FCA Fit and Proper Tests Explained: SM&CR Requirements Guide

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Who needs this screening?

The Senior Managers and Certification Regime (SM&CR) applies to almost all FCA-authorised (Financial Conduct Authority) firms in the UK. This ensures client protection and high conduct standards by holding key individuals strictly accountable and verifying their fitness for the roles.

In December 2019, the FCA extended the regime to all solo-regulated firms, building on its previous coverage of banks, insurers and Prudential Regulation Authority (PRA) regulated firms. The FCA then expanded it further to include benchmark administrators in December 2020. It remains fully in force in 2026, although the FCA and HM Treasury are consulting on future reforms to streamline the regime without weakening accountability.

The objectives of the SM&CR are to:

• Reduce financial crime and misconduct.
• Promote individual responsibility and accountability.
• Improve governance and culture across financial services.
• Protect consumers and market integrity.

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What are Fit and Proper Tests?

Fit and Proper Tests are a core component of the SM&CR. The FCA outlines these tests in the FIT sourcebook of the FCA handbook.

Firms must elevate candidates based on three core pillars:

1. Honesty, integrity and reputation

This includes consideration of:

• Criminal convictions or cautions
• Regulatory breaches or disciplinary findings
• Non-financial misconduct such as, serious bullying, harassment or violence (explicitly confirmed by the FCA in December 2025 guidance, effective from 1 September 2026)
• Any behaviour that could damage trust in the individual or the firm

2. Competence and Capability

This assessed whether the individual:

• Has the necessary skills, experience and qualifications
• Understands their regulatory responsabilities
• Is capable of performing the role effectively

3. Financial Soundness

This considers:

Bankruptcy, insolvency or IVAs

County Court Judgement (CCJs)

Evidence of poor financial management that could indicate risk

These tests apply to firms of all sizes, including UK branches of overseas firms carrying out regulated activities in the UK.

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Which firms are covered?

All FCA-authorised firms fall into one of three SM&CR categories:

• Core firms
• Limited-scope firms
• Enhanced firms

The classification depends on the nature of size and risk profiles of the business. The Financial Conduct Authority (FCA) publishes it’s rules on their official website.

Regardless of firm type, fitness and propriety assessments are mandatory.

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Who needs to pass a Fit and Proper test?

Fit and Proper Tests apply to individuals known as “Senior Managers” and Certified Persons”, including those performing roles that could present a risk of significant harm to customers or the firm.

Examples include:

• Directors and Non-Executive Directors
• Chief Executives and Partners
• Senior Managers holding SMF roles
• Individuals performing Certification Functions
• Certain significant management, client-dealing or oversight roles

The FCA continues to classify these individuals as Certified Persons under the Certification Regime, although ongoing government and regulatory consultations may alter this framework in the future.

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How often must Fit and Proper Tests to be carried out?

Passing a Fit and Proper Test is not a one-off excercise.

Firms must:

• Assess fitness and propriety before appointment
• Re-assess individuals at least annually
• Re-assess on any material change, such as misconduct, disciplinary action or new information

If a firm believes an individual is no longer fit and proper it must:

• Take appropriate internal action
• Notify the FCA and/or PRA where required
• Update internal records and the FCA Directory

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Is there flexibility in how Fit and Proper Tests are applied?

Yes. Fit and Proper Tests are principles-based and assessed individually.

A criminal conviction or misconduct finding does not automatically disqualify someone. When assessing honesty, integrity and reputation, firms should consider:

• The seriousness of the matte
• The circumstances and context
• Time elapsed since the incident
• The relevance to the role
• Any evidence of rehabilitation or remediation

This proportional approach means central to FCA expectations.

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What happens if someone fails?

Outcomes depend on the individual’s status:

• Senior Manager applicants will not be approved by the FCA
• Certified Persons cannot lawfully perform their roles
• New firms applications may be refused if a key individual fails the test
• Existing firms must remove the individual from their role and notify regulators

Failure to act can result in regulatory action, fines or restrictions on the firm’s permissions.

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What does a comprehensive Fit & Proper Test include?

Reflecting FCA expectations and good industry practice, a robust Fit and Proper assessment may include:

• Identity, address, date of birth and right to work checks
• Standard criminal record checks
• 6-year career history including gaps exceeding 31 days
• Academic and professional qualification verification
• Social Media Search
• A check of financial public records into CCJ’s, insolvency, bankruptcy, IVA’s and company directorships
• A check of financial sanctions, money laundering and OFAC searches

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If you need a FCA Fit & Proper Test Check today, visit our FCA Fit & Proper Screening page or get in touch and receive your application form today.

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