FCA SMCR INED

FCA SMCR INED Appointments

NED Capital places independent non-executive directors (INEDs) for FCA-authorised and PRA-regulated firms across all sectors of UK financial services. Under the Senior Managers and Certification Regime (SMCR), every INED appointment to a regulated firm board requires formal designation to one or more Senior Manager Functions — making regulated firm INED appointments materially more complex than equivalent appointments to non-regulated company boards. Adrian Lawrence FCA, founder of NED Capital and Fellow of the ICAEW, leads every regulated firm INED search personally and assesses SMCR suitability, regulatory independence and fit and proper position for every candidate before shortlisting.

For general financial services NED recruitment — including the SMCR framework overview and our search process — see our Financial Services NED Recruitment page. This hub covers the six NED-tier SMF designations specifically and links to dedicated pages for the most commonly appointed regulated firm INED roles. Call 0203 137 2496 or email recruitment@nedcapital.co.uk to discuss a regulated firm INED appointment.

The Six NED-Tier SMF Designations

Under the Senior Managers and Certification Regime, six Senior Manager Functions apply specifically to independent non-executive directors at regulated firms. Each SMF designation carries specific personal accountability — the designated individual is personally responsible to the FCA (and PRA where applicable) for the governance area the SMF covers. Unlike the management-tier SMF functions (SMF1-SMF6, which cover executive roles), the INED-tier SMFs are specifically designed to provide independent governance oversight of management functions.

SMF9 — Chair of the Governing Body. The most senior INED designation — the non-executive chair of the board of directors. The SMF9 holder is personally accountable for the board’s governance effectiveness and for overseeing the firm’s compliance with its regulatory obligations at board level. For PRA-regulated firms (banks, building societies, insurers), the PRA’s expectations for the SMF9 chair are particularly demanding — the chair must be genuinely independent of management and must demonstrate active, not passive, governance leadership. See our SMF9 Non-Executive Chair page.

SMF10 — Chair of the Risk Committee. The INED who chairs the board’s risk committee — formally accountable for the board’s risk oversight function, including the firm’s risk appetite framework, the oversight of the Chief Risk Officer (CRO) and the adequacy of the firm’s risk management systems. For dual-regulated firms, the PRA requires a standalone risk committee chaired by an independent NED. See our SMF10 & SMF11 Appointments page.

SMF11 — Chair of the Audit Committee. The INED who chairs the audit committee — formally accountable for the integrity of the firm’s financial reporting, the external audit relationship and the internal audit function’s effectiveness. The FCA’s and PRA’s expectations for SMF11 holders include recent and relevant financial experience, robust external auditor independence assessment and active oversight of the internal audit function. See our SMF10 & SMF11 Appointments page.

SMF12 — Chair of the Remuneration Committee. The INED who chairs the remuneration committee — formally accountable for the firm’s remuneration framework and its compliance with the applicable remuneration code provisions (PRA Remuneration Rules, FCA SYSC 19). For PRA-regulated firms, the SMF12 holder must ensure the remuneration policy promotes sound risk management and does not incentivise excessive risk-taking. The remuneration governance requirements for dual-regulated firms are more extensive than for FCA solo-regulated firms.

SMF13 — Chair of the Nominations Committee. The INED who chairs the nominations committee — formally accountable for board composition governance, including the assessment of board members’ ongoing fitness and propriety and the process for appointing new senior managers and NEDs. The SMF13 holder oversees the SMCR notification process for new SMF appointments and the annual fitness and propriety assessment of existing SMF holders.

SMF14 — Senior Independent Director. The designated SID for regulated firms — providing the governance accountability function for situations where shareholders, the regulator or other stakeholders need to raise concerns outside the normal chair-management channels. The SMF14 designation also carries specific responsibility for the chair’s performance evaluation. See our SMF14 Senior Independent Director page.

SMCR Fit and Proper Requirements for INEDs

Every individual designated to an SMF role — including all INED-tier designations — must be assessed as fit and proper by the firm before the FCA (and PRA where applicable) is notified of the proposed appointment via Form A. The FCA’s fit and proper assessment for INEDs covers three dimensions.

Honesty, integrity and reputation. The candidate must not have a history that raises concerns about their suitability to hold a position of trust in a regulated firm. Relevant considerations include: any regulatory censure, criminal convictions, civil judgements, bankruptcy or financial difficulties, dismissals from previous roles and any other circumstances that might reflect adversely on the individual’s character. Regulatory censure from previous SMF roles — whether at the FCA or at overseas regulators — is specifically material to the honesty and integrity assessment.

Competence and capability. The candidate must have the skills, knowledge and experience to perform the SMF function they are being designated to. For INED-tier SMFs, this requires that the candidate has the governance experience and sector knowledge to provide effective independent oversight of the management function their designation covers. An SMF11 (audit committee chair) candidate must have sufficient financial expertise to oversee the firm’s financial reporting and external audit relationship credibly.

Financial soundness. The candidate must not be subject to outstanding judgement debts, have not been declared bankrupt or had a voluntary arrangement with creditors and should not have a pattern of financial management that raises concerns about their financial responsibility.

NED Capital assesses every regulated firm INED candidate against all three fitness and propriety dimensions before including them in a shortlist. We advise firms on the specific fit and proper positioning for each candidate before Form A notification and can facilitate introductions to specialist regulatory counsel where the notification involves any complexity — prior regulatory engagement by the candidate, overseas regulatory history or any circumstance that warrants pre-notification FCA engagement.

Independence Requirements for FCA/PRA-Regulated INEDs

The FCA’s and PRA’s independence requirements for INEDs in regulated firms align broadly with the FRC Code’s independence criteria but include specific additional considerations relevant to the regulated context. Key independence considerations for regulated firm INEDs include:

Independence from management — no current or recent employment relationship with the firm or group, no material business relationship with the firm and no close family connections with the firm’s senior management or advisers. Independence from significant shareholders — where the firm has a major shareholder (for example, a parent company, a PE investor or a founding family), the INED must be genuinely independent of that shareholder’s influence and not represent their interests on the board. Independence from the firm’s external advisers — the INED should not have a material current or recent relationship with the firm’s auditors, legal advisers or other professional service providers.

For PRA-regulated firms (banks, building societies, insurance companies), the PRA’s expectations for independence are particularly rigorous — the PRA has indicated in its supervisory communications that it regards genuine independence as a fundamental expectation for INEDs at systemically important firms, not a compliance box to be ticked.

Our SMCR INED Search Process

NED Capital’s regulatory firm INED searches follow a specific process that integrates SMCR assessment into the search from brief stage.

SMF designation assessment. Before briefing the search, we confirm which SMF designation(s) the appointment requires and whether a standalone appointment or a combined designation (for example, a single INED holding both SMF11 and SMF14) is appropriate given the firm’s governance structure.

SMCR pre-screening. Every candidate approached for a regulated firm INED mandate is pre-screened for SMF suitability, independence status against FCA/PRA criteria and fit and proper position. We do not present candidates who have not passed this pre-screening.

Shortlist with regulatory assessment. Our regulated firm INED shortlists include a specific regulatory assessment section for each candidate, covering their SMF history, independence assessment and our view on their fit and proper position.

Form A support. We advise on the Form A notification documentation and on the supporting material that strengthens the fit and proper case for each proposed INED.