A finance function at an FCA-regulated firm does everything a finance function does anywhere else: management accounts, cash flow, budgeting, statutory reporting. It also does a second job that most unregulated businesses never see. It produces regulatory returns, calculates and monitors capital, safeguards client money, and gives the firm's senior managers the numbers they rely on to show the regulator they are in control. That second job changes who you need to hire, from the CFO down. This article sets out the roles that matter and where firms most often get them wrong.
At the Top: The SMF2 Chief Finance Function
At most regulated firms above the smallest tier, the most senior finance role is a Senior Manager Function. SMF2, the Chief Finance function, needs FCA or PRA approval before the individual starts, comes with a written Statement of Responsibilities, and carries personal accountability under the Duty of Responsibility. A CFO who is excellent at commercial finance but has never held regulatory accountability can struggle at the approval stage, and more so once in post.
That is why a regulated CFO search needs a different approach from a standard finance director appointment. The shortlist has to be tested against the fit and proper standard from the start, not just against commercial capability. SMF Capital, our specialist practice for FCA and PRA-regulated appointments, explains why an SMF2 search should start with a CFO specialist rather than a generalist regulatory recruiter.
At larger and Enhanced-tier firms, the CFO also works closely with the Chief Risk Officer, who owns the risk framework the finance function feeds. Capital planning, stress testing and risk appetite metrics sit across both roles. Understanding where the Chief Risk Officer's accountability begins helps define the CFO's own role more clearly.
Regulatory Reporting
Regulated firms submit a steady stream of returns to the FCA through its RegData system, covering financial position, capital, client money, conduct data and more, depending on the firm's permissions. Late or inaccurate returns are one of the most visible signs of weak control a supervisor can see, and they tend to trigger closer scrutiny of everything else.
At smaller firms, regulatory reporting often sits with the financial controller or a senior accountant. As firms grow, it becomes a specialist role in its own right. Either way, the person producing the returns needs to understand what they mean, not just how to fill in the template. They are also the person the firm's compliance lead depends on. SMF Capital has looked at who actually supports the compliance function on regulatory reporting, and why that role is so often under-resourced.
The Financial Controller
The financial controller at a regulated firm carries a broader brief than their unregulated equivalent. Alongside the month-end close and the audit, they typically own the capital calculations that underpin the firm's prudential position, the reconciliations that feed regulatory returns, and the controls that demonstrate the numbers can be trusted. At an investment firm under the MIFIDPRU regime, that includes the figures behind the ICARA process.
The most common hiring mistake here is appointing a strong controller from an unregulated background and assuming the regulatory side can be learned on the job. Sometimes it can, but it takes time the firm may not have. SMF Capital explains what makes the financial controller role different at an FCA-regulated firm.
Client Money and CASS
Firms that hold client money or safe-custody assets are subject to the FCA's Client Assets Sourcebook, known as CASS. The rules require daily or frequent reconciliations, strict segregation of client money from the firm's own, detailed record-keeping, and an annual client assets report from the firm's auditor. At firms holding client assets, responsibility for CASS compliance must be allocated to a named senior manager.
CASS is highly technical, and mistakes are taken seriously because they put customers' money at risk. General accounting experience, however strong, does not substitute for hands-on knowledge of the client money and custody rules. When firms hire for these roles, the specific experience matters more than the seniority. SMF Capital's guide to recruiting CASS accountants covers what to test for.
Supporting the Compliance and MLRO Functions
The finance team also plays a quieter role in supporting the firm's compliance oversight and money laundering reporting officer. Transaction data, customer payment patterns, client money breaks and financial crime management information often start life in finance systems. When that information is late or unreliable, the compliance function cannot do its job, and the senior managers responsible for compliance carry the consequences. SMF Capital's piece on the finance team behind your compliance and MLRO holders explains how to structure that support.
Newly Regulated Sectors
The talent pool is tightest in sectors coming into regulation for the first time. Cryptoasset firms preparing for the FCA's new regime are a clear example. They need finance professionals who understand both digital assets and regulated reporting, and very few people have done both. Firms in that position should start recruiting early, and be realistic about how much regulatory experience they can find. SMF Capital has looked in more detail at the finance talent gap behind the FCA's crypto regime.
Getting the Structure Right
The right finance structure depends on the firm's size, permissions and growth plans. A small investment firm might combine the controller, regulatory reporting and CASS roles under one experienced person, supported by a fractional CFO. A growing payments or lending business may need each as a separate hire. What every regulated firm needs is someone in each role who understands the regulatory side of the job, not just the accounting side.
For any appointment where the regulatory dimension is central, from the SMF2 CFO to the specialists beneath them, SMF Capital offers specialist recruitment for Senior Manager Function roles, with the fit and proper assessment built into every search. Where a firm needs cover quickly, it can also provide interim and fractional regulated appointments.
Building or Strengthening a Regulated Finance Team?
Speak to SMF Capital on 0203 137 2496 or email recruitment@smfcapital.co.uk to discuss SMF2, controller, regulatory reporting or CASS appointments in confidence.
Adrian Lawrence FCA — Founder
Adrian is a Chartered Accountant and Fellow of the ICAEW with a practising certificate, and a former listed-company Finance Director. He founded FD Capital in 2018 and has since built Exec Capital, NED Capital, Accountancy Capital and SMF Capital, a specialist network for senior finance, executive, board and regulated appointments. View Adrian's ICAEW profile.
