SMF18 Other Overall Responsibility Function: The Role, July 2026 Changes and CP26/37

SMF18, the Other Overall Responsibility function, is the senior manager role for an executive who is the most senior person responsible for an area of a firm's business but does not hold any other senior management function. It applies at Enhanced solo-regulated firms and, as an FCA function, at UK banks and Solvency II insurers. Today the FCA must approve every SMF18 before they start. CP26/37 proposes to remove SMF18 altogether, with its responsibilities moved to other senior managers, so holders and firms need to plan for that now.

What SMF18 covers

Under SUP 10C.7.1R a person performs SMF18 if they hold one of three things and are not approved for any other senior management function at the firm:

• overall responsibility for an activity, business area or management function, allocated under SYSC 26.3.1R, the rule that requires every part of the firm to sit with a named senior manager
• prescribed responsibility (z), oversight of the firm's compliance with the client assets rules (CASS)
• overall responsibility for activities excluded from SYSC 26.3 by the AIFMD exclusion, where the firm has chosen to allocate it

Overall responsibility means being the senior manager who answers for an area to the board, not necessarily running it day to day. SMF18 is a residual role: if the person already holds another function, such as executive director or chief operations, that approval covers the area instead.

Typical holders are heads of large business units who do not sit on the board: head of wealth management, head of retail lending, head of investment operations or a CASS oversight lead. Example: an Enhanced lender's head of commercial lending reports to the chief executive, runs a division with its own credit and collections teams, and is not a director. Unless another senior manager has overall responsibility for that division, the head of commercial lending is an SMF18.

The FCA does not expect a non-executive director ever to perform SMF18 (SUP 10C.7.4G). The head of legal is excluded, even if they have overall responsibility for the legal function (SUP 10C.7.6R).

On seniority, SUP 10C.7.8G says an SMF18 is in the top layer of executive management, and SUP 10C.7.9G says they should be the most senior person responsible for the area. PS26/6 removed the earlier wording that an SMF18 should have equal status to the firm's executive directors, because firms found it too restrictive. The FCA still expects an SMF18 to be the most senior individual reporting into the governing body for their area.

Which firms need an SMF18

The tables are in SUP 10C Annex 1. Many Enhanced firms need no SMF18 at all, because the people responsible for every area already hold other functions. A firm that falls below the Enhanced thresholds, raised by about 30% from 10 July 2026, becomes a Core firm and no longer has SMF18 roles.

What the SMF18 holder is personally accountable for

The Statement of Responsibilities, the document the regulator holds that lists what this person answers for, is what defines an SMF18. The function has no fixed job description, so the statement is the only official record of the area. It should name the business area or function precisely, give the reporting line and record any prescribed responsibility.

Prescribed responsibilities are specific duties the rules require a firm to give to a named senior manager. Since 10 July 2026, an SMF18 at a solo-regulated firm can hold any of them. SYSC 24.2.3AG still says this will be unusual, because each one should go to the most senior person responsible for the area. It gives three cases where it may fit: unusual management arrangements, covering an absent senior manager's prescribed responsibility, or a prescribed responsibility closely linked to the SMF18's own area. At dual-regulated firms the old restriction remains: an SMF18 can hold only prescribed responsibility (z) for CASS.

The SMF18 holder must follow the Individual Conduct Rules in COCON and the four Senior Manager Conduct Rules: SC1, take reasonable steps to ensure their area is controlled effectively; SC2, take reasonable steps to ensure it complies with the regulatory system; SC3, delegate only to appropriate people and oversee them; and SC4, disclose appropriately anything the FCA or PRA would reasonably expect to know.

The Duty of Responsibility in section 66A(5) FSMA means that if the firm breaches a requirement in the SMF18's area, the FCA can act against them personally unless they took the steps a person in their position could reasonably be expected to take. Our guide to reasonable steps explains the standard.

Reasonable steps in practice

Because an SMF18 is usually responsible for a whole business area, the evidence should show control of that area from top to bottom.

The first 90 days in the role

• Agree the Statement of Responsibilities wording and confirm it matches the management responsibilities map.
• Get a written handover from your predecessor, including open issues, audit findings and regulatory correspondence.
• Review the area's risk register, recent compliance monitoring and complaints data.
• Set the management information you will receive and how often.
• Meet the heads of risk, compliance, internal audit and, where relevant, CASS.
• Record every material decision and the reasoning behind it from the first week.

Applying for approval

The firm applies on Form A through the FCA's Connect system. The FCA application page requires the completed form, the candidate declaration, a Statement of Responsibilities and supporting documents. The firm must be satisfied first that the candidate is fit and proper under FIT: honest, competent and financially sound.

• Regulatory references from the current employer and anyone who employed the candidate in the past six years (SYSC 22.2.1R), returned within four weeks of a request since 24 April 2026.
• A criminal records check, valid for six months since 24 April 2026 and not needed for an internal or intragroup move.
• Evidence of competence for the specific business area.
• A possible FCA interview where the FCA applies its highest level of scrutiny.

Section 61 FSMA gives the FCA three months from a complete application, with the clock stopped while it waits for requested information. The FCA has committed to decide within two months. Starting in the role before approval breaches section 59 FSMA and can lead to a personal penalty under section 63A. The temporary cover rule lets a firm cover an unforeseen or temporary absence and submit an application within 12 weeks; during that period SYSC 26.4.6R lets the absent person's overall responsibilities go to someone who is not a senior manager.

What CP26/37 would change for SMF18

CP26/37 proposes to remove SMF18 entirely. The FCA says SMF18 accounts for 19% of applications at solo-regulated Enhanced firms, and that it has brought into the regime many people in roles that were not meant to be senior managers. Removing SMF18 and SMF22 together would take about 1,400 people out of the senior manager population.

• Overall responsibilities and prescribed responsibilities held by SMF18s would move to other senior managers.
• The draft rules say a senior manager with overall responsibility can rely on delegated management structures and exercise it mainly through governance, oversight and escalation, and that significant parts of an area can be run by managers below with substantial autonomy. Wide responsibilities would be acceptable only where delegation structures are strong.
• New guidance on Senior Manager Conduct Rule SC3 says a senior manager need not review every delegated decision or repeat the delegate's work.
• Firms would not need to notify the FCA that a person has stopped performing SMF18.
• Enhanced and dual-regulated firms would update Statements of Responsibilities and management responsibilities maps at commencement.

The FCA considered keeping SMF18 as a notified role, one the firm reports rather than the FCA approves, and asks in Question 4 whether it should. If it does, it would not make the delegation changes. Responses close on 22 January 2027 and changes are expected in the second half of 2027, subject to the Financial Services and Markets Bill.

What current holders should do now:

• Keep meeting the role in full. The approval, the Conduct Rules and the Duty of Responsibility apply until commencement.
• Make sure your records show how you controlled your area, because a later review could look back at your time in the role.
• Ask which senior manager would take your area, and whether your role fits another function, such as SMF24 or SMF3.

What firms should do now:

• Keep applying for SMF18 approval where a new appointment needs it.
• Map every SMF18's overall responsibilities and prescribed responsibilities to the senior manager who would hold them.
• Treat the July 2026 freedom to give prescribed responsibilities to SMF18s with care: the FCA itself warned it may be short lived. Prescribed responsibility (z) for CASS survives Phase 2, so it should sit with the person who will hold it long term.
• Write down the delegation and reporting lines that would support the receiving senior managers.
• Decide whether to answer Question 4.

Our SM&CR Phase 2 article covers the wider package, and our guide to Statements of Responsibilities and management maps covers the drafting.

Holding SMF18 with other functions

SMF18 cannot be combined with another function at the same firm: approval for any other senior management function means the person is no longer an SMF18. If an SMF18 is later approved as an executive director, the SMF18 falls away and the area is recorded in their new Statement of Responsibilities. A person can hold SMF18 at one group firm and a different function at another, with a separate statement for each firm. Watch the line with SMF16 and SMF24: an SMF18 who in practice runs compliance or operations probably needs that function instead.

How we support SMF18 holders

We help SMF18 holders and their firms define the role, evidence control of the area and prepare for its proposed removal. Our SM&CR support covers:

• one-to-one Senior Manager training built on the person's own Statement of Responsibilities
• drafting and review of the Statement of Responsibilities
• the Form A application and the fitness and propriety file behind it
• preparation for an FCA or PRA interview
• handover arrangements when the role changes hands

The Senior Management Functions guide sets out how SMF18 fits with the other roles.