Fitness and Propriety Is Continuous

Under the Senior Managers and Certification Regime, firms must be satisfied that a Senior Manager is fit and proper not only when applying for approval, but on a continuing basis. In practice, firms are expected to assess each Senior Manager’s fitness and propriety at least once a year, and whenever something happens that could affect it. The criteria are the same as at approval, set out in the FCA’s FIT sourcebook: honesty, integrity and reputation; competence and capability; and financial soundness.

If a firm becomes aware of something that calls a Senior Manager’s fitness into question, it can’t wait for the annual cycle. It needs to consider the matter promptly, and in some circumstances notify the regulator.

Running the Annual Assessment

Honesty, Integrity and Reputation

Firms typically ask Senior Managers to confirm annually whether anything has changed that could affect this part of the test, such as legal proceedings, regulatory findings, disciplinary action, disputes with professional bodies or directorships of companies that have entered insolvency. Some firms repeat criminal records and credit checks periodically.

Competence and Capability

This is the part most often done superficially. A good assessment asks whether the Senior Manager still has the knowledge and skills their role requires, particularly if the role has grown, the firm has changed or the rules have moved on. Evidence might include performance reviews, feedback from the board and the control functions, training completed and the quality of the Senior Manager’s oversight of their area.

Financial Soundness

An annual confirmation of any relevant financial matters, supported by periodic checks where appropriate.

Conduct Rules

The assessment should also consider whether the Senior Manager has complied with the Conduct Rules, including any breaches, and how any concerns were handled.

When Roles Outgrow People

Firms change. A compliance officer approved for a small firm with one product may find themselves overseeing a much larger business with several product lines and new permissions. A chief executive approved to run a Core firm may lead it into Enhanced status. The annual assessment should ask honestly whether each Senior Manager’s competence has kept pace with their role.

Where it hasn’t, there are several options: training and development, additional support within the function, reallocating some responsibilities, adding independent oversight, or, in some cases, appointing a new Senior Manager. The worst option is to ignore the gap. If problems later arise in that Senior Manager’s area, the firm’s annual assessment will be one of the first documents the regulator reads.

How Senior Managers Stay Competent

Keeping Up With Regulatory Change

The rules affecting most Senior Managers change every year. Recent examples include the Consumer Duty, operational resilience requirements and the 2026 reforms to the Senior Managers regime itself. Senior Managers should have a reliable way of knowing which changes affect their area, usually through the compliance function, industry bodies and their own reading.

Structured Development

Many Senior Managers are members of professional bodies with continuing professional development requirements. Structured learning on topics relevant to their responsibilities, such as financial crime, prudential regulation, technology risk or conduct, helps them stay current and provides evidence for the annual assessment.

Learning From Others

Industry forums, peer networks and events give Senior Managers a view of how other firms approach the same challenges. SMF Capital runs free online briefings on the regime, and many attendees record them as part of their development.

Board Exposure

Presenting to the board and its committees, and responding to challenge, develops the judgement Senior Managers need. Firms should make sure Senior Managers have regular board exposure, not just through the chief executive.

Knowing the Limits

Competence includes knowing when to seek specialist help. A Senior Manager who recognises a gap in their knowledge and brings in expertise is demonstrating good judgement, not weakness.

When Something Changes Mid-Year

Some events should prompt an immediate review rather than waiting for the annual assessment. Examples include a serious breach or incident in the Senior Manager’s area, credible allegations of misconduct, a significant change in the Senior Manager’s personal financial position, a new regulatory finding against a firm where they previously held a role, or a major change to their responsibilities.

In each case, the firm should consider whether the Senior Manager remains fit and proper, record its reasoning and decide whether any action or notification is needed. Senior Managers themselves should tell their firm promptly about anything that could affect the assessment. Being open about an issue early is almost always better than the firm discovering it later.

First-Time Senior Managers

Where a firm made commitments to the regulator as part of a first-time Senior Manager’s approval, such as mentoring, training or additional oversight in the first year, the annual assessment should confirm that those commitments were delivered. Regulators may ask, and a firm that didn’t follow through on what it told the regulator is in a weak position.

The Certification Regime Link

Ongoing fitness and propriety isn’t only about Senior Managers. Under the Certification Regime, firms must certify each year that staff in certification functions are fit and proper. Senior Managers are often responsible for the certification process in their area, and the strength of that process reflects on them.

Common Failings

• Tick-box assessments. Annual confirmations signed without any real review of competence.
• No link to role changes. Assessments that don’t consider how the role has changed since approval.
• No evidence. Conclusions reached without records of training, feedback or performance.
• Ignoring concerns until the annual cycle. Waiting months to consider information that should prompt an immediate review.
• Treating it as HR’s job. Assessments that don’t involve the board or the relevant senior colleagues.

Supporting Competence in the Wider Team

A Senior Manager’s effectiveness also depends on the team around them. A compliance officer without capable analysts, or a finance director without qualified accountants who understand regulatory reporting, will struggle regardless of their own competence. Firms should consider the resourcing of each Senior Manager’s area as part of the annual assessment. Accountancy Capital, a sister practice of SMF Capital, recruits qualified finance professionals below director level, including regulatory reporting and client money specialists who support Senior Managers in regulated firms.

A Checklist for Firms

• Is every Senior Manager assessed at least annually against all parts of the fit and proper test?
• Does the assessment consider how the role has changed since approval?
• Is it supported by evidence, such as training, feedback and performance?
• Are concerns considered promptly, outside the annual cycle when necessary?
• Are gaps in competence addressed with a plan?
• Is the resourcing of each Senior Manager’s area considered?

The Bottom Line

Approval is the start of a Senior Manager’s accountability, not the end of the fit and proper assessment. Firms that assess their Senior Managers honestly each year, and Senior Managers who invest in keeping their knowledge current, are far better placed as firms and rules change. For more on what the regulator assesses, see SMF Capital’s guide to the fit and proper test in full.