SMF9 — Non-Executive Chair Appointments

SMF9 Chair Recruitment for Regulated Firms

The chair of a regulated firm’s board holds one of the most visible roles under the Senior Managers and Certification Regime. SMF9, Chair of the Governing Body, is a senior manager function that requires regulatory approval before the individual takes up the role. The appointment shapes how the board challenges management, how it oversees risk and conduct, and how the firm is seen by its supervisors.

NED Capital recruits SMF9 chairs for FCA solo-regulated firms and for dual-regulated firms supervised by both the FCA and the PRA, including banks, building societies, insurers, investment managers, payment and e-money firms, consumer credit businesses and wealth managers. Our non-executive chair recruitment process is adapted for regulated boards: candidates are assessed against the regulatory expectations of the role as well as the board’s governance and strategic needs, and the approval application is planned from the start of the search.

Searches are run by our senior search team under founder Adrian Lawrence FCA, a Fellow of the ICAEW and former listed-company finance director. Call 0203 137 2496 or email recruitment@nedcapital.co.uk to discuss an SMF9 appointment.

What the SMF9 Function Covers

Under the Senior Managers and Certification Regime, the Chair of the Governing Body is a designated senior management function. For FCA solo-regulated firms, how the regime applies depends on the firm’s category. The FCA’s SM&CR categorisation divides solo-regulated firms into Limited Scope, Core and Enhanced. SMF9 applies to Core and Enhanced firms that have a chair of their governing body. Limited Scope firms are subject to a narrower set of senior manager functions.

For dual-regulated firms, the PRA also designates the chair as a senior management function, and the Bank of England’s material on strengthening individual accountability sets out the PRA’s side of the regime. In practice, the chair of a bank, insurer or building society is approved by the PRA with the FCA’s consent, and must meet the expectations of both regulators.

The function itself is defined in the FCA Handbook in SUP 10C, which sets out the senior manager functions, the approval requirements and the documents firms must maintain. The chair leads the board and is responsible for its effectiveness. The role is not an executive one. The chair does not manage the business, but is accountable for how the board oversees those who do.

How SMF9 sits with the other board functions

At Enhanced and dual-regulated firms, the chair is usually one of several non-executive senior managers. The chairs of the risk, audit, remuneration and nomination committees may also hold senior manager functions (SMF10 to SMF13), and the senior independent director is SMF14. Our pages on SMF10 and SMF11 risk and audit committee chairs and the SMF14 senior independent director cover those roles. At Core firms, the chair may be the only non-executive senior manager, which makes the appointment even more important to the board’s independence. Other independent directors are covered in our guide to FCA SMCR INED appointments.

Responsibilities and Accountability

Statement of responsibilities

Every senior manager must have a statement of responsibilities, submitted with the approval application and kept up to date. For a chair, the statement describes the leadership of the board and any further responsibilities allocated to the individual. It should be specific enough that the FCA, and the chair, can see clearly where their accountability lies. A vague statement is a common reason for supervisory questions during the approval process.

Prescribed responsibilities

The regime requires firms to allocate a set of prescribed responsibilities to their senior managers, and the list depends on the firm’s category. Most prescribed responsibilities sit with executive senior managers. At Enhanced and dual-regulated firms, some responsibilities concern the board’s oversight role, for example overseeing the development of the firm’s culture, and are often allocated to the chair or to other non-executive senior managers. Where a chair is allocated a prescribed responsibility, it appears in the statement of responsibilities and, for Enhanced firms, in the firm’s management responsibilities map.

The duty of responsibility

Senior managers are subject to the duty of responsibility. If a firm breaches a regulatory requirement in an area for which a senior manager is responsible, the regulator can take action against that individual if they did not take reasonable steps to prevent or stop the breach. For a chair, reasonable steps usually means showing that the board asked the right questions, received adequate information, challenged management and followed up. That is why board minutes, management information and the quality of committee reporting matter so much to a regulated chair.

Conduct rules

The chair is bound by the individual conduct rules and the senior manager conduct rules in the FCA’s Code of Conduct sourcebook (COCON). These include taking reasonable steps to ensure the business is controlled effectively, that it complies with regulatory requirements, that delegation is appropriate and overseen, and that information the regulator would reasonably expect to know about is disclosed.

Approval: Form A and Fitness and Propriety

An SMF9 chair cannot take up the role until the regulator has approved them. The firm, not the candidate, submits the application, using Form A through the FCA’s online system, together with the statement of responsibilities and, for Enhanced firms, an updated management responsibilities map. The FCA, and the PRA for dual-regulated firms, then assesses whether the candidate is fit and proper. The regulator may ask further questions and may interview candidates for significant roles. Incomplete or poorly prepared applications take longer to determine, so we plan the approval work in parallel with the final stages of the search.

Before applying, the firm must satisfy itself that the candidate is fit and proper. The FCA’s Fit and Proper test (FIT) covers three areas:

• Honesty, integrity and reputation. Including any criminal, civil, regulatory or disciplinary matters. Firms must carry out a criminal records check for senior manager candidates.
• Competence and capability. Whether the candidate has the knowledge, experience and skills to perform the role, judged against the firm’s size, complexity and business model.
• Financial soundness. Including any judgments, debts or insolvency history.

Firms must also obtain regulatory references from the candidate’s previous employers in regulated roles, covering a defined look-back period. For a chair candidate with a long portfolio career, gathering references from several boards can take time, which is another reason to start early.

Our process screens for these issues before a candidate is shortlisted. We ask about previous approvals, any regulatory or disciplinary history, other directorships and time commitments, and potential conflicts of interest, so the board does not reach a preferred candidate only to find a problem at the application stage. Our guide to appointing a NED for an FCA-regulated firm sets out what boards should prepare.

What Makes a Strong SMF9 Candidate

The best regulated-firm chairs combine board leadership with a working understanding of how supervision operates. We assess candidates on:

• Board leadership. A record of chairing, or of senior non-executive roles, on boards of comparable size and complexity, with evidence of running effective board meetings and developing the board.
• Regulatory understanding. Experience of the SMCR, of supervisory engagement and of the regulatory priorities relevant to the firm, such as the Consumer Duty, operational resilience, prudential requirements or financial crime controls.
• Independence. Freedom from relationships with the firm, its executives or its owners that could compromise judgement, assessed against the firm’s own requirements and, for listed firms, the UK Corporate Governance Code.
• Relationship with the CEO. The ability to support and challenge the chief executive, and to lead the board’s assessment of management performance and succession.
• Time commitment. Realistic capacity for the role, including periods of heavy supervisory engagement, remediation or transactions, alongside other appointments.
• Sector fit. Relevant experience in the firm’s market, whether retail banking, insurance, asset management, payments, lending or fintech.

When Firms Recruit an SMF9 Chair

Firms come to us for SMF9 appointments in several situations:

• Planned succession. An outgoing chair reaching the end of their tenure, where the board wants a structured search and a managed handover.
• Growth or recategorisation. A firm moving from Core to Enhanced, or preparing for a significant change in scale, that needs a chair with experience of larger regulated boards.
• Supervisory pressure. A firm under heightened supervision, or completing remediation, that needs a chair with credibility in dealing with regulators.
• New authorisation. A firm applying for authorisation, where the quality of the proposed board is part of the regulator’s assessment.
• Ownership change. A firm acquired by private equity or a new owner, where the chair must balance investor expectations with regulatory responsibilities.
• Unexpected vacancy. A chair leaving at short notice, where an interim chair may be needed while the permanent search runs. Interim appointments to SMF9 still need approval, so planning is essential.

How We Run an SMF9 Search

1. Brief. We agree the firm’s regulatory category, its supervisory position, the board’s composition and the skills the chair must bring. We review the existing statement of responsibilities and the board’s committee structure.

2. Research and approach. We map serving chairs and senior non-executives of regulated firms, and senior executives ready for a first chair role, and approach them in confidence. The strongest candidates are rarely on the market. Our financial services NED recruitment network is central to this stage.

3. Assessment. Structured interviews cover board leadership, regulatory understanding and independence. We test candidates’ grasp of the SMCR and the duty of responsibility, and screen for fitness and propriety issues.

4. Shortlist and selection. We present a shortlist with a clear assessment of each candidate, support the nomination committee’s interviews and take board-level references.

5. Approval and induction. We work with the firm’s compliance and company secretarial teams on the approval application, and support the chair’s induction.

We work in line with the voluntary code of conduct for executive search firms. Our sister practice SMF Capital recruits executive senior manager functions such as SMF16 compliance oversight and SMF17 MLRO, so the group can support a firm’s whole senior manager population. NED Capital is one of five specialist firms in the FD Capital Group, alongside FD Capital, Exec Capital, Accountancy Capital and SMF Capital.

Frequently Asked Questions

Which firms need an SMF9 chair?
SMF9 applies to Core and Enhanced FCA solo-regulated firms that have a chair of their governing body, and to dual-regulated firms. Limited Scope firms have a narrower set of senior manager functions. Check your firm’s category on the FCA’s categorisation page.

Can a chair start before approval?
No. An SMF9 chair must be approved before performing the function. Boards should plan the timetable so that the outgoing chair, or an approved interim, remains in place until approval is granted.

Who submits the approval application?
The firm submits Form A, with the statement of responsibilities and supporting information. The candidate provides information and supports the process, and the firm must have assessed their fitness and propriety first.

Is SMF9 the same as an independent NED?
No. The chair is usually independent on appointment, but SMF9 is a specific senior manager function with its own accountability. Other independent non-executives may not hold a senior manager function at all. See our INED recruitment page.

What does an SMF9 chair cost?
Fees depend on the firm’s size, complexity and time commitment. Our NED salary guide sets out typical ranges for chairs and non-executive directors.