From Core to Enhanced — Building a Multi-SMF Team

Welcome to the SMF Capital podcast. Today we're looking at a transition that can significantly change the senior management structure of a regulated business: moving from Core to Enhanced SM&CR status. For a growing financial services firm, reaching the point where enhanced requirements apply is an important stage of development. It can mean additional Senior Management Functions, more formal allocation of responsibilities and a greater need for a coordinated board and executive structure...

Welcome to the SMF Capital podcast.

Today we're looking at a transition that can significantly change the senior management structure of a regulated business: moving from Core to Enhanced SM&CR status.

For a growing financial services firm, reaching the point where enhanced requirements apply is an important stage of development. It can mean additional Senior Management Functions, more formal allocation of responsibilities and a greater need for a coordinated board and executive structure.

The FCA currently categorises solo-regulated firms as Enhanced, Core or Limited Scope, with Enhanced firms subject to additional requirements reflecting their greater size, complexity or potential impact on consumers or markets.

The 2026 SM&CR reforms also raised a number of thresholds for becoming an Enhanced firm, meaning businesses should monitor their position rather than assuming that historic thresholds still apply.

Today we'll look at what happens when a firm needs to build several SMF roles rather than recruit one senior manager at a time.

Why Core-to-Enhanced Is Different

A Core firm may have a relatively compact senior management structure.

As the business grows, however, its regulatory obligations and governance requirements can become more extensive.

Moving into Enhanced scope can bring additional SMF requirements and responsibilities into the firm's structure.

The challenge is that these appointments don't exist independently.

The Chief Executive needs to work effectively with the Chief Risk Officer.

Risk needs to interact with Compliance.

Operations needs to work alongside Risk and Technology.

The board needs clear visibility across all of these functions.

This means that simply launching several separate recruitment searches may not produce the best overall result.

The firm needs to consider the team as a whole.

What Does an Enhanced Firm Need to Consider?

The exact SMF requirements depend on the firm's regulatory status, activities and circumstances.

Enhanced firms can have additional Senior Management Functions and prescribed responsibilities compared with Core firms.

The objective is straightforward:

There should not be uncertainty about who is responsible for what.

That can leave the business operating with an incomplete senior management structure for an extended period.

A coordinated multi-SMF programme takes a different approach.

The firm identifies the roles it expects to need, maps the responsibilities, establishes the desired board structure and then sequences the recruitment process accordingly.

Why Board Dynamics Matter

Senior appointments cannot be assessed entirely in isolation.

A candidate may have an excellent individual CV but still be unsuitable for the particular team.

The question is not only:

"Can this person perform the SMF?"

It is also:

"How will this person work with the other SMF holders?"

A Chief Executive and Chief Risk Officer, for example, need to be able to challenge one another constructively.

A Compliance Oversight function needs sufficient independence while still working effectively with executive management.

The board needs a mixture of expertise, challenge and collaboration.

That is why a multi-SMF recruitment project should consider the resulting team rather than simply the individual vacancies.

Consistency in Fit and Proper Assessment

Another advantage of a coordinated search is consistency.

The FCA requires SMF candidates to be fit and proper before they are approved, and every SMF holder has a Statement of Responsibilities setting out what they are responsible and accountable for.

When several SMFs are recruited independently, there is a risk that different standards or assessment processes are applied to different candidates.

A coordinated process allows the firm to establish the requirements for the whole leadership team from the outset.

The recruitment assessment can then consider:

• Technical competence
• Regulatory experience
• Leadership capability
• Relevant sector knowledge
• Governance experience
• Independence and judgement
• Board and executive working relationships

This creates a much more coherent appointment process.

The Importance of Responsibilities Mapping

When several SMFs are being appointed, responsibility mapping becomes particularly important.

The FCA's rules require firms to allocate responsibilities systematically and explicitly, with appropriate coverage of the firm's activities and management functions.

This means that recruitment and governance should work together.

If the firm is recruiting an SMF4 Chief Risk Officer, for example, it should understand how that responsibility interacts with the Chief Executive, Compliance Oversight and other senior managers.

The same principle applies to operations, finance, financial crime and other functions.

The objective is to create a structure where responsibilities are clear and meaningful.

Don't Recruit the Titles — Recruit the Structure

One of the biggest mistakes in a multi-SMF recruitment exercise can be starting with job titles.

Instead, start with the firm's requirements.

What has changed as the business has grown?

Which areas now require dedicated senior oversight?

Where are the existing responsibilities allocated?

Where are the gaps?

Which functions need additional independence?

Which roles need to interact closely?

Once those questions have been answered, the appropriate SMF structure becomes much clearer.

The recruitment process can then identify people who fit that structure.

Timing Multiple SMF Appointments

Timing is another important consideration.

Several SMF applications reaching the regulator at approximately the same time need to be properly coordinated.

The firm needs to ensure that each application is complete, that responsibilities are clearly documented and that the candidates are ready for the approval process.

A coordinated recruitment programme allows the business to work backwards from its desired governance structure and build a realistic timetable.

It can also reduce the risk of one appointment being completed months before another, leaving the firm with a partially refreshed senior team.

What About Existing SMF Holders?

A Core-to-Enhanced transition does not necessarily mean replacing the existing leadership team.

Existing SMF holders may remain entirely appropriate.

The question is whether their responsibilities, experience and authority continue to fit the firm's new structure.

Some responsibilities may need to be redistributed.

Additional SMFs may need to be appointed.

The firm's Statements of Responsibilities and, where applicable, its Responsibilities Map may also need to be updated.

This is therefore both a recruitment exercise and a governance exercise.

Multi-SMF Recruitment With SMF Capital

SMF Capital supports firms that need to build several senior management positions as part of a wider governance change.

Our Multi-SMF Board & Executive Team Build service is designed for situations such as Core-to-Enhanced transitions and coordinated board refreshes.

Rather than treating each vacancy as a completely separate project, the process considers the overall senior management structure, sequencing the searches and assessing how the resulting team will work together.

You can explore the service here:

https://www.smfcapital.co.uk/multi-smf-board-executive-team-build/

Permanent SMF Recruitment

For firms that have individual SMF vacancies, SMF Capital also provides specialist SMF Recruitment Services.

The service covers senior management recruitment across a range of regulated functions, with fit-and-proper considerations built into the recruitment process from the outset.

You can find out more here:

https://www.smfcapital.co.uk/smf-recruitment-services/

Final Thoughts

Moving from Core to Enhanced is more than a regulatory classification change.

For a growing firm, it can be an opportunity to review whether the senior management structure still reflects the scale and complexity of the organisation.

Additional SMFs may need to be appointed.

Existing responsibilities may need to be reconsidered.

And the board and executive team need to work effectively as a whole.

The FCA's current framework continues to emphasise individual accountability, clear allocation of responsibilities and appropriate senior management oversight, while the 2026 reforms have changed aspects of how Enhanced firms are defined and how the regime operates.

For firms approaching an Enhanced threshold, planning early can make the transition considerably more structured.

Rather than recruiting one SMF at a time, a coordinated approach can look at the whole senior management team, the responsibilities it needs to carry and how those individuals will operate together.

If your firm is approaching a Core-to-Enhanced transition or planning a wider board and executive refresh, visit SMF Capital's Multi-SMF Board & Executive Team Build service.

For individual appointments, explore SMF Recruitment Services.

SMF Capital — specialist recruitment for Senior Management Functions and regulated leadership teams.