SMF10 & SMF11 — Risk & Audit Committee Chair Appointments

SMF10 & SMF11 — Risk & Audit Committee Chair Appointments

FCA and PRA-Regulated Firms

NED Capital places SMF10 (Chair of the Risk Committee) and SMF11 (Chair of the Audit Committee) designated INEDs for FCA-authorised and PRA-regulated firms. Risk and audit committee chairs in regulated financial services firms carry personal regulatory accountability under the SMCR that is specific and significant — the SMF10 holder is accountable for the board’s risk oversight function and the SMF11 holder for the integrity of financial reporting and the internal audit function — in an environment where the FCA and PRA both assess committee governance quality as part of their supervisory framework. Adrian Lawrence FCA, founder of NED Capital and Fellow of the ICAEW, leads every SMF10 and SMF11 search personally.

Call 0203 137 2496 or email recruitment@nedcapital.co.uk to discuss an SMF10 or SMF11 appointment.

SMF10 — Chair of the Risk Committee

The SMF10 designation applies to the INED who chairs the board’s risk committee — the committee responsible for the board’s risk oversight function. For PRA-regulated firms, a standalone board risk committee chaired by an independent NED is a requirement of the PRA’s governance framework. For FCA solo-regulated firms, a separate risk committee may or may not exist depending on the firm’s size and governance structure — where no separate risk committee exists, risk oversight is typically conducted by the audit committee and the SMF10 designation may apply to the audit committee chair covering both functions.

SMF10 governance responsibilities. The SMF10 holder’s regulatory accountability covers the board’s oversight of the firm’s risk management framework — the risk appetite statement, the risk limit framework, the identification and assessment of material risks and the adequacy of management’s risk management systems and controls. Specifically: reviewing and challenging the firm’s risk appetite and monitoring whether actual risk-taking remains within the approved appetite; overseeing the Chief Risk Officer (CRO) function and its independence from business lines; reviewing the results of stress testing and scenario analysis; and governing the firm’s approach to model risk where models are used in risk assessment or business decision-making.

CRO relationship governance. The most important bilateral governance relationship for the SMF10 holder is the relationship with the Chief Risk Officer. The board’s risk committee — and specifically the SMF10 chair — is the primary governance accountability relationship for the CRO. The risk committee chair must ensure the CRO has genuine organisational independence, adequate resources and direct access to the board without requiring management approval. Where the CRO’s independence or resource adequacy is compromised, the SMF10 holder carries regulatory accountability for the resulting risk governance weakness.

SMF10 candidate profile. Candidates suitable for SMF10 designation typically have: prior board-level risk governance experience in a comparable regulated firm (ideally as a risk committee member or chair); direct understanding of enterprise risk frameworks, risk appetite design and stress testing methodologies; sector-specific risk knowledge relevant to the firm’s primary risk exposures (credit risk for lenders, insurance risk for insurers, market risk for investment firms); and a track record of engaging effectively with risk management professionals at a governance peer level rather than as recipients of technical risk management presentations.

SMF11 — Chair of the Audit Committee

The SMF11 designation applies to the INED who chairs the audit committee — the committee responsible for the integrity of the firm’s financial reporting, the external audit relationship, the internal audit function and the internal controls framework. For regulated financial services firms, the SMF11 chair’s governance responsibilities extend beyond the standard audit committee chair function described on our Finance Governance NED page — the regulated firm context adds specific FCA and PRA requirements for financial reporting and internal audit oversight.

Financial reporting governance in regulated firms. Regulated financial services firms prepare financial statements under IFRS (for listed firms), FRS 102 or the relevant industry-specific reporting framework. For banks and insurers, regulatory capital reporting — Common Equity Tier 1 (CET1), IFRS 17 insurance contracts — creates additional financial reporting governance requirements that the SMF11 chair must understand. Regulatory capital adequacy reporting errors — where financial reporting misrepresents the firm’s regulatory capital position — are a specific FCA and PRA enforcement concern that the SMF11 chair’s governance must guard against.

Recent and relevant financial experience. The FCA’s and PRA’s expectations for SMF11 holders include the requirement for “recent and relevant financial experience” — mirroring the FRC Code requirement for audit committee chairs, but applied within the regulatory context. For regulated financial services firms, “relevant” means financial experience applicable to the specific financial reporting and regulatory capital framework of the firm’s sector. A manufacturing CFO who has not previously served on a financial services audit committee may not be “relevant” even if their qualification is strong. NED Capital applies a specific test for SMF11 candidates: do they have financial experience applicable to this specific type of regulated firm, recent enough to be current?

Internal audit governance. The FCA’s and PRA’s expectations for internal audit functions in regulated firms — including the Internal Audit function’s organisational independence, its risk-based audit planning and its direct reporting line to the audit committee — are more prescriptive than standard governance code expectations. The SMF11 chair governs the internal audit function’s compliance with these regulatory expectations, including assessing whether the head of internal audit is appropriately qualified and independent.

SMF11 candidate profile. Candidates suitable for SMF11 designation in regulated firms typically hold: a professional accountancy qualification (ACA/FCA, ACCA, CIMA or international equivalent) and are currently applying it in a relevant context; direct prior audit committee governance experience in a comparable regulated firm; specific familiarity with the financial reporting framework applicable to the firm’s sector; and experience of engaging with both external auditors and internal audit functions in a financial services governance context. Former Big 4 audit partners with financial services clients, former CFOs of regulated firms and experienced financial services audit committee chairs are the strongest candidate profiles.

Form A Process for SMF10 and SMF11 Appointments

Both SMF10 and SMF11 appointments require notification to the FCA via Form A before the designated individual takes up their function. For PRA-regulated firms, both the FCA and PRA must be notified. The Form A submission must include the firm’s assessment of the candidate’s fitness and propriety against all three assessment criteria (honesty, integrity and reputation; competence and capability; financial soundness) and must demonstrate that the proposed designation is appropriate given the candidate’s specific background and experience.

NED Capital advises on Form A documentation for SMF10 and SMF11 appointments — including the narrative supporting the competence and capability assessment, which is the element where regulatory pre-screening of the candidate’s specific financial services governance experience is most important. For complex notifications — where a candidate has regulatory history, overseas regulatory background or any circumstances requiring specific explanation — we facilitate introductions to specialist regulatory counsel for pre-notification FCA/PRA engagement where appropriate.

Fee Benchmarks — SMF10 and SMF11

SMF10 and SMF11 fees for regulated firms reflect the committee chair supplement over the standard INED fee and the regulatory accountability of the designation. Major banks and insurers: committee chair total fee £115,000–£175,000 (including base NED fee). Mid-tier regulated firms: £70,000–£110,000. Smaller FCA-authorised firms: £45,000–£85,000. Where both SMF10 and SMF11 are held by the same individual (unusual but possible in smaller firms where functions are combined), the fee reflects the combined accountability. See our NED Compensation Benchmarking guide for full market data on committee chair fees.