executive Directors, given that the loss of a senior client-facing executive during the holding period can materially affect the firm’s valuation at exit.

The regulatory framework constrains some retention mechanisms that would otherwise be available. Long-term incentive arrangements for SMF3 holders must comply with the applicable remuneration code’s deferral requirements, and provisions that restrict a departing Executive Director’s ability to work at a competitor or to maintain client relationships post-departure must be proportionate and reasonable to be legally enforceable. The tension between the commercial desire to bind senior executives tightly and the legal and regulatory constraints on doing so is a recurring challenge at wealth management firms, and it is one that Exec Capital addresses explicitly in advising clients on offer structures.

Non-compete provisions for wealth management Executive Directors are particularly complex because the clients themselves have a relationship with the individual rather than simply with the firm. Restricting an Executive Director from contacting clients post-departure does not prevent clients from seeking out the individual — and courts have been unwilling to enforce non-solicitation provisions that effectively prevent clients from choosing their own financial adviser. Boards and their legal advisers should be realistic about the extent to which restrictive covenants will protect the firm’s client base in the event of an Executive Director departure, and should invest in building firm-level client relationships that reduce the concentration of client dependency on any single individual.

The ESG and Responsible Investment Dimension

Executive Director appointments at asset-managing wealth firms increasingly require candidates to demonstrate credibility on ESG and responsible investment matters. The FCA’s Sustainability Disclosure Requirements and accompanying investment labels regime has made ESG governance a board-level responsibility at firms managing investments that are marketed on sustainability grounds. An Executive Director who is responsible for a discretionary portfolio management business that includes sustainability-labelled products must be able to oversee the investment process in a way that meets the SDR’s requirements — which means having sufficient understanding of sustainable investment principles, labelling requirements, and client disclosure obligations to provide effective board-level oversight.

For nomination committees making Executive Director appointments at wealth management firms with significant ESG product exposure, the brief must therefore include ESG governance competence alongside the other dimensions of the candidate profile. This is an emerging requirement — not all senior wealth management executives have the same depth of ESG investment understanding — and it is one that the candidate pool reflects with increasing differentiation. Exec Capital assesses candidates at ESG-oriented wealth managers against their SDR literacy and their track record of governing sustainable investment operations, alongside the broader profile requirements of the role.

The Role of the Executive Director in Board Reporting and Governance

Executive Directors at wealth management firms have a specific governance obligation that their counterparts in unregulated businesses do not carry: they must provide the board with accurate and sufficient information about the regulated activities within their area of accountability to enable the board to exercise effective oversight. This is not simply good practice — it is a regulatory obligation, and an Executive Director who provides incomplete or misleading board reporting in their area of accountability creates both a governance failure and a potential breach of the conduct rules that apply to all SMF holders. The quality of management information that Executive Directors bring to the board is therefore itself a regulatory matter, and boards at wealth management firms should consider it as such when assessing the performance of their Executive Directors. An Executive Director who manages their business well but who does not translate that management into the board reporting the oversight function requires is not fully discharging their SMF3 responsibilities, regardless of the commercial performance of the area they lead. Exec Capital discusses board reporting requirements and management information quality with Executive Director candidates as part of our assessment process for wealth management mandates.

The Deputy CEO role at an FCA-regulated firm sits at one of the most complex governance intersections in the SMCR framework. It is a role defined more by its succession purpose than by its operational scope — a position created principally to provide CEO continuity, but which must be structured as a genuine governance role with real accountability if it is to satisfy the FCA’s expectations and serve the firm’s actual interests. Getting the structure wrong — creating a Deputy CEO that is more title than substance, or one that is positioned as a succession candidate without the regulatory credentials to assume the SMF1 — can create both governance and regulatory risk.

This guide sets out how regulated firms should approach the Deputy CEO role — what designation applies, what the FCA expects, how to structure genuine succession without pre-empting the board’s future decision, and what the search process looks like.

The Deputy CEO Under SMCR: Which SMF Applies?

SMCR does not have a designated “Deputy CEO” function. The Deputy CEO at a regulated firm will typically hold the SMF3 designation — Executive Director — which covers executive board members whose role does not correspond to one of the other specifically defined functions. In some cases, depending on the firm’s structure and the specific responsibilities of the Deputy CEO role, they may hold an additional SMF designation alongside SMF3 — for example, SMF24 (Chief Operations Function) if the Deputy CEO also carries operational oversight accountability, or SMF2 (Chief Finance Function) if they have functional responsibility for the finance operation.

The critical point is that the Deputy CEO does not automatically hold or inherit the SMF1 designation. If the CEO is absent, incapacitated or departs without notice, the Deputy CEO cannot simply step into the SMF1 role without the FCA’s approval — unless the firm has structured a temporary appointment under the provisions of SUP 10A.14, or unless the individual has been separately submitted for and received SMF1 approval. Boards that create a Deputy CEO on the assumption that the individual will “cover” the CEO role in the event of an emergency without thinking through the regulatory mechanics are creating a compliance gap rather than a succession solution.

Genuine vs Titular Deputy CEO Roles

The FCA’s assessment of any SMF holder’s fitness and propriety is based on whether the individual is genuinely performing the functions designated to them. A Deputy CEO who holds SMF3 but whose role is primarily titular — who is not genuinely operating as an executive board member, who does not attend board meetings in an active capacity, and whose “deputy” responsibilities do not involve real accountability for any aspect of the firm’s operations — is potentially holding an SMF designation that does not reflect reality. This creates a risk not only for the firm’s regulatory compliance but for the individual, whose Statement of Responsibilities would purport to describe accountability that they are not in practice exercising.

A well-structured Deputy CEO role at a regulated firm should have genuine operational accountability in its own right — a specific functional area, a defined scope of the firm’s activities, or a programme of strategic work for which the individual is personally responsible. This ensures that the individual is a genuine SMF3 holder with real accountability, rather than a nominal Deputy whose principal function is to be available as a succession backstop.

Structuring Genuine Succession Without Pre-Empting the Board

One of the governance tensions in creating a Deputy CEO role at a regulated firm is the succession signal it sends. Appointing a specific individual to the Deputy CEO role implies, at least in market perception, that this person is the designated CEO successor. For many boards, this implication is intentional — the Deputy is explicitly being developed and tested for the CEO role. But for others, the board wants to maintain flexibility in its future CEO succession decision without being seen to have pre-committed.

There are several ways to manage this tension. The first is to be explicit in the appointment communication about the nature of the role — framing the Deputy CEO as a senior operational executive role rather than as a succession title, and making clear that CEO succession will be decided by the board at the relevant time. This does not fool sophisticated observers, but it preserves the formal governance position that the board retains discretion over succession.

The second approach is to structure the Deputy CEO role with a genuine operational mandate that justifies the appointment on its own terms — transformation leadership, international expansion, a specific business line — so that the succession dimension is genuinely secondary to a real operational rationale. This is the stronger governance approach, because it means the Deputy CEO is not dependent on the succession expectation to justify their presence and their SMF3 designation.

The SMF1 Question: Should the Deputy Be Pre-Approved?

Whether to seek FCA approval for the Deputy CEO as an SMF1 holder simultaneously with their SMF3 appointment is a decision that boards at regulated firms should consider explicitly rather than leave unaddressed. There are arguments on both sides.

The case for pre-approval as SMF1 is that it eliminates the regulatory gap in the event of an unplanned CEO absence or departure. If the Deputy holds both SMF3 and SMF1 approval, they can assume the CEO function immediately without the delay of a temporary appointment process or a full Form A submission. For firms where the CEO is the dominant regulatory contact and where an unplanned CEO vacancy would create immediate supervisory concern — typically at smaller or higher-risk regulated firms — this may be the most prudent approach.

The case against is that holding dual SMF1 and SMF3 approval creates a governance appearance that pre-commits the succession in a way that limits the board’s future flexibility. It also raises questions about the independence of the SMF1 designation — if both the CEO and the Deputy hold SMF1, the FCA may seek to understand how accountability is allocated between the two individuals in circumstances where both are in post.

The right approach depends on the firm’s specific circumstances. Exec Capital advises on this structural question as part of every Deputy CEO search at a regulated firm, and we recommend that the firm’s legal and compliance advisers are involved in the decision before the appointment is finalised.

The Candidate Profile for a Regulated Firm Deputy CEO

The Deputy CEO candidate at an FCA-regulated firm needs to be credible in two distinct ways. First, they need to be credible as a senior executive in their own right — with the operational experience, leadership capability and commercial judgment to contribute genuinely to the firm’s management rather than simply to occupy a succession position. Second, they need to be credible as a potential future CEO of a regulated firm — with the regulatory track record, the FCA engagement capability, and the personal accountability framework understanding that the SMF1 designation would eventually require.

Where the firm is creating the Deputy CEO role specifically to develop an internal succession candidate, the profile question is partly answered — the candidate is known, their capabilities are understood, and the FCA approval for SMF3 is the key immediate hurdle. The focus of the search in this case is more about structuring the role and the development programme than about identifying the candidate.

Where the firm is recruiting an external Deputy CEO, the search is genuinely bidirectional — finding a candidate who is strong enough to contribute operationally in the short term and plausible enough as a CEO succession candidate to justify the senior designation. This combination narrows the candidate pool considerably, and boards should be realistic about how long the search may take and how much flexibility they are willing to accept on either dimension of the profile requirement.

The Form A Process for SMF3

The Deputy CEO’s SMF3 designation requires FCA approval via Form A in the same way as any other SMF appointment. The approval timeline — typically six to ten weeks for a straightforward application — applies in full, and the candidate cannot exercise their SMF3 responsibilities until approval is granted. Boards should build this timeline into the appointment plan alongside the broader search and negotiation process, recognising that in practice the total elapsed time from identifying a preferred candidate to that individual being in post and approved is likely to be three to four months minimum.

The regulatory reference requirements for an SMF3 appointment apply in the same way as for any senior management function. Where the preferred candidate has held regulated firm roles in the last six years, references must be collected from all relevant previous employers before the Form A is submitted. This is one of the most frequently underestimated elements of the regulated firm appointment process, and leaving it until after the offer has been made creates both timeline risk and the potential for late-stage surprises.

Working with Exec Capital

Exec Capital places Deputy CEOs and senior executive board members at FCA-regulated firms. We advise on the governance structure of the role, the SMF designation that applies, and the regulatory approval process, as well as conducting the search itself. Every regulated firm mandate is led personally by Adrian Lawrence FCA. Call us on 0203 834 9616.< We advise on whether the Deputy CEO role is the right succession solution for a given firm's circumstances, develop the brief in consultation with the board and any investor stakeholders, and conduct the search for candidates who are credible both as immediate operational contributors and as longer-term CEO succession candidates. Our regulated firm governance experience means we can support the discussion of the SMF designation, the Statement of Responsibilities scope and the pre-approval question as an integrated part of the search, rather than as a separate compliance exercise./p>

The Deputy CEO’s Statement of Responsibilities

The Statement of Responsibilities for a Deputy CEO who holds SMF3 must accurately describe the specific areas for which the individual is personally accountable. This is more complex than it appears, because the Deputy CEO role frequently involves a combination of genuine operational accountability in specific areas alongside a broader “deputy” mandate that does not correspond neatly to any defined functional area.

The FCA expects the Statement of Responsibilities to be specific rather than generic. A statement that describes the Deputy CEO as “responsible for supporting the CEO and deputising in their absence” does not meet the standard — it describes a relationship with another SMF rather than a specific area of accountability. The SoR should identify the specific aspects of the firm’s activities for which the Deputy CEO is personally responsible, the specific committees or governance bodies that the individual chairs or attends in a decision-making capacity, and the specific regulatory obligations that fall within their personal scope.

Where the Deputy CEO is intended to provide CEO succession, the SoR should also be drafted in a way that gives the individual genuine board-level exposure to the areas they would need to oversee as CEO — not simply the areas they currently manage in their Deputy role. A Deputy CEO who is being developed for CEO succession but whose SoR confines them to a single functional area will not have the breadth of board exposure that the SMF1 designation requires, and the succession may be delayed or complicated when the FCA’s assessment reveals this gap.

When the Deputy CEO Route Is Not the Right Solution

Creating a Deputy CEO role is not always the right answer to a CEO succession challenge at a regulated firm. There are circumstances in which the cost, the governance complexity, and the market signal of a Deputy CEO appointment outweigh its benefits. Where the board has a strong internal succession candidate who simply needs time and development before they are ready for the CEO role, the right solution may be a structured development programme for the existing individual rather than the creation of a new senior position. Where the succession timeline is long enough to allow a proper external search when the CEO eventually departs, maintaining search readiness is often more appropriate than installing a succession candidate years before they will be needed.

The risk of creating a Deputy CEO without a clear rationale is that the individual occupies a position that is neither fully empowered nor clearly transitional — a liminal governance role that creates tension with both the CEO (who may feel their authority is being shared before they are ready to hand it over) and the board (which has pre-committed to a succession path it may later wish to revise). Exec Capital advises on whether a Deputy CEO appointment is the right solution for a given succession challenge before the search process begins, and we are candid when we believe an alternative approach would serve the firm better.

The Board’s Ongoing Responsibility for the Deputy CEO’s Development

Where the Deputy CEO is being developed as a CEO succession candidate, the board has an ongoing responsibility to ensure the development is genuine rather than nominal. A Deputy CEO who is formally identified as the succession candidate but who is not given the board exposure, the strategic involvement, and the regulatory engagement experience they will need as CEO is not actually being developed — they are being held in a succession holding pattern that may prove inadequate when the succession moment arrives. Boards should structure the Deputy CEO’s role to provide progressive exposure to the full scope of the CEO’s responsibilities — increasing their engagement with the FCA supervisory team, broadening their responsibility for strategic planning, and ensuring they are present at the board’s most significant governance discussions. Annual reviews of the Deputy CEO’s development — against a structured assessment of their readiness for the CEO role — should be a standing item in the board’s succession planning governance. Exec Capital can facilitate this assessment process as part of our regulated firm succession advisory work.

CEO succession at an FCA-regulated firm is one of the most demanding governance challenges a board will manage. It combines the complexity of a senior executive search with the regulatory obligations of the Senior Managers Regime, the supervisory relationship dynamics of a significant change in the firm’s most senior leadership, and the operational continuity requirements of a business that cannot function without a person holding the SMF1 designation. Managing all three simultaneously — and doing so in a way that satisfies the FCA’s expectations, maintains the firm’s supervisory standing, and produces the best possible appointment outcome — requires planning that most boards begin too late.

This guide sets out what CEO succession looks like at a regulated firm, what the FCA expects, and how to approach it in a way that manages the regulatory and commercial risks simultaneously.

The FCA’s Framework for CEO Succession

The FCA Handbook SUP 10A requires regulated firms to notify the FCA when an SMF1 holder leaves their role and when a new individual is appointed. The notification obligations are specific: the firm must notify the FCA of a departure within seven days, and must submit a Form A for the incoming CEO before the individual begins exercising their SMF1 responsibilities. The Form A cannot be submitted after the appointment has taken effect — the prior approval obligation is absolute.

The FCA expects regulated firms to have succession plans in place for all their senior management functions, and it pays particular attention to CEO succession given the SMF1’s position as the individual primarily accountable for the firm’s regulatory standing. A firm that does not have a credible CEO succession plan — that has not identified potential successors, assessed their suitability, or considered how the gap between a departure and an approved replacement would be managed — will face challenge from the FCA in supervisory interactions.

The FCA’s assessment of a CEO succession is also coloured by the context in which it is occurring. A planned succession, managed over an appropriate timeline with adequate communication to the regulator, creates a very different supervisory impression from an unplanned departure managed reactively with inadequate interim coverage. The FCA distinguishes between boards that govern succession proactively and those that manage it as a crisis, and that distinction affects the intensity of the supervisory engagement that follows the transition.

The Realistic Timeline for Planned CEO Succession

The most important planning input for CEO succession at a regulated firm is the realistic total elapsed time from initiating the search to having an approved replacement in post. Boards that underestimate this timeline find themselves either accepting a suboptimal appointment to meet an artificial deadline, managing an extended period of interim coverage that creates operational and regulatory risk, or both.

A realistic timeline for a well-managed CEO succession at a mid-tier regulated firm is:

Weeks 1–4: Brief development — working with search advisers to define the candidate profile, agree the brief, and confirm the scope of the search. For a board that has done its succession planning properly, this phase may be shorter because potential candidate profiles and market maps already exist. For a board starting from scratch, allow four weeks.

Weeks 5–10: Search and longlist — active candidate identification, discreet approaches, initial conversations, and the development of a longlist. Six weeks is realistic for a well-resourced search at this level, but the timeline extends at more specialist firm types where the candidate pool is limited.

Weeks 11–14: Shortlist, interviews, and preferred candidate identification — board interviews, reference conversations, and the selection of a preferred candidate. Four weeks is the minimum for a proper process at this level.

Weeks 15–16: Offer, negotiation, and Form A preparation — agreeing terms, preparing the Form A submission, collecting regulatory references, and completing the fit and proper assessment.

Weeks 17–26: FCA approval — the statutory three-month period, though approvals for straightforward appointments often come through in six to eight weeks. At dual-regulated firms, allow the full period and plan for up to twenty weeks if a regulatory interview is required.

Total: five to six months under favourable conditions, seven to nine months at more complex firms or where the approval process encounters complications. Boards that initiate the search process after a CEO resignation has been announced are working against this timeline from day one.

FCA Engagement During the Succession Process

How and when the firm communicates with the FCA during a CEO succession is a governance decision with real consequences for the supervisory relationship. The FCA expects regulated firms to be open and transparent about significant changes in their senior leadership, and a succession that appears to have been managed without adequate communication — where the FCA learns of a CEO departure through market intelligence rather than firm notification — will generate supervisory concern regardless of how well the eventual appointment is managed.

For planned succession, best practice is to brief the FCA relationship supervisor informally before the departure is made public, ideally at the next scheduled supervisory meeting or through a proactive call. This gives the FCA the opportunity to raise any questions about the succession process and to confirm its expectations for the transition. It also demonstrates the board’s commitment to an open supervisory relationship, which is itself a positive governance signal.

For unplanned succession — a sudden departure, a resignation at short notice, or a forced departure — the firm should notify the FCA of the departure within the required seven-day period and should simultaneously brief the relationship supervisor on the firm’s plans for interim coverage and the timeline for a permanent replacement. Having a clear plan to communicate at this point is significantly better than the alternative of notifying the departure without being able to say what happens next.

Interim CEO Coverage at a Regulated Firm

Managing the gap between a CEO departure and an approved replacement is one of the most operationally sensitive aspects of regulated firm CEO succession. The firm cannot operate without an SMF1 holder — the designation is a regulatory requirement, and the gap in coverage must be addressed from the point the incumbent’s approval ceases.

The FCA provides for temporary SMF appointments under SUP 10A.14 in circumstances where an unplanned SMF vacancy arises. The temporary appointment mechanism allows a firm to appoint an individual to an SMF on a temporary basis without prior FCA approval, subject to notification to the FCA within seven days and a maximum duration of twelve weeks. If the permanent Form A approval process is likely to take longer than twelve weeks, the firm must either apply for a further temporary appointment or seek FCA guidance on how to manage the extended gap.

The individual providing interim SMF1 coverage must be genuinely capable of exercising the CEO’s responsibilities — not simply a figurehead while the real executive work continues elsewhere. An interim CEO who is not actively engaged in the firm’s strategic and regulatory governance during the interim period is creating a compliance fiction that the FCA will identify in any supervisory interaction. Exec Capital maintains relationships with experienced executives who have held SMF1 designations and who can provide credible interim CEO coverage at regulated firms while a permanent search progresses.

The Outgoing CEO’s Obligations

The outgoing CEO has regulatory obligations that continue until their SMF1 approval formally ceases. These include a continuing obligation to cooperate with the FCA, to complete any outstanding supervisory matters within their area of accountability, and to ensure that the handover to their successor is conducted in a way that provides genuine continuity of regulatory oversight rather than simply operational handover.

The outgoing CEO should also be aware that their regulatory history — including any matters that arose during their tenure — will form part of the regulatory reference that the firm must provide if they seek a regulated firm senior appointment in the future. Managing the end of a CEO tenure at a regulated firm in a way that is transparent, properly documented, and consistent with the FCA’s expectations is therefore in the outgoing CEO’s personal interest as well as the firm’s.

Succession in a Regulatory Remediation Context

CEO succession that occurs during a period of regulatory remediation — when the firm is subject to a skilled person review, an enforcement investigation, or a supervisory requirement — requires particular care. The FCA will scrutinise the succession more intensively in this context, and the choice of successor will be assessed against the specific regulatory concerns that the remediation is addressing.

A successor who is seen by the FCA as likely to manage the regulatory relationship better than the outgoing CEO — who brings relevant expertise, a positive regulatory track record, and credibility in the specific area of concern — may itself be a positive factor in the regulatory relationship. A succession that appears to perpetuate the same governance culture or leadership approach that gave rise to the regulatory concern will not receive the benefit of the doubt. Boards managing CEO succession in a remediation context should take specific legal and compliance advice on how to present the succession to the FCA and what the regulator is likely to expect from the incoming CEO’s early priorities.

Working with Exec Capital on CEO Succession

Exec Capital advises regulated firms on CEO succession planning and conducts the search process when an external appointment is required. We integrate the Form A approval timeline into the search process from the outset, advise on interim coverage options, and support FCA engagement during the transition. Every CEO succession mandate at a regulated firm is led personally by Adrian Lawrence FCA. Call us on 0203 834 9616.< We integrate regulatory approval timelines into every CEO search from day one, advise on interim SMF1 coverage arrangements where required, and support the firm's FCA communications throughout the transition. Our network of experienced interim executives who have previously held SMF1 designations provides regulated firms with credible interim coverage options that go beyond the firm's immediate network./p>

How the Outgoing CEO Supports the Transition

The outgoing CEO’s role in a regulated firm CEO succession is more formal than in an unregulated business. Beyond the standard operational handover — briefing the incoming CEO on strategy, key relationships, and operational priorities — the outgoing CEO has regulatory obligations that continue until their SMF1 approval formally ceases, and they have a specific role in ensuring the regulatory continuity of the transition.

The outgoing CEO should ensure that their Statement of Responsibilities is accurately documented as of their departure date and that the firm’s Management Responsibilities Map is updated to reflect the transition. They should brief the incoming CEO on the firm’s current supervisory relationship — the key FCA contacts, the status of any outstanding supervisory matters, and the regulatory history that the new CEO will inherit. And they should be available to participate in a joint meeting with the FCA where the regulator requests this — particularly if there are active supervisory matters that require the incoming CEO to understand the context in which they arose.

The regulatory reference the firm provides about the outgoing CEO — should they seek a regulated firm role in the future — must be completed honestly regardless of the circumstances of their departure. Where the CEO’s departure is the result of performance or conduct concerns rather than a planned succession, the firm must take specific legal advice on its regulatory reference obligations. Providing an incomplete or misleading regulatory reference is itself a breach of FCA rules, and the firm that provides such a reference creates its own compliance risk alongside the harm to the next employer who receives it.

Communication Strategy During the Succession

The communication of a CEO succession at a regulated firm — to staff, clients, counterparties, and the FCA — requires careful sequencing. The FCA should be informed before any public announcement, not simultaneously. Key clients and major counterparties should be briefed personally by a senior member of the board or the outgoing CEO before the announcement is made public, so that they hear about the transition directly rather than through market communications. Staff should be informed in a way that addresses the natural uncertainty that a CEO transition creates — particularly at firms where the outgoing CEO has been a defining figure in the firm’s culture and client relationships.

The communication to the FCA should be substantive, not formulaic. A brief notification that the CEO is departing and that a successor is being sought is the minimum required, but a more detailed briefing — covering the planned timeline, the succession process, the interim coverage arrangements, and the type of candidate the board is seeking — demonstrates the governance quality that the FCA expects of well-run regulated firms. The board Chair or company secretary should lead this communication in close coordination with the firm’s legal and compliance advisers.

Building Succession Resilience Over the Long Term

The most effective CEO succession planning at regulated firms is not a discrete project initiated when succession becomes imminent — it is an ongoing governance process embedded in the board’s annual cycle. Boards that discuss CEO succession annually, that maintain a current assessment of potential internal and external candidates, and that review their interim coverage arrangements as the firm’s regulatory complexity evolves are in a fundamentally stronger position than those that treat succession as an event to be managed when it arrives. The FCA’s expectation is clear: regulated firms should have succession plans for their senior management functions, those plans should be live documents rather than archived policy statements, and the board’s discussion of succession should be recorded in board minutes as evidence of active governance engagement. Building this discipline into the board’s annual cycle does not require large investment — it requires a commitment from the Chair and the board to treat CEO succession as a continuous governance responsibility rather than a periodic crisis management challenge.

The assumption that a CEO appointment at an FCA-regulated firm requires a candidate who has previously held an SMF designation is understandable but wrong. The FCA does not require candidates for senior management functions to have prior SMF experience — it requires them to be fit and proper for the specific role. A candidate who has led a significant business in an unregulated sector, who understands the regulatory obligations of the SMF1 designation, and who can demonstrate the personal qualities and governance capability the FCA expects, is a credible candidate for a regulated firm CEO appointment regardless of whether they have previously been FCA approved.

That said, a first-time SMF1 appointment is a materially more complex process than an appointment where the candidate has an established regulatory track record. The FCA’s assessment of a first-time applicant is more intensive, the Form A preparation requires more care, and the board has a greater advisory responsibility toward the candidate to ensure they understand what they are taking on. This guide addresses each of these dimensions.

Why First-Time SMF1 Candidates Arise

There are several legitimate scenarios in which the best candidate for a regulated firm CEO position has no prior SMF approval history. The most common is the transition from an unregulated sector — a successful CEO from a technology, professional services or industrial background who is moving into a regulated financial services firm for the first time. This profile is increasingly common as regulated firms recognise that deep financial services experience is not always the most important criterion, particularly for CEO appointments at fintech businesses, payment institutions or financial services businesses at early stages of their regulatory journey.

A second scenario is promotion from within, where the best internal candidate is a capable executive who has operated below the SMF threshold — in a senior management role that fell within the certification regime rather than the senior managers regime. Their competence is known, their cultural fit is established, but their regulatory approval history is limited to the firm’s own certification process rather than FCA pre-approval. Promoting this individual to CEO requires a first-time SMF1 application.

A third scenario is the return to executive roles from an extended period outside the regulated sector — a former regulated firm executive who has spent several years in private equity, academia, or non-executive roles and whose most recent SMF approval is more than six years old. The regulatory references required for a Form A application cover only the last six years, which means an individual whose regulated firm executive experience is older than this is, in regulatory reference terms, making a first-time application.

What the FCA Assesses in a First-Time SMF1 Application

The FCA’s fit and proper assessment covers the same three areas for a first-time applicant as for an experienced SMF holder: honesty, integrity and reputation; competence and capability; and financial soundness. The difference is not in the framework but in the evidence base available to the FCA when making its assessment.

For an experienced SMF holder, the FCA has a regulatory track record to draw on — previous approval history, supervisory interactions at previous firms, any regulatory references that have been submitted. For a first-time applicant, none of this history exists within the regulatory framework. The FCA must assess the individual’s fitness and propriety based on their professional background, character references, the firm’s own assessment of their suitability, and the quality and completeness of the Form A submission itself.

This typically results in a more detailed FCA assessment for first-time applicants. The probability of a regulatory interview — in which the FCA meets the proposed SMF holder directly to assess their understanding of the role and the regulatory obligations it carries — is higher for first-time applicants than for candidates with an established FCA approval history. The regulatory interview for a first-time SMF1 applicant will typically explore the candidate’s understanding of the SMCR framework, their approach to the firm’s regulatory relationship, their understanding of the specific risks and regulatory obligations of the firm’s business, and their plans for the first six to twelve months in the role.

Preparing a First-Time SMF1 Candidate for the FCA Interview

The regulatory interview is one of the most consequential steps in the approval process for a first-time SMF1 applicant. A candidate who performs poorly — who is unable to articulate the regulatory framework that applies to the firm, who is unprepared for the level of technical engagement the FCA expects, or who appears to have an incomplete understanding of the personal accountability the SMF1 designation carries — risks both the rejection of the specific application and a poor start to their relationship with the regulator.

Preparation for the regulatory interview should begin well before the Form A is submitted. The candidate should have read and understood the FCA Handbook provisions on the Senior Managers Regime, the firm’s most recent supervisory correspondence, and any regulatory concerns or remediation activity that the firm has been subject to. They should understand the specific SMFs that apply to the firm and the responsibilities that attach to each, so that they can speak coherently about the governance structure they are inheriting and their plans for managing it.

They should also be prepared to discuss the firm’s risk profile in specific terms — not at a high level of generality but with genuine knowledge of the principal risks the FCA supervises the firm against, what the firm’s current control framework addresses, and where the candidate believes further development is needed. A first-time SMF1 candidate who has done this preparation will make a materially better impression in a regulatory interview than one who has not, and the quality of that impression directly affects the FCA’s assessment of the individual’s fitness and propriety for the role.

The Form A Submission for a First-Time Applicant

The Form A submission for a first-time SMF1 applicant requires particular care in several respects. The material disclosure section must be completed with great precision — the requirement to disclose spent convictions in certain circumstances, civil proceedings, and any financial difficulties is broader than most candidates initially expect, and the consequences of a material omission are serious regardless of whether the omission was deliberate. The candidate’s legal advisers should review the disclosure requirements before the form is completed.

The regulatory references section presents specific challenges for first-time applicants. Where the candidate’s previous career has been entirely in unregulated sectors, there may be no regulated firm employer from whom a regulatory reference is required — simplifying this aspect of the process. Where the candidate has had any regulated firm employment in the last six years, those references must be obtained and their content must be reviewed and understood before the Form A is submitted. A first-time SMF1 candidate who is unaware of potential issues in their regulatory reference and who only encounters the content at the point of FCA review is in a far worse position than one who has anticipated and planned for the disclosure.

The Board’s Role in Supporting a First-Time SMF1 Appointment

Where the board has chosen a first-time SMF1 candidate, it has a specific advisory responsibility that it does not carry to the same extent when appointing an experienced SMF holder. The experienced SMF candidate understands what the designation involves from direct experience. The first-time candidate is relying partly on the firm and its advisers to ensure they understand the personal accountability they are accepting.

The board should ensure that the candidate has had a thorough briefing on the SMCR framework before the appointment is confirmed — not the Form A process specifically, but the substance of the SMF1 designation: what the Statement of Responsibilities will say about their personal accountability, how the FCA supervisory relationship works, what the Duty of Responsibility requires of them, and what the consequences of a regulatory breach in their area of accountability can be for them as an individual. A CEO who accepts an SMF1 appointment without genuinely understanding the personal accountability framework is not adequately informed, and the board that has not provided that information carries its own governance responsibility.

Timeline and Contingency Planning

First-time SMF1 appointments typically take longer to approve than applications from candidates with an established regulatory track record. Boards should plan for a minimum of ten weeks from Form A submission to approval for a first-time applicant, with a contingency allowance of up to twenty weeks if a regulatory interview is required and if the FCA requests additional information. Building this timeline into the succession plan — including identifying interim SMF1 coverage where the gap between the outgoing CEO’s departure and the new CEO’s approval is likely to exceed a few weeks — is essential.

Interim SMF1 coverage while a first-time appointment is being approved requires careful structuring. The individual providing interim coverage must themselves be capable of holding the SMF1 designation temporarily, must be notified to the FCA under the temporary appointment provisions of SUP 10A, and must be genuinely in a position to exercise the CEO’s regulatory responsibilities during the interim period rather than simply holding the designation on paper.

When First-Time SMF1 Is the Right Choice

The question of whether to appoint a first-time SMF1 candidate or to insist on a candidate with prior FCA approval depends on the specific circumstances of the firm and the appointment. At firms with a well-established regulatory relationship, a strong compliance function, and a stable governance structure, a first-time SMF1 appointment from a highly capable external candidate can be an excellent outcome — bringing fresh perspective and commercial capability that the regulated financial services sector does not always provide. The regulatory approval process is manageable with proper preparation, and the FCA’s assessment is of the individual’s fitness and propriety rather than their regulatory credentials per se.

At firms with active regulatory concerns, an ongoing skilled person review, or a recently imposed requirement, the FCA’s scrutiny of a first-time SMF1 applicant will be more intensive and the risk of a delayed or problematic approval process higher. In these circumstances the board should give serious weight to whether a candidate with an established and positive regulatory track record would serve both the firm and the incoming CEO better than a first-time applicant who faces a more challenging approval environment.

Working with Exec Capital

Exec Capital has placed first-time SMF1 CEOs at FCA-regulated firms and understands the specific preparation and process management the appointment requires. We brief first-time candidates on the regulatory framework early in the search process, advise on Form A preparation, and support the regulatory interview preparation as part of every assignment. Call Adrian Lawrence FCA on 0203 834 9616 to discuss your CEO search.

Induction and Ongoing Development After Approval

The FCA’s assessment of fitness and propriety is a point-in-time judgment — it confirms that the individual is fit and proper to take up the SMF1 designation at the point of approval. It does not guarantee that the individual will continue to be fit and proper as the role develops and as the regulatory environment evolves. For a first-time SMF1 holder, the period immediately after approval is one of the highest-risk phases — the individual is exercising a level of personal regulatory accountability that is new to them, in a supervisory environment they are encountering for the first time.

Boards should invest in a structured induction programme for a first-time SMF1 CEO that goes beyond the operational handover from the outgoing CEO. The regulatory dimension of the induction should cover: the firm’s supervisory relationship history with the FCA, including any concerns that have been raised and remediation that has been completed; the firm’s SMCR governance map and the Statement of Responsibilities for each SMF holder; the firm’s risk framework and how it is reported to the board and the FCA; and the specific regulatory obligations that the CEO’s Statement of Responsibilities places on the individual personally. A first-time SMF1 holder who completes this induction systematically is materially better prepared for their first supervisory interaction with the FCA than one who relies on the outgoing CEO’s verbal briefing.

Ongoing development — through regulatory updates, peer networks, and engagement with the firm’s compliance function — should also be structured for a first-time SMF1 CEO. The regulatory environment continues to evolve, and a CEO who was fully briefed on the FCA’s expectations at the point of approval but who has not kept pace with regulatory developments in the two years since will find the supervisory relationship more challenging than one who has actively tracked the changes. Exec Capital can refer first-time SMF1 CEOs to appropriate regulatory networks and development resources as part of our post-appointment support.

Long-Term View: Managing Regulatory Credibility Over a CEO Tenure

First-time SMF1 approval is the beginning of a regulatory relationship that will define the CEO’s tenure. The FCA forms its view of individual SMF holders over time — through supervisory meetings, through the quality of the firm’s regulatory submissions, and through the conduct of the firm’s regulated activities. A CEO who begins their tenure at a disadvantage because of the first-time approval process, but who invests in building the regulatory relationship and demonstrates genuine regulatory engagement over their first two years, can substantially improve the FCA’s assessment of their fitness and propriety relative to the initial approval. Conversely, a CEO whose regulatory engagement is weak or reactive — who is unprepared for supervisory meetings, who is not familiar with the firm’s regulatory position, or who defers all FCA contact to the compliance function — will find the supervisory relationship deteriorating over time regardless of how smoothly the initial approval went. The first-time SMF1 designation is not a permanent marker — it is the starting point for a regulatory relationship that the individual shapes through their own conduct over the course of their tenure.