SMF29 Limited Scope Function: Who Holds It and What They Answer For

SMF29, the Limited Scope function, is the Senior Management Function held by the person who apportions responsibilities and oversees systems and controls at a limited scope firm, the lightest tier of the Senior Managers and Certification Regime (SM&CR). In many limited scope firms it is the only Senior Management Function. It is an FCA-approved function, and the FCA's Phase 2 consultation, CP26/37, does not propose to change it or make it notified.

What SMF29 covers

The rule in SUP 10C.6 defines SMF29 as acting as the person responsible for the apportionment function, the oversight function, or both, set out in SYSC 4.4.5R. Those two functions are:

• Apportionment: dealing with the apportionment of significant responsibilities among directors and senior managers under SYSC 4.4.3R, so that it is clear who does what and the business can be properly monitored and controlled.
• Oversight: overseeing the setting up and running of the firm's systems and controls under SYSC 4.1.1R, which requires sound governance, clear lines of responsibility, risk management and internal controls.

In plain words, the SMF29 holder makes sure everyone senior knows what they are responsible for, and that the firm's controls work. The function replaced the old Apportionment and Oversight function (CF8) in December 2019, and CF8 holders were converted automatically.

The table in SYSC 4.4.5R generally points to the chief executive, where the firm has one, with other directors or senior managers as optional additions. The FCA's guidance in SYSC 4.4.6G says allocating the functions to one or two individuals is likely to suit most firms, and that where a committee runs the firm the functions can be allocated to each member.

Typical holders are the managing director, owner-director or chief executive. Example: a car dealership with a limited permission to act as a credit broker appoints its managing director as SMF29. The FCA's solo-regulated firms guide uses a similar firm as its example: one director holds SMF29, the other directors do not need approval, and the firm needs no SMF16 or SMF17.

Which firms are limited scope

SYSC 23 Annex 1 sets out the limited scope categories. In summary:

• firms whose principal purpose is not regulated business, that are not MiFID investment firms, and that are oil market participants, energy market participants, service companies, or wholly owned subsidiaries of a local authority or registered social landlord
• firms whose principal purpose is not regulated business, that distribute only non-investment insurance (with at most advising on P2P agreements or claims management alongside)
• firms with only a limited permission for consumer credit, such as many retailers and motor dealers acting as credit brokers
• claims management firms with no other regulated activity except consumer credit
• sole traders
• not-for-profit debt advice bodies
• authorised professional firms whose only regulated activities are non-mainstream
• internally managed AIFs that are bodies corporate and not collective investment schemes

Principal purpose is a question of fact. The FCA expects a firm relying on it to be able to show where the balance of its business lies. A limited scope firm can also notify the FCA that it will become a Core firm.

Which firms need an SMF29

The table reflects SUP 10C Annex 1 Part Seven. A sole trader with no employees does not need an SMF29, because SYSC 4.4 applies to a sole trader only when they employ someone who must be approved. Our Senior Management Functions guide shows how SMF29 compares with the Core and Enhanced functions.

What the SMF29 holder is personally accountable for

Statement of Responsibilities. This is the document the FCA holds that lists what the person answers for. For SMF29 it should state that the holder is responsible for apportionment under SYSC 4.4.3R and oversight under SYSC 4.1.1R, and name the business areas and controls this covers. Our guide to Statements of Responsibilities explains the drafting standard.

Prescribed responsibilities. None. The FCA's guide and CP26/37 both confirm that prescribed responsibilities do not apply to limited scope firms, and there is no management responsibilities map.

Conduct Rules. The SMF29 holder must follow the six Individual Conduct Rules and the four Senior Manager Conduct Rules in COCON: reasonable steps to control the business effectively (SC1), to make it comply (SC2), to delegate appropriately and oversee the delegation (SC3), and to disclose to the FCA what it would reasonably expect to know (SC4).

Duty of Responsibility. Under section 66A of FSMA the FCA can act against the holder if the firm breaches a requirement in their area and they did not take reasonable steps to prevent it. Because SMF29 covers apportionment and oversight across the firm, the holder's area is wide. In everyday terms: the person approved as SMF29 is the one the FCA will look to first.

Reasonable steps in practice

Our article on how senior managers evidence reasonable steps explains the standard.

The first 90 days in the role

• Confirm the firm is limited scope and record why, including its principal purpose if relevant.
• Write or update the allocation of responsibilities among directors and managers.
• List the firm's regulated activities and the controls for each.
• Check financial promotions, complaints handling and record keeping, which are frequent weak points in small firms.
• Agree the management information you will receive and how often.
• Diarise the firm's FCA returns and the annual fitness and propriety review of staff and senior managers.

Applying for approval

The firm applies on Form A through Connect. Form A covers employment history, the Statement of Responsibilities, a competency assessment, fitness and propriety questions, directorships, regulatory references and criminal records checks, as the FCA's application page explains.

• Fitness and propriety. The firm must be satisfied the candidate is fit and proper before it applies, under section 60A of FSMA. See our fitness and propriety guide.
• References and records. Regulatory references cover six years and must be given within four weeks of a request. Criminal records checks are valid for six months.
• Scrutiny. The FCA says it may apply a lower level of scrutiny to SMF roles at smaller firms where it finds no cause for concern, including for a first-time candidate whose firm explains how it will support them.
• Timing. The FCA must decide within three months of a complete application and has committed to a two-month target.
• Starting early. Performing SMF29 without approval breaches section 59 of FSMA. Temporary cover of up to 12 weeks is allowed for an unexpected vacancy, and continues until the FCA decides if an application is made in that time.

What CP26/37 would change for SMF29

CP26/37 does not change SMF29. The FCA says it is not proposing changes to SMF roles at Core and Limited Scope firms, and SMF29 is not on the list of functions that would become notified. The changes that would matter most to limited scope firms are:

• No Statement of Responsibilities for single-SMF firms. Where only one person performs SMF roles, no statement would be needed. Many limited scope firms have just one SMF29 holder.
• No refiling. Where statements are still needed, firms would keep them current internally and provide them on request.
• Certification and the Directory removed. Staff below SMF level would be assessed under the competent employee rules instead.
• Temporary cover would rise from 12 to 18 weeks.
• Sole traders would come within the Conduct Rules for the first time.
• Conduct Rules training would become a duty to tell staff which rules apply to them and what happens if they breach them.

Consultation closes on 22 January 2027. See our SM&CR Phase 2 guide.

Holding SMF29 with other functions

• SMF29 with SMF16 and SMF17. In limited scope firms that need them, one person often holds all three on one Form A and one Statement of Responsibilities. See our SMF16 Compliance Oversight and SMF17 Money Laundering Reporting Officer guides.
• Several holders. The FCA's guidance accepts allocation to one or two individuals in most firms. Where two people share SMF29, record how they divide or share the work.
• Overseas managers. SUP 10C.6 guidance says the presence of an SMF29 holder responsible for FCA-regulated activities is a factor in deciding whether a manager based overseas is performing a controlled function.

How we support SMF29 holders

We help limited scope firms confirm their category, appoint the right SMF29 holder and keep the evidence the role needs.

• 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
• FCA interview preparation
• Handover arrangements between outgoing and incoming SMF29 holders

Our SM&CR support team also helps firms decide whether to stay limited scope or opt into the Core tier.