SMF7 Group Entity Senior Manager: Scope, Accountability and the CP26/37 Changes

SMF7, the Group Entity Senior Manager function, covers a person employed by a parent company or another group company who has a significant influence over how a UK regulated firm runs its regulated business. At FCA solo-regulated firms it applies only to Enhanced firms, and it is an approved role: the FCA must approve the person before they start. Banks and insurers regulated by the PRA have a separate PRA version of SMF7. Under CP26/37 the role stays approved, but the FCA proposes to narrow it to group officers who hold one of seven named top jobs, which it expects to remove about 40% of current holders.

What SMF7 covers

SUP 10C.5B.1R defines the function as having a significant influence on the management or conduct of one or more aspects of a firm's affairs in relation to its regulated activities. It applies only where the person is employed by, or is an officer of, the firm's parent undertaking or holding company, or another company in the same group. Influence exercised while performing another senior management function for the same firm does not count.

In practice the holders are group executives and some group non-executive directors: a group chief executive, group chief financial officer, group chief risk officer or group chief information officer whose decisions shape what happens inside the UK firm. The FCA's own example in SUP 10C.5B.10G mentions group finance, technology and human resources officers.

Since 24 April 2026, PS26/6 has added worked guidance on the group chief financial officer. A group CFO who only sets broad financial policies for the group and monitors them is unlikely to be performing SMF7. Allocating group capital to the firm is not enough either, because that is the investing group company's function, not the firm's. A group CFO who implements group strategy inside the firm, or runs the firm's finance function day to day, probably is performing SMF7. The test the FCA offers is whether the firm's own CFO considers group proposals on their merits, or simply follows them.

Example: a UK asset manager in the Enhanced tier has its own chief executive and chief finance officer, both approved. Its parent's group CFO sends finance proposals that the UK CFO reviews and can reject. That group CFO is probably outside SMF7. If the UK firm had no CFO and the group CFO signed off its budgets and liquidity decisions directly, SMF7 would very likely apply.

SUP 10C.5B.5CG sums up the position: where a firm has effective SMF managers based in the firm with sufficient control, the FCA would not routinely expect anyone to hold SMF7. A firm with no SMF7 holders is not unusual.

Which firms need an SMF7

The applicability tables are in SUP 10C Annex 1. From 10 July 2026 the Enhanced thresholds rose by about 30%, so some firms that needed SMF7 holders have moved to Core and no longer need them. CP26/37 would raise several thresholds again.

What the SMF7 holder is personally accountable for

An SMF7 holder needs a Statement of Responsibilities, the document the regulator holds that sets out what this person answers for at the firm. For a group officer it should describe the specific influence they exercise over the UK firm, not their whole group job. A vague statement such as "group oversight" makes it hard to show later what they were and were not responsible for.

Prescribed responsibilities, the specific duties the rules say must be given to a named senior manager, rarely sit with an SMF7. SYSC 24.3.1G says each one should go to the most senior person responsible for that area, and that is usually someone inside the firm.

As a senior manager, the SMF7 holder must follow the Individual Conduct Rules in COCON 2.1 (integrity, due skill, care and diligence, openness with regulators, fair treatment of customers, proper market conduct and, where relevant, good outcomes for retail customers) and the four Senior Manager Conduct Rules:

• SC1: take reasonable steps to ensure the business they are responsible for is controlled effectively
• SC2: take reasonable steps to ensure it complies with the regulatory system
• SC3: take reasonable steps to ensure any delegation goes to an appropriate person and is overseen effectively
• SC4: disclose appropriately any information the FCA or PRA would reasonably expect notice of

The Duty of Responsibility in section 66A(5) FSMA means the FCA can take action against a senior manager if the firm breaches a requirement in an area they were responsible for and they did not take the steps a person in their position could reasonably be expected to take. For a group officer living abroad, this is personal UK exposure that follows from their group role.

Our guide to reasonable steps sets out the general standard.

Reasonable steps in practice

An SMF7 holder exercises influence from outside the firm, so the evidence needs to show how that influence reaches the UK firm and how it is checked.

The first 90 days in the role

• Read the UK firm's Statement of Responsibilities for each senior manager and its management responsibilities map, and confirm where your influence sits.
• Agree your own Statement of Responsibilities with the UK board, limited to the influence you actually exercise.
• Set up a regular management information pack from the UK firm and a standing slot with its chief executive.
• List the group policies that apply to the UK firm and check each one against UK requirements.
• Attend at least one UK board or committee meeting and record your input.
• Agree how you will hear about UK regulatory correspondence and incidents.

Applying for approval

The firm applies through the FCA's Connect system using Form A. The FCA's application page says every application must include the completed form, the candidate declaration, a Statement of Responsibilities and any supporting documents. Before applying, the firm must be satisfied that the person is fit and proper. FIT 1.3.1BG names the three main tests: honesty, integrity and reputation; competence and capability; and financial soundness.

• Regulatory references: the firm must seek references from the candidate's current employer and anyone who employed them in the past six years (SYSC 22.2.1R).
• Criminal records check: since 24 April 2026 a check is valid for six months and is not needed for an internal or intragroup move, which often applies to SMF7 candidates already employed in the group.
• Overseas candidates: the FCA says it considers approvals from foreign regulators and experience outside the UK, but assesses every candidate itself and will expect a candidate based abroad to understand the UK regulatory system.
• Interview: the FCA may interview a candidate where it applies its highest level of scrutiny.
• Timing: section 61 FSMA gives the regulator three months from receiving a complete application, and the clock stops while it waits for information it has asked for. The FCA has committed to decide within two months and to complete at least half of approval applications within 35 days.

A person who performs SMF7 without approval exposes the firm under section 59 FSMA and can be penalised personally under section 63A. Since 24 April 2026 the temporary cover rule gives a firm 12 weeks to submit an application for someone covering an unforeseen or temporary absence, and the person may act until the FCA decides.

What CP26/37 would change for SMF7

CP26/37, published on 22 October 2026, proposes to narrow SMF7 at solo-regulated firms. A person would hold SMF7 only if they meet both limbs of a new test:

• they exercise significant influence over the firm's activities, and
• they perform one of seven functions for the firm, its group or the part of the group containing the firm: Chief Executive, Chief Finance, Chief Risk, Chief Operations, Chair of the governing body of a parent or holding company, Compliance Oversight or Money Laundering Reporting Officer.

The FCA's own example: if a group CFO does not exercise significant influence over the firm, they fall outside SMF7 even though Chief Finance is on the list. A group head of human resources, who appears as an example in the current guidance, is not on the list, and the draft rules delete that example. The FCA expects the change to cut the solo-regulated SMF7 population by about 40%. SMF7 stays an approved function; it is not on the list of roles that would become notified.

Firms would need to assess every current SMF7 and, under the draft transitional guidance, notify the FCA that a person has ceased to perform SMF7 because the definition changed.

The PRA is taking a different route in CP14/26. For dual-regulated firms it proposes to split SMF7 into an approved SMF7, for group roles corresponding to Chief Executive, Chief Financial Officer, Chief Risk Officer, Chief Operations Officer, Chief Compliance Officer, MLRO and Board Chair, and a new notified SMF7a for everyone else who exercises significant influence. Existing PRA approvals would cover both. The FCA is not creating an equivalent of SMF7a: a person who meets only the significant influence limb would simply not be a senior manager at a solo-regulated firm.

Responses are due by 22 January 2027 and changes are expected in the second half of 2027. Our SM&CR Phase 2 article covers the wider package.

Holding SMF7 with other functions

Some group officers also hold an SMF inside the UK firm, for example a group chief executive who chairs the UK board as SMF9. Influence exercised as SMF9 is not SMF7, so the person usually needs only the SMF9 approval. Where their influence goes beyond the chair's role, both may apply.

Watch for overlap with the UK firm's own SMF1, SMF2 and SMF24. If the group officer is effectively doing the UK officer's job, the UK officer's Statement of Responsibilities is likely to be inaccurate, and the FCA may ask who really controls the firm. Under CP26/37, the group officer's role would need to match one of the seven listed functions to stay in SMF7.

How we support SMF7 holders

We work with group officers and the UK firms that appoint them to decide whether SMF7 applies, describe the role accurately and prepare for the narrower test proposed in CP26/37. 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 explains how SMF7 fits with the other roles.