Getting a Compliance Officer Approved: What the FCA Looks At

Finding the right compliance officer is only half the job. At a firm within the Senior Managers and Certification Regime, the person who will hold the compliance oversight function, SMF16, can’t start in the role until the regulator has approved them. If the application stalls, or the regulator has doubts, the firm can be left without a compliance lead for months.

Most delays are avoidable. They come from a small number of predictable issues that firms can check before the application goes in. This article sets out what the FCA looks at, and where applications most often run into trouble. For the wider picture of SMF16 hiring, see SMF Capital’s page on compliance officer recruitment (SMF16).

The Starting Point: Fit and Proper

Every Senior Manager must be fit and proper. The regulator assesses three things: honesty, integrity and reputation; competence and capability; and financial soundness. The firm must carry out its own assessment first, and the FCA then considers the application alongside the firm’s evidence. The framework is set out in the regulator’s Fit and Proper test for Employees and Senior Personnel, and SMF Capital’s guide to the fitness and proper test in full explains each part.

For a compliance officer, competence carries particular weight. The FCA wants to see that the candidate has relevant experience of compliance in a similar type of firm, understands the rules that apply to the firm’s activities, and can stand up to the business when needed.

Relevant Experience, Not Just Seniority

A strong CV is not enough on its own. The regulator looks at whether the candidate’s experience matches the firm. A compliance officer who has spent their career at a large bank may be highly capable but have little experience of a small advice firm’s day-to-day issues. Someone from a wealth manager may not know the consumer credit rules. Applications go more smoothly when the candidate’s background clearly fits the firm’s permissions and activities, or where any gap is acknowledged and addressed, for example through training or support.

Time Commitment

The FCA looks at whether the candidate has enough time to do the job. This matters most for part-time and fractional appointments, and for candidates who hold roles at other firms. The firm should be able to explain how many days the role needs, why that is enough for its size and risks, and how the candidate’s other commitments fit around it. A fractional arrangement is entirely acceptable, but a vague one invites questions.

The Statement of Responsibilities

Every Senior Manager needs a Statement of Responsibilities setting out what they are accountable for. For an SMF16, it should be clear what the compliance function covers, who it reports to and how it relates to other functions, such as the MLRO if that is a separate person. Vague or copied statements are a common weakness. SMF Capital’s Statement of Responsibilities template is a useful starting point.

Checks and References

Firms must carry out background checks before applying, including criminal records checks and credit checks, and must request regulatory references from the candidate’s employers over the previous six years. References that arrive late, are incomplete or raise issues that weren’t disclosed are one of the most common causes of delay. SMF Capital’s guides to SMCR background checks and regulatory references and the six-year rule set out what is required.

Disclosure

The application form asks candidates to disclose a wide range of matters, from past regulatory issues and complaints to civil proceedings and financial difficulties. Failing to disclose something the FCA later finds is far more damaging than the matter itself, because it goes directly to honesty and integrity. The rule is simple: if in doubt, disclose it and explain it.

The Interview

The FCA may interview candidates for some roles, particularly at larger firms or where it has questions. A compliance officer should expect to be asked about the firm’s key risks, the rules that matter most to its business, how they would handle a disagreement with the chief executive, and how they plan to spend their first months. SMF Capital’s guide to preparing for an approval interview covers what to expect.

Common Causes of Delay

How Long It Takes

The FCA has up to three months to decide a complete application, and can take longer if it needs more information. Many applications are decided faster, but firms should plan for the full period. Where a compliance officer leaves suddenly, the 12-week rule allows temporary cover while a permanent appointment is made and approved.

Building Approval Into the Search

The best way to avoid problems is to think about approval from the start of the search, not at the end. That means checking fit with the firm’s activities, asking about disclosure early, confirming availability and other commitments, and starting references as soon as an offer is accepted. At SMF Capital, every candidate is assessed against the fit and proper test before they reach a shortlist, so firms are not surprised later. Our page on SMF16 compliance officer recruitment explains how those searches work, for permanent, interim and fractional appointments.