SMF1: What It Takes to Be Approved as a Regulated CEO

Let's take a closer look at one of the most important senior management functions: SMF1, the Chief Executive function.

For many businesses seeking FCA authorisation, the CEO is going to be central to the proposed governance structure.

But becoming the CEO of a regulated business is different from simply becoming the CEO of an ordinary commercial company.

An SMF1 holder has a specific senior management responsibility within the regulated firm, and the individual needs to be approved to perform that function where the regulatory regime requires it.

So what does the regulator want to see?

Again, it's not simply about having an impressive job title.

The individual's previous experience, competence, responsibilities and understanding of the regulated environment all become relevant.

A successful commercial entrepreneur, for example, may have excellent experience building a business, but that doesn't automatically mean they have the regulatory experience required for a particular SMF1 role.

Equally, someone who has spent years in a regulated financial services environment may have extensive regulatory knowledge but a different type of leadership experience.

The important question is whether the individual's overall experience is appropriate for the role they are being proposed for.

We've put together a dedicated guide explaining SMF1: What It Takes to Be Approved as a Regulated CEO.

It's particularly useful for founders and senior executives who are moving from an unregulated business environment into a regulated financial services business.

And SMF1 is only one part of the wider framework.

There are a number of different SMF designations covered by the FCA regime, with the appropriate requirements depending on the type of firm, its activities and its governance structure.

That's why SMF planning shouldn't start with individual job titles.

It should start with the proposed regulated business.

What permissions are being sought?

What activities will the firm undertake?

What governance structure is being proposed?

Which senior management functions apply?

And who has the appropriate experience to take responsibility for each of them?

Once those questions have been answered, the recruitment process becomes much more targeted.

And for a new regulated business, getting that structure right at the beginning can be considerably more straightforward than trying to redesign it shortly before an FCA application is submitted.