SMF22 Other Local Responsibility Function: Branch Roles and the Proposed Removal

SMF22, the Other Local Responsibility function, applies only in the UK branches of overseas banks and overseas insurers. It covers a person who is responsible for an activity, business area or management function of the branch, or for its client assets oversight, but holds no other senior management function there. It is an FCA function, and the FCA must approve the holder before they start. CP26/37 proposes to remove SMF22 entirely and move its responsibilities to other senior managers.

What SMF22 covers

Under SUP 10C.8.1R a person performs SMF22 in relation to a UK branch of an overseas firm if they hold responsibility allocated under the overall and local responsibility rules in SYSC 26, or prescribed responsibility (z) for compliance with the client assets rules (CASS), and they are not approved for any other senior management function in relation to the branch.

SYSC 26.3.2R explains what local responsibility means for a branch. The firm must make sure a senior manager has overall responsibility, subject to the branch's governing body, for each activity under that body's management, and that a senior manager has responsibility for every other activity, business area and management function of the branch. A person given that local responsibility must be directly involved in managing the area. If they hold no other function, they are an SMF22.

Typical holders are heads of business lines or support functions in a large branch who do not sit on its management body: head of markets, head of corporate banking, head of operations or head of internal audit for the UK branch. Example: the UK branch of an Asian bank has a branch head approved by the PRA as SMF19. Its head of trade finance runs that business line in London, reports to the branch head and holds no other function. He is an SMF22.

The FCA's examples in SUP 10C.8.3G help with edge cases. A person outside the branch who only sets strategy, without implementing it, is not an SMF22. In a branch with no head of internal audit, the person given that responsibility needs SMF22 approval unless they already hold another function. A person approved for a PRA function for the area needs only the PRA approval. The head of legal is excluded.

On seniority, SUP 10C.8.11G applies the SMF18 guidance to SMF22: the holder should be in the top layer of the branch's executive management and the most senior person responsible for the area. PS26/6 removed the earlier "equal status to executive directors" wording from that guidance from 24 April 2026, and the FCA confirmed the change also applies to SMF22.

Which firms need an SMF22

The applicability rules are SUP 10C.8.-2R and SUP 10C.8.-1G and the tables in SUP 10C Annex 1. Many branches need no SMF22 at all, because every area sits with the SMF19 or another senior manager.

What the SMF22 holder is personally accountable for

The Statement of Responsibilities, the document the regulator holds that sets out what this person answers for, defines the SMF22's area. Because the function has no fixed job description, the statement should name the business line or function, its scope within the branch and the reporting line.

Prescribed responsibilities, the specific duties a firm must give to a named senior manager, are tightly limited for SMF22. All branches that need SMF22 are PRA-authorised, and under SYSC 24.2.3R a PRA-authorised firm may give an SMF22 only prescribed responsibility (z) for CASS. The July 2026 freedom for SMF18s to hold any prescribed responsibility applies only at solo-regulated firms, so it does not reach SMF22.

The SMF22 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 the FCA can act against the SMF22 personally if the branch breaches a requirement in their area and they did not take 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

An SMF22 usually runs one part of a branch whose policies, systems and reporting lines often come from head office. The evidence should show the holder understood and controlled the UK end.

The first 90 days in the role

• Agree your Statement of Responsibilities and check it matches the branch's management responsibilities map.
• Get a written handover covering open issues, audit findings and regulator contact.
• Map which parts of your area are run from head office or other group offices.
• Set up management information and a regular meeting with the SMF19.
• Review the area's risk register and recent compliance monitoring.
• Keep a record of material decisions from the start.

Applying for approval

SMF22 is an FCA-only function, so the FCA decides the application, made on Form A through Connect. The FCA application page requires the completed form, the candidate declaration, a Statement of Responsibilities and supporting documents. The firm must first be satisfied 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).
• A criminal records check, valid for six months since 24 April 2026 and not needed for an internal or intragroup move, which often applies to staff moving from head office.
• Competence for the specific business line, including knowledge of UK rules.
• A possible FCA interview where the FCA applies its highest level of scrutiny.

Section 61 FSMA allows three months from a complete application, with the clock stopped while requested information is outstanding. The FCA has committed to decide within two months. Performing SMF22 without approval breaches section 59 FSMA and can lead to a personal penalty under section 63A. The temporary cover rule gives 12 weeks to submit an application where the absence is temporary or reasonably unforeseen, and during that period the absent person's local responsibilities can go to someone who is not a senior manager (SYSC 26.4.6R).

What CP26/37 would change for SMF22

CP26/37 proposes to remove SMF22. The FCA says SMF22 accounts for 24% of applications at dual-regulated branches and has brought into the regime people in roles not intended to be senior managers. Removing SMF22 and SMF18 together would take about 1,400 people out of the senior manager population.

• Local responsibilities and the CASS responsibility held by SMF22s would move to other senior managers, often the SMF19 or branch executive directors.
• The draft rules say a senior manager can rely on delegated management structures and exercise responsibility mainly through governance, oversight and escalation, so one person can hold wider responsibilities where delegation is 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 SMF22.
• Branches would update Statements of Responsibilities and management responsibilities maps at commencement.

The FCA considered making SMF22 a notified role, one the firm reports rather than the FCA approves, and asks in Question 4 whether it should. If it keeps SMF22 as notified, it would not make the delegation changes. The PRA's functions at branches, including SMF19, are separate and stay as the PRA proposes in CP14/26. 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 holders and branches should do now:

• Keep the role running in full. Approval, the Conduct Rules and the Duty of Responsibility apply until commencement, and records of your time in the role still matter afterwards.
• Map each SMF22's local responsibilities and any CASS responsibility to the senior manager who would take them.
• Check the receiving senior manager's workload and the delegation framework they would rely on.
• Keep applying for SMF22 approval for new appointments until the rules change.
• Decide whether to answer Question 4.

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

Holding SMF22 with other functions

SMF22 cannot be held alongside another function for the same branch: approval for any other function there means the person is no longer an SMF22. If an SMF22 is later approved as an executive director, the SMF22 falls away and the firm uses Form E. A person can hold SMF22 at one group branch and a different function at another group firm, for example compliance oversight at a UK subsidiary, and needs approval for both.

How we support SMF22 holders

We help branch business heads and their branches define SMF22 roles, evidence control and plan the move of local responsibilities proposed in Phase 2. 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 SMF22 fits with the other roles.