SM&CR divides the regulatory population at FCA-authorised firms into three tiers. Understanding where your employees fall — and where they don't — is the starting point for any Section 250 gap analysis.
The three tiers of SM&CR
SM&CR applies to everyone at an FCA-authorised firm, but with different intensity. Tier one is Senior Managers — those holding a Senior Management Function (SMF) who require pre-approval from the FCA before they can act. Tier two is Certified Persons — those in roles that could cause significant harm, who need firm-level certification but not FCA pre-approval. Tier three is all other Conduct Rules staff. The distinction that matters for Section 250 is between SMF holders (pre-approved) and everyone else.
What approved person status actually means
Being an "approved person" under SM&CR means the FCA has positively confirmed that you can perform a specific function at a specific firm. It is a personal authorisation — not a blanket licence — and it lapses if you move to a different firm or function. Approved person status creates accountability for the functions you are approved to perform. It does not create accountability for functions you perform without approval.
The gap Section 250 targets
SM&CR captures approved persons and certified persons in roles the FCA has specifically defined. But financial firms have many individuals who exercise material financial authority in roles that SM&CR does not specifically require to be pre-approved or certified. Section 250 was drafted to address exactly this population — not because SM&CR failed, but because the scope of financial authority in modern firms has grown beyond what SM&CR was designed to cover.
Running an SM&CR gap analysis for Section 250
To identify your Section 250 exposure, you need to compare two lists: everyone currently approved or certified under SM&CR, and everyone who meets the s.250(3) functional test — playing a significant role in managing or organising a substantial part of the organisation's activities (whether or not they are SM&CR-approved). The gap between these two lists is your potential Section 250 exposure. CoverProof automates this comparison using your FCA register extract and an AI classification of each individual against the verbatim s.250(3) statutory test.
Related articles
Ready to identify your Section 250 exposure?
Import your SM&CR register, run your gap analysis, and download a litigation-grade evidence pack. First analysis is free.
Start Free Gap Analysis →