SMF27 Partner Function: Partners, LLP Members and Personal Accountability

SMF27, the Partner function, is the Senior Management Function held by partners in a partnership and members of a limited liability partnership (LLP) who take part in managing an FCA-authorised firm. Each partner who performs it needs FCA approval before taking up the role. It is an approved function, and the FCA's Phase 2 consultation, CP26/37, does not propose to make it notified or to remove it.

What SMF27 covers

The partner function rules sit in SUP 10C.5. The FCA's solo-regulated firms guide summarises SMF27 as "a partner in a firm, other than a limited partner in a partnership registered under the Limited Partnership Act 1907". In plain words, the rules capture:

• in a partnership, each partner, by whatever name the role is called, including anyone acting as a member of the firm's governing body
• in an LLP, each member, any person appointed to direct the firm's affairs, and any person whose directions or instructions the members are used to acting on, other than professional advice
• not limited partners in a limited partnership registered under the Limited Partnership Act 1907

Two limits narrow this. First, every Senior Management Function must meet the general test in SUP 10C.3 and section 59ZA of FSMA: the person must be responsible for managing an aspect of the firm's affairs that could have serious consequences. FCA guidance in SUP 10C.5 says partners or members who play no part in managing the firm are unlikely to perform the partner function, and in PS18/14 the FCA confirmed it is for firms to decide, on those rules, whether each partner performs an SMF. When the FCA consulted on this in CP17/25 it gave the examples of a purely silent partner, or a large number of junior partners with no management role or authority to act for the firm.

Second, SUP 10C.5.19R deals with firms whose principal purpose is not regulated business. If the firm's principal purpose is regulated activities, every partner who meets the definition performs SMF27. If not, a partner performs it only to the extent they are responsible for a regulated activity, and is treated as responsible unless the firm has given that responsibility to another partner or group of partners. SUP 10C.5.20G adds that a partner whose only regulated activities are incidental to their professional services, in a firm whose main business is not regulated, need not be approved. This is how most solicitors and accountants in authorised professional firms fall outside SMF27.

Example: an investment management LLP has nine members. Five sit on the management committee and the investment committee. Four are former senior members who keep a capital interest but take no part in running the firm. The firm applies for SMF27 for the five and records why the other four do not meet the definition.

Which firms need an SMF27

The tiers come from SUP 10C Annex 1 and SYSC 23 Annex 1. The FCA's Senior Managers Regime page lists SMF27 among FCA-only functions and explains the overlap rule. See our Senior Management Functions guide for the full map.

Corporate partners. The FCA's application page explains that a corporate body, such as a company acting as a member of an LLP, can be approved as SMF27. Applications are made on paper rather than through Connect, with the partnership agreement, the governance links to the firm and fitness and propriety answers for two senior individuals at the corporate body.

What the SMF27 holder is personally accountable for

Statement of Responsibilities. This is the document the FCA holds that lists what the person answers for. In a partnership it does the work that a job title does in a company. The FCA's guide says responsibilities in partnerships can be allocated in different ways: shared between several partners, or weighted towards senior or executive partners. Firms should explain how this works in each partner's statement. A shared responsibility should be recorded the same way in each sharing partner's statement. A partner with a narrow role will have a shorter statement than a managing partner.

Collective decisions. The FCA's guide says individual accountability does not cut across or undermine decisions made by a governing body acting collectively. Where partners decide matters at a members' meeting or in committees, each partner's statement should say which committees they sit on, which they chair, and which areas they personally oversee between meetings. A line such as "member of the investment committee, with responsibility for portfolio risk limits across all funds" is far easier to defend than "partner".

Prescribed responsibilities. Partnerships at Core and Enhanced level must give the prescribed responsibilities in SYSC 24 to their senior managers. The FCA's guide says it would not normally expect them to be divided or shared between partners without strong justification. Name one partner for each.

Conduct Rules and Duty of Responsibility. The Individual Conduct Rules and the Senior Manager Conduct Rules SC1 to SC4 in COCON apply to every partner approved as SMF27. Under section 66A of FSMA, if the firm breaches a requirement in an area a partner was responsible for, the FCA can act against that partner if they did not take reasonable steps. In everyday terms: being one of many partners does not dilute personal accountability for your own areas.

How SMF27 interacts with other functions held by partners

A partner who also performs another SMF needs approval for each. In CP17/25 the FCA gave the example of a partner acting as chief executive or MLRO. Common patterns:

• Managing partner and SMF1. The partner who runs the firm under the authority of the partners usually also holds the SMF1 Chief Executive function.
• Compliance partner and SMF16. A partner who runs compliance holds the SMF16 Compliance Oversight function as well. The firm must still show that compliance is independent of the business it monitors.
• MLRO partner and SMF17. See our SMF17 Money Laundering Reporting Officer guide.
• Management responsibilities maps. For Enhanced firms, SYSC 25 guidance says the partner function is defined generically and can be performed by several people, so the map does not need to explain why several people perform it.

Practical examples for investment LLPs

Asset managers. Where an LLP manages several funds, a conflict between funds (for example, allocating a scarce investment opportunity) is a classic area for personal accountability. The responsible partner should be able to show the allocation policy, the decision record and the compliance review.

Investment advisers and sub-advisers. Many LLPs advise or arrange for an offshore manager. The partner responsible for the advisory relationship should be able to show what advice was given, on what basis, and how conflicts with other mandates were handled.

Real estate investment advisers. Firms advising on property funds often rely on third parties for valuations, property management and fund administration. Name the partner who oversees each outsourced or delegated service, and keep their review of service levels and exceptions.

Investment committee minutes. Minutes should record who attended, what was presented, the challenge raised and the decision, not just the outcome. They are often the best evidence a partner has.

Reasonable steps in practice

See our guide to evidencing reasonable steps and our article on SM&CR for investment firms.

Preparing a partner for a Senior Management Function for the first time

Partners who have spent their careers in investment roles are often approved as SMF27 without having held a regulatory role before. A practical plan:

• Explain the difference between partnership liability and regulatory accountability. The Duty of Responsibility is personal and separate from the LLP agreement.
• Draft the Statement of Responsibilities with the partner, not for them, and check it against what they actually control.
• Walk through the Senior Manager Conduct Rules using the partner's own committees and decisions.
• Build a short evidence routine: what to keep, where, and how to record challenge in meetings.
• Prepare for FCA questions on the partner's role, the firm's main risks and how they would escalate a problem.

The first 90 days in the role

• Read the LLP agreement, committee terms of reference and recent minutes.
• Agree your Statement of Responsibilities and any prescribed responsibility you hold.
• List the delegated and outsourced services in your area and the oversight you receive.
• Review the conflicts register for your funds or clients.
• Set the management information you need and how often.
• Record the reasons for any decision you challenge or dissent from.

Applying for approval

The firm applies on Form A through Connect, or on paper for a corporate partner. Form A covers employment history, the Statement of Responsibilities, competence, capacity, fitness and propriety, directorships, regulatory references and criminal records checks. Under section 60A of FSMA the firm must be satisfied the partner is fit and proper before applying. Since PS26/6, criminal records checks stay valid for six months and references must be given within four weeks of a request. The FCA must decide within three months of a complete application and has committed to a two-month target. It may interview a candidate where it has concerns. A partner who performs SMF27 without approval puts the firm in breach of section 59 of FSMA. Temporary cover of up to 12 weeks is available for an unexpected vacancy, extended until the FCA decides if an application is made in that time. Our fitness and propriety guide covers the checks.

What CP26/37 would change for SMF27

SMF27 is not on the CP26/37 list of functions that would become notified, and the FCA says it is not changing SMF roles at Core and Limited Scope firms. Partners would still need approval. The wider changes still matter:

• Revised Statements of Responsibilities would not be refiled but must be kept current, kept for six years and provided on request. Most partnerships have several SMFs, so the single-SMF exemption will rarely help.
• Prescribed responsibilities would fall to A, D and Z for Core and Enhanced firms, plus J-3 for Enhanced firms.
• Temporary cover would rise from 12 to 18 weeks.
• Certification would end, so junior partners who are not SMFs would be assessed under the competent employee rules.

See our SM&CR Phase 2 guide.

Holding SMF27 with other functions

Most partners who hold another SMF also hold SMF27. Each function needs approval, but one Form A and one Statement of Responsibilities can cover all of them. Watch capacity where a partner holds roles in several group firms, and keep compliance and MLRO duties separate from investment decisions where you can.

How we support SMF27 holders

We help partnerships and LLPs decide which partners perform SMF27, draft clear statements for collective structures and prepare partners for the role.

• One-to-one Senior Manager training built on the partner's own Statement of Responsibilities
• Drafting and review of the Statement of Responsibilities
• The Form A application and the fitness and propriety file
• FCA interview preparation
• Handover arrangements when partners join, retire or change roles

Our SM&CR support team also reviews which members fall outside the definition and records the reasons.