FCA

What FCA Regulation Actually Changes About Hiring

Every firm has to recruit competent people. A regulated firm has to recruit competent people whose appointment the regulator will approve, whose responsibilities are written down and allocated, and whose fitness and propriety the firm can evidence if asked.

That is the whole difference, and it is bigger than it sounds. It changes who is willing to take a role, how long an appointment takes, what happens when someone resigns, and what the firm is expected to be able to prove afterwards.

This page is organised around the obligations that drive senior hiring, rather than around job titles. If you already know which function you are filling, our SMF recruitment guide lists every senior management function and who handles it. If you are looking for the regulator’s own material and other official sources, the resources page collects them.

The Gateway: Authorisation

Authorisation is where most firms meet the regime properly for the first time, and it is where hiring and regulation are most entangled. The application requires named individuals for the relevant senior management functions, which means a firm must recruit people before it is authorised to do the business those people will oversee.

That sequencing catches firms out. Candidates are being asked to commit to a business that does not yet have permission to operate, and the stronger ones will ask searching questions about funding, timetable and what happens if the application is refused. Those are reasonable questions rather than a lack of commitment.

The practical consequence is that authorisation-stage hiring takes longer and needs candidates who have done it before. Someone who has taken a firm through the gateway knows what the regulator asks and what evidence satisfies it.

SMCR: Three Populations, Not One

The Senior Managers and Certification Regime divides a firm’s people into three groups, and firms routinely conflate them.

Senior managers hold pre-approval functions. They cannot start until the FCA approves them, they have a Statement of Responsibilities, and they carry personal accountability for their areas.

Certified staff perform functions capable of causing significant harm but need no FCA approval. The firm certifies them as fit and proper, annually, and that assessment is the firm’s responsibility rather than the regulator’s.

Conduct rules staff is almost everyone else. They are subject to the conduct rules and must be trained on them.

The hiring implications differ sharply. A senior manager appointment runs on the regulator’s timetable. A certified appointment runs on yours, but creates an ongoing annual obligation the firm has to resource. Firms that treat certification as a form-filling exercise tend to discover otherwise during a supervisory review.

Firm Category Changes Everything

Limited Scope, Core and Enhanced firms carry materially different obligations, and the gap between Core and Enhanced is where most hiring surprises live.

Becoming an Enhanced firm brings additional senior management functions, prescribed responsibilities that must be allocated, and governance expectations that generally require people the firm does not currently employ. Firms crossing the threshold frequently plan for the compliance workload and not for the headcount. SMF Capital covers this in becoming an Enhanced firm and the SMF hires that come with it.

It also matters for benchmarking. Two firms of similar revenue in different categories are not comparable employers, and a salary benchmarked against the wrong one is the most common reason a preferred candidate declines.

The Obligations That Drive Hiring

Compliance monitoring. Every regulated firm needs a monitoring programme that is designed, executed and reported on. It is the single largest recurring item in most compliance functions and the first thing that quietly shrinks when the function is under-resourced. Our worked example of building a year’s compliance monitoring plan shows what a real one looks like, and SMF Capital’s compliance monitoring explained covers the principles.

Financial crime. The MLRO function, transaction monitoring, suspicious activity reporting, sanctions screening and the business-wide risk assessment. This is the area where workload scales with transaction volume rather than with complexity, which is why it outgrows part-time arrangements first. See building the financial crime team around your MLRO and SMF Capital’s business-wide risk assessment explained.

Client money. Firms holding client money or assets carry CASS obligations, and CASS experience is genuinely not transferable from general finance work. The oversight role and the operational role are different jobs. SMF Capital’s CASS client money oversight covers the distinction, and Accountancy Capital handles the finance-side hiring through CASS accountant recruitment.

Regulatory reporting. RegData submissions, prudential returns and the capital calculations behind them sit with the finance function rather than compliance, and the skills are specific. Regulatory reporting recruitment covers that market.

Appointed representatives. Principal firms are responsible for their ARs, and the oversight obligation has tightened considerably. Firms growing an AR network usually need oversight capacity before they think they do. See appointed representatives explained.

What the Regulator Looks At When You Appoint

An application for a senior management function is an assessment of three things: the individual, the role as the firm has described it, and the fit between them.

The individual is assessed on honesty and integrity, competence and capability, and financial soundness. History does not automatically disqualify anyone — candidates are approved with regulatory history behind them regularly — but history the firm has not found before the regulator does causes far more difficulty than the history itself.

The role is assessed through the Statement of Responsibilities, and this is where a surprising share of problems originate. Firms write them aspirationally, listing everything the function might cover, then present a candidate credible for the role as it actually exists. The mismatch is visible and it invites questions.

Capacity is the third area, and it has become more prominent as fractional appointments have grown. An individual holding functions at several firms will be asked whether they can discharge another. That is a legitimate question with a good answer available, provided the firm has prepared one rather than improvising when it arrives.

Timetable: The Thing Firms Plan Worst

Senior management functions are pre-approval roles, so nothing starts until the regulator says so. The practical consequence runs through every regulated hire: the search has to begin earlier than instinct suggests, because approval runs after the offer rather than alongside the notice period.

Firms facing a resignation routinely lose a month before starting, on the reasonable-sounding basis that they should decide what they want first. The deliberation is better informed once the market has been tested, and the month is never recovered. The twelve-week rule provides temporary cover but it is narrower than most firms assume, and it does not stretch to accommodate a slow start.

Candidates increasingly face an interview with the regulator as well, particularly at firms already receiving supervisory attention. Preparing for that is part of the process rather than an afterthought.

Permanent, Fractional, Interim or Outsourced

One of the more useful features of the regime is that it does not require senior managers to be employees. Functions can be held by individuals engaged on a consultancy basis, and a great many are, particularly at smaller firms.

That flexibility is widely misunderstood as a cheaper option. It is better understood as a way of buying seniority a small firm could not otherwise afford — two or three days a month of someone with twenty years behind them, rather than a full-time hire the budget had to compromise on. We have written about the trend in why more regulated firms are going fractional, and about the distinction between an appointed officer and a consultancy in outsourced compliance officer or compliance consultancy.

What does not change with the engagement model is accountability. The firm keeps the obligations and the individual keeps personal accountability, whatever the contract says.

When One Person Holds Two Functions

Combining SMF16 and SMF17 in one person is the most common arrangement at smaller firms, and the FCA accepts it where it is proportionate. It stops being appropriate as transaction volumes grow, where the firm is carrying a remediation plan, or where the business model involves higher-risk jurisdictions.

We have set out how firms move through the stages in compliance officer, MLRO or one person for both. FD Capital covers the recruitment side on its fractional dual SMF16 and SMF17 page, with the individual functions at SMF16 recruitment and SMF17 recruitment.

Who Handles What

Regulatory Capital is the editorial side of SMF Capital, which recruits senior manager functions. Across the wider group, FD Capital handles fractional and interim compliance leadership and regulated finance directors, Exec Capital handles CEO, COO and executive director appointments at regulated firms, NED Capital handles non-executive and committee chair appointments, and Accountancy Capital handles the regulated finance function below director level.

If you are unsure which applies, describe the firm and the function and we will point you at the right team.

Where to Go Next

For a function-by-function directory of every senior management role and who recruits it, see the SMF recruitment guide. For the regulator’s own publications, professional bodies and official sources, see resources. For current commentary, the blog covers hiring and compliance developments as they happen, including where regulated firms are currently hiring.