SMF10 & SMF11 — Risk & Audit Committee Chair Appointments

SMF10 and SMF11 Committee Chair Appointments

In a regulated financial services firm, the chairs of the risk committee and the audit committee carry more than a governance title. Where a firm is required to have these committees, the chairs hold designated senior manager functions under the Senior Managers and Certification Regime (SMCR): SMF10, the chair of the risk committee function, and SMF11, the chair of the audit committee function. Both must be approved by the regulator before they take up the role, and both carry personal accountability for the oversight their committee provides.

NED Capital recruits SMF10 and SMF11 committee chairs for banks, building societies, insurers, investment firms, payment and e-money firms, consumer credit businesses and other regulated organisations. We look for independent non-executive directors who combine technical expertise in risk or audit with the judgement to challenge management and the regulatory record to pass the fitness and propriety assessment.

Searches are run by our senior search team under founder Adrian Lawrence FCA, a Fellow of the ICAEW and former listed-company finance director. NED Capital is part of FD Capital Group, five specialist firms that include SMF Capital, which focuses on senior manager function appointments across FCA-regulated firms.

What the SMF10 and SMF11 Functions Cover

The FCA describes both functions in its Handbook at SUP 10C.5A, as part of the governing functions that carry oversight responsibility.

SMF10: Chair of the risk committee. The function of chairing a committee responsible for overseeing the firm’s risk management systems, policies and procedures, where the firm has established such a committee under the risk control requirements that apply to it. The SMF10 holder leads the board’s oversight of risk appetite, the risk management framework, stress testing, emerging risks and the work of the chief risk officer.

SMF11: Chair of the audit committee. The function of chairing a committee responsible for overseeing the firm’s internal audit system, where the firm has established such a committee under the internal audit requirements that apply to it. The SMF11 holder leads the board’s oversight of financial reporting, internal controls, internal audit and the relationship with the external auditor.

Which firms must designate these functions depends on how they are categorised. For FCA solo-regulated firms, the committee chair functions generally apply to enhanced SMCR firms; core firms usually designate the chair of the board (SMF9) as their main governing function but not separate committee chair functions. Dual-regulated firms, such as banks and insurers, fall under both the FCA and the PRA, and the PRA sets its own requirements for these roles; the Bank of England’s strengthening accountability pages set out the PRA’s approach. Every firm should confirm its own position with its compliance function or advisers, and the FCA’s SMCR guidance is the starting point.

Prescribed Responsibilities and the Statement of Responsibilities

Every senior manager must have a statement of responsibilities: a document setting out the areas they are accountable for, submitted to the regulator with their application and kept up to date. For SMF10 and SMF11 holders, this records their role as committee chair and any prescribed responsibilities allocated to them.

Prescribed responsibilities are specific areas that the rules require a firm to allocate to a senior manager. Which ones apply depends on the firm’s category. In larger firms, responsibilities linked to the independence and performance of the internal audit function, the risk function and the compliance function are often allocated to the chairs of the audit and risk committees, because those chairs oversee the relevant teams. A good search brief starts with a draft of the statement of responsibilities, so candidates understand exactly what they would be accountable for.

Senior managers are also subject to the duty of responsibility: if there is a breach of regulatory requirements in an area they are responsible for, they can be held accountable if they did not take reasonable steps to prevent it. For a committee chair, reasonable steps usually means a well-run committee, clear challenge, good minutes and timely escalation to the board.

Regulatory Approval and Form A

An SMF10 or SMF11 appointment cannot take effect until the regulator has approved the individual. The firm submits an application on Form A, which covers the candidate’s employment history, directorships, qualifications and fitness and propriety disclosures, along with the statement of responsibilities. The FCA’s approved persons pages explain the process.

Before applying, the firm must satisfy itself that the candidate is fit and proper, applying the criteria in the FCA’s FIT sourcebook: honesty, integrity and reputation; competence and capability; and financial soundness. That includes criminal records checks, regulatory references from previous regulated employers covering the past six years, and verification of qualifications. The regulator may also interview candidates for significant roles.

Approval takes time, and incomplete applications take longer. Boards should plan the search so that the preferred candidate is identified well before the outgoing chair steps down, and our process builds regulatory readiness into the assessment so that the application goes in complete.

What Boards Look For in an SMF10 or SMF11 Chair

For SMF11, the audit committee chair:

• Recent and relevant financial experience, usually a professional accountancy qualification and senior finance or audit background.
• Experience of financial reporting in the relevant sector, such as insurance accounting, banking regulation or client money.
• The confidence to challenge the finance director and the external auditor, and to protect the independence of internal audit.
• Prior audit committee experience, ideally in a regulated firm. Our guide to hiring NEDs for financial services boards covers the wider profile regulated boards expect.

For SMF10, the risk committee chair: our article on the role of non-executive directors in corporate risk management sets out what good risk oversight looks like.

• A background in risk management, prudential regulation or senior executive roles in the relevant sector.
• Understanding of risk appetite frameworks, capital and liquidity, operational resilience and conduct risk.
• The ability to work closely with, and hold to account, the chief risk officer.
• Experience of regulatory engagement and supervisory visits.

Both roles require genuine independence, a clean regulatory record and the time to do the job well, including preparation between meetings and contact with the relevant function heads. Many firms refresh both committee chairs at around the same time, and candidates are sometimes suitable for either role. Our audit committee chair recruitment page covers audit chairs in unregulated companies, and our guide to what an audit committee actually does explains the committee’s remit.

Related SMF Board Appointments

SMF10 and SMF11 sit alongside the other governing functions held by non-executive directors. The chair of the board holds SMF9, the senior independent director holds SMF14, and the chairs of the remuneration and nomination committees hold SMF12 and SMF13 where those functions apply. Independent directors without a designated function are covered on our FCA SMCR INED appointments page.

For boards thinking about the wider composition of a regulated board, our guide to appointing a NED for an FCA-regulated firm and our financial services NED recruitment page explain how we approach a search across the whole board.

How We Run an SMF10 or SMF11 Search

1. Brief and statement of responsibilities. We agree the profile, the committee remit, the time commitment and the draft statement of responsibilities, so that candidates understand the accountability from the first conversation.

2. Research and approach. We map serving audit and risk committee chairs, former chief risk officers, finance directors and audit partners with regulated sector experience, and approach them directly and in confidence.

3. Assessment with regulatory readiness. Candidates are assessed for technical depth, independence and time, and we raise fitness and propriety questions early: regulatory history, other directorships, references and anything that could delay approval.

4. Shortlist, appointment and application. We present a shortlist with a clear assessment of each candidate, support the board through interviews and references, and work with the firm’s compliance team so the Form A application is complete. We follow the voluntary code of conduct for executive search firms throughout.

Frequently Asked Questions

Does every regulated firm need an SMF10 and SMF11?
No. The functions apply where a firm is required to have a risk or audit committee under the rules for its category. Enhanced SMCR firms and dual-regulated firms are the main cases. Core firms usually do not designate these functions, although they may still have committees.

Can one person hold both SMF10 and SMF11?
Firms generally appoint different directors to chair the risk and audit committees so that each has independent leadership, but the right structure depends on the firm and the applicable rules. Take advice on your own position.

Does the SMF11 chair have to be an accountant?
Not necessarily, but boards and regulators expect the audit committee chair to have recent and relevant financial experience, and a professional accountancy qualification is the most common way to demonstrate it.

Can a candidate start before approval?
No. An individual cannot perform a senior manager function until the regulator has approved them. Firms should plan for interim arrangements if a chair leaves before a successor is approved.

This page is general information, not legal or regulatory advice.