SMF1 Chief Executive Function: Accountability, Approval and the 2027 Changes

SMF1, the Chief Executive function, is held by the person responsible, under the board's immediate authority, for running the whole business of a UK regulated firm. It applies to Core and Enhanced solo-regulated firms and, as a PRA function, to banks and insurers. Anyone performing it must be approved before they start. The FCA's CP26/37 proposes that SMF1 stays an approved function, but it would change the prescribed responsibilities the chief executive usually holds.

What SMF1 covers

SUP 10C.5.21R defines the chief executive function as acting in the capacity of a chief executive of a firm. The guidance that follows explains what that means: having responsibility, alone or jointly with others, under the immediate authority of the governing body, for the conduct of the whole of the business. This mirrors the definition of chief executive in section 417 of FSMA.

The guidance also settles four practical questions:

• The chief executive may sit on the board but does not have to.
• A chair who also runs the business is performing SMF1 as well as SMF9.
• Joint chief executives each perform SMF1.
• If responsibility is divided between people, for example by business line, and not shared, nobody performs SMF1.

In practice the holder is the CEO, managing director or chief executive officer. Title does not decide it. Example: a 40-person Core investment firm has a "Managing Director" who reports to the board and runs every department. That person performs SMF1, whatever the job title, and as an executive director on the board also holds SMF3.

Which firms need an SMF1

The function applies only if someone actually performs the role. SMF1 is not a required function, so a firm with no single person running the whole business does not have to create one.

The firm types come from SUP 10C Annex 1. Our Senior Management Functions guide has the full table for every SMF.

What the SMF1 holder is personally accountable for

Statement of Responsibilities. The firm must give the chief executive a Statement of Responsibilities, the document held by the FCA that lists what this person answers for. For a chief executive it usually covers the firm's strategy and business plan, overall management of the business, culture, and any prescribed responsibilities. Everything not given to another senior manager tends to land here by default, so the statement should be precise about where the chief executive's role stops.

Prescribed responsibilities. These are duties the rules say must be given to a named senior manager. Guidance in SYSC 24 Annex 2 says that, at a Core firm, these three most naturally sit with SMF1:

• (a) the firm's obligations under the Senior Managers Regime, including vetting senior manager candidates
• (b) the firm's obligations under the Certification Regime
• (b-1) Conduct Rules training and reporting

At Enhanced firms the same guidance again points (a) towards SMF1. If a firm has no chief executive, the same guidance says those responsibilities should go to the most suitable other senior manager.

Senior Manager Conduct Rules. The chief executive must take reasonable steps to ensure the business they run is controlled effectively (SC1) and complies with the regulatory system (SC2), that delegation goes to the right people and is overseen (SC3), and must disclose to the FCA or PRA anything they would reasonably expect to know (SC4). The six Individual Conduct Rules in COCON 2.1 apply too, including the duty to act to deliver good outcomes for retail customers.

The Duty of Responsibility. Under section 66A(5) of FSMA, if the firm breaches a requirement in an area the chief executive is responsible for, and they did not take the steps a person in their position could reasonably be expected to take, the FCA can act against them personally. Because the chief executive's area is the whole business, this is the widest exposure of any SMF. Our guide to senior manager reasonable steps explains how the FCA assesses it.

Reasonable steps in practice

DEPP 6.2 lists what the FCA considers, including the information the person had, whether they acted on it in good time, how they delegated and whether they took steps to understand the firm's activities. For a chief executive the evidence usually looks like this.

The test is what a reasonable chief executive would have done with what they knew or should have known. Records made at the time count for more than explanations written afterwards.

The first 90 days in the role

• Read your Statement of Responsibilities line by line and agree any changes with the board before you sign it.
• Get the handover from your predecessor in writing, with open issues, regulatory correspondence and known breaches.
• Meet each direct report who holds an SMF and agree what they will report to you and how often.
• Review the last year of board and committee minutes, risk reports and complaint data.
• Check the vetting and annual fitness and propriety records for every senior manager if you hold prescribed responsibility (a).
• Ask compliance for every open item with the FCA, including commitments made in supervisory meetings.
• Set up your own record of decisions and escalations from week one.

Applying for approval

The firm applies on Form A through Connect, using the long form for a candidate not approved in the last six months. The application includes the Statement of Responsibilities, ten years of employment history and directorships, a competence and capacity assessment, a skills gap analysis and learning plan, regulatory references from every employer in the last six years under SYSC 22, and a criminal records check no more than six months old. Enhanced and dual-regulated firms also send the management responsibilities map and a handover summary. A standalone long Form A carries a category 1 fee.

The firm must assess the candidate as fit and proper against FIT before applying: honesty, integrity and reputation; competence and capability; and financial soundness. The FCA expects the firm to show the candidate has the knowledge, skills and experience for this specific role and understands the firm and its markets, and to explain how any gaps will be closed. It may interview the candidate, telling the firm in advance what it wants to discuss. The FCA's guidance on applying for an SMF sets out what a complete application looks like.

Under section 61 of FSMA, the regulator must decide within three months of receiving a complete application, and the clock stops while it waits for information it has asked for. The FCA has committed to deciding within two months. Acting as chief executive without approval exposes the individual to a penalty under section 63A. The exception is the temporary cover rule in SUP 10C.3A: someone can cover an absent chief executive for up to 12 weeks, and since 24 April 2026 the firm only has to submit a complete application in that time for the person to continue until the decision.

What CP26/37 would change for SMF1

SMF1 stays an approved function at every firm, and the FCA proposes no change to SMF roles at Core and Limited Scope firms. The changes that matter for chief executives are elsewhere:

• Prescribed responsibilities. Only (a), (d), (z) and, for Enhanced firms, (j-3) would remain. Responsibilities (b) and (b-1), often held by the chief executive, would go, because certification would be removed and Conduct Rules training would become a duty to notify staff of the rules.
• Vetting. The FCA would reword (a) to make clear its holder answers for the firm's vetting of SMF candidates, including notified SMFs. At Enhanced firms, where committee chairs and the head of internal audit would no longer be approved by the FCA, a chief executive holding (a) would own that vetting.
• Statements of Responsibilities. Changes would be kept internally and provided on request instead of being filed. If the chief executive is the only person performing SMFs at the firm, no statement would be needed.
• Temporary cover. Cover for an absent chief executive would run for 18 weeks, with a "reasonable use" test replacing "reasonably unforeseen" for FCA functions.
• Group roles. At an Enhanced solo-regulated firm, a group chief executive with significant influence over the firm would still fall within the narrowed SMF7.

The consultation closes on 22 January 2027 and final rules are expected in the first half of 2027. Our article on SM&CR Phase 2 covers the full package.

Holding SMF1 with other functions

• SMF1 and SMF3. At a Core company, a chief executive who sits on the board is also an executive director. The FCA's guide for solo-regulated firms treats that person as holding both, so apply for both. See our guide to SMF3 Executive Director.
• SMF1 and SMF9. A chief executive can also chair the board unless another rule prevents it, for example SYSC 4.3A.2. Apply for both functions. The board will need another way to challenge the chief executive.
• SMF1 with SMF16 or SMF17. Common in small firms. SYSC 24 Annex 2 says giving (a) or (b) to the compliance or MLRO holder is harder to justify, so the chief executive usually keeps those, and the firm must show the compliance role still has independent challenge. Our guides to SMF16 Compliance Oversight and SMF17 MLRO cover those roles.

One Statement of Responsibilities covers every function a person holds at one firm. Combining roles adds to the reasonable steps you must be able to show, so the FCA will test capacity.

How we support SMF1 holders

We work with chief executives and the boards appointing them, so that the person is ready to answer for the whole business from day one.

• One-to-one Senior Manager training built on the chief executive's own Statement of Responsibilities
• Drafting and review of the Statement of Responsibilities and prescribed responsibility allocation
• The Form A application and the fitness and propriety file
• FCA interview preparation
• Handover arrangements between outgoing and incoming chief executives

Our wider SM&CR support covers the firm's whole senior management structure and the move to the 2027 rules.