FCA

FCA regulation changes the finance job before it changes almost anything else in a business. The permissions arrive, and with them a set of obligations that sit squarely inside the finance function: regulatory reporting, a capital requirement that has to be monitored rather than calculated once a year, client money rules if the firm holds any, and a wind-down plan that has to be credible rather than present.

This page is written for finance leaders at regulated firms and for those about to become one. It sets out what the FCA actually changes about the finance role, which parts of the regulatory burden belong to finance rather than to compliance, and where to find the detailed guidance across the FD Capital Group. Every guide linked here is free to read.

The Finance Job Becomes a Controlled Function

At most authorised firms, the senior finance role is SMF2, the chief finance function under the Senior Managers and Certification Regime. That is not a title change. It means the individual is approved by the FCA for the role, holds a statement of responsibilities describing what they are accountable for, and is personally answerable for taking reasonable steps to prevent regulatory breaches in their area.

Three consequences follow, and finance leaders moving from an unregulated business are usually surprised by at least one. Approval has to be obtained before the person starts, not afterwards. The responsibilities are written down and allocated, so ambiguity about who owns something is itself a finding. And the accountability is individual and does not transfer when the person leaves the firm.

Our guide to the SMF2 chief finance function explains the function in detail, and the SMCR guide sets out what the regime expects of the people inside it. For what “reasonable steps” means in practice, which is the phrase everything turns on, the reasonable steps guide is the fuller treatment.

The Obligations That Are Finance’s, Not Compliance’s

Firms new to regulation tend to assume everything regulatory belongs to the compliance function. A substantial part of it does not.

Regulatory reporting. Periodic returns through the FCA’s reporting system, on a calendar set by the firm’s category and permissions. Late or inaccurate submissions are visible, cumulative, and a common trigger for supervisory attention.

Capital adequacy. The firm has to hold prescribed financial resources and know, continuously, that it does. Under the prudential regimes applying to investment firms and to payments and e-money firms, this means an ongoing assessment rather than a year-end calculation — and it is finance that produces it.

Client money and assets. Where the firm holds either, the reconciliation and segregation obligations are detailed, prescriptive and unforgiving. These are finance processes subject to an assurance regime of their own.

Financial resilience and wind-down. The firm must be able to demonstrate it could cease business in an orderly way without harm to clients. That is a finance-authored document with a finance-owned set of assumptions.

Each of these is a reason a regulated CFO is not simply a CFO who happens to work at a regulated firm, which is the point our what changes when the finance job is a senior manager function develops.

Authorisation: What the Finance Function Has to Produce

If the firm is applying for permissions rather than already holding them, the finance function carries a large share of the application. The regulatory business plan, the financial projections and stress scenarios, the capital calculation, and the governance and resourcing narrative all come from or through finance, and the quality of that material is a material determinant of how the application goes.

The relevant guides are the how to become FCA authorised overview, the regulatory business plan guide, the guide to authorisation fees and capital and the threshold conditions guide. Firms that have left this late, or that need the application run by somebody who has done it before, most often want an FCA authorisation CFO.

The Control Functions Finance Works Alongside

Two appointments shape the finance leader’s working life at a regulated firm, and understanding what they own makes the relationship considerably easier.

Compliance Oversight, SMF16, is responsible for the compliance function and for assuring the governing body that the firm is meeting its obligations. A meaningful part of the monitoring programme will point at work finance produces. See SMF16 recruitment and the SMF16 function guide.

The Money Laundering Reporting Officer, SMF17, owns the financial crime framework, the suspicion decisions and the relationship with law enforcement. Finance supplies a great deal of the evidence those decisions rest on without making the decisions. See SMF17 recruitment and the SMF17 MLRO function guide.

At smaller firms one person frequently holds both; the fractional dual SMF16/17 page covers how that structure works and the conditions under which it is appropriate. Where either function falls vacant unexpectedly, temporary cover under the twelve-week rule is the mechanism, and it is narrower than most firms assume.

Where Finance Ends and Compliance Begins

The boundary is worth drawing explicitly, because the common failure mode is not conflict but the assumption that the other function has something in hand.

Finance produces; compliance assures. Finance owns the numbers in the regulatory return; compliance owns the view on whether the treatment is right. Finance supplies the data for monitoring; compliance designs the test and reaches the conclusion. Where a firm cannot say which function owns a given obligation, that is the gap, and it is usually found during an exercise rather than before one.

One structural point deserves emphasis. A CFO asked to hold Compliance Oversight as well as the finance function is being asked to provide independent assurance over work they produced. That is sometimes proportionate at a very small firm and frequently not, and we have written about what a CFO should know about compliance monitoring separately.

Timetables, and Why They Slip

The single most common planning error at regulated firms is treating senior appointments as though they complete on the candidate’s start date. They do not: approval has to be in place first, and the application is assessed rather than processed.

Three guides cover the sequence: how long FCA senior manager approval takes, the Form A application guide, and FCA senior manager interviews for candidates and firms preparing for a regulatory interview. Taken together they usually move a firm’s hiring timetable back by a month or more, which is far better discovered now than in week eleven of a notice period.

Permanent, Fractional and Interim

Not every regulated firm needs a full-time finance leader, and not every gap should be filled permanently. A firm mid-authorisation often wants somebody experienced for the application and a different profile afterwards. A firm whose CFO has resigned needs cover long before it needs a successor. A firm of twenty-five people may need two or three days a month at genuine CFO level rather than a full-time appointment it cannot justify.

All three are ordinary structures now, and the approval route is the same in each case. SMF2 regulated CFO recruitment covers the permanent and fractional end at regulated firms; Compliance recruitment is the right starting point for broader compliance leadership.

Where the Rest of the Group Can Help

CFO Capital focuses on the finance leadership. The other firms in the FD Capital Group cover the roles around it: SMF Capital for senior manager functions and compliance leadership, Exec Capital for FCA-regulated appointments generally, NED Capital for board and committee chair roles including the independent non-executives a regulated board needs, and Accountancy Capital for the qualified finance roles beneath director level that carry much of the regulatory reporting work.

Our own four specialist resources every CFO should know and compliance monitoring explainer are worth reading alongside this page if you are weighing a move into a regulated firm or hiring into one.

Authoritative Sources

For the primary material rather than our summaries of it: the FCA Handbook, the FCA guidance on approved persons, the FCA pages on the Senior Managers and Certification Regime, and the legislation.gov.uk covering the Money Laundering Regulations. Our FCA regulatory glossary is a plain-English companion for the terminology.