1 DEPP 8 sets out the FCA's statement of policy on the exercise of its power under section 63ZB of the Act to vary, on its own initiative, an approval given by the FCA or the PRA for the performance of a designated senior management function in relation to the carrying on of a regulated activity by an SMCR firm2. The FCA is required to publish this statement of policy by section 63ZD of the Act.
Status: Please note you should read all Brexit changes to the FCA Handbook and BTS alongside the main FCA transitional directions. Where these directions apply the 'standstill', firms have the choice between complying with the pre-IP completion day rules, or the post-IP completion day rules. To see a full list of Handbook modules affected, please see Annex B to the main FCA transitional directions.
When considering the use of this power to deal with a particular concern, the FCA will have regard to the range of regulatory tools that are available. The FCA will consider dealing with any concerns informally through discussion and agreement with the firm and the SMF manager, instead of using the own-initiative variation of approval power.
The power to impose a conditional or time-limited approval does not depend on the SMF manager being unfit without that condition or time limitation. The FCA can impose a condition or time limitation even if the candidate would still be fit and proper without it. Conversely, where an SMF manager is not fit and proper but might be if a condition or time limitation is imposed, the FCA is not obliged to impose a condition or time limitation, and may take the view that a prohibition order or withdrawal of approval is the appropriate course of action.
The circumstances which will lead to a condition or time limitation being imposed on a candidate for an SMF manager role will, where appropriate, also lead to an existing SMF manager’s approval being varied. SUP 10C is therefore relevant to the FCA’s use of the own-initiative variation of approval power.
it has concerns about an SMF manager’s fitness to remain approved in relation to the performance of a designated senior management function but, in all the circumstances, it considers it appropriate to vary their approval by imposing one or more conditions or a time limitation, rather than making a prohibition order or withdrawing approval;
the nature or scope of the SMF manager’s role has changed, for example where they have taken on additional or different responsibilities. In this situation, the FCA may consider it appropriate to impose a condition that they undertake training to enhance their competency and capability regarding their new responsibilities, or a condition that they receive mentoring;
the SMF manager is required to personally support supervisory action in relation to the firm. For example, where a firm is running a remedial programme the FCA may impose a condition that the SMF manager take responsibility for managing or overseeing delivery of aspects of that programme;
it is appropriate to use the own-initiative variation of approval power as a matter of urgency (see DEPP 8.4);
the SMF manager’s approval is subject to an existing condition but the FCA considers that condition is insufficient to mitigate the risk in respect of which it was imposed. In this case, the FCA will vary the condition to make it more effective. The FCA may also, or instead, limit the period of the approval;
the SMF manager’s firm applies to the FCA to remove a condition, or vary a condition to make it less onerous, where the condition was imposed by the FCA on its own initiative, and the FCA considers that it is desirable to remove or vary the condition in order to advance one or more of its operational objectives. The FCA expects that such a removal or variation would normally occur on the application of the firm.
The FCA will consider exercising its own-initiative variation of approval power as a matter of urgency where:
circumstances indicate that it is appropriate to use statutory powers immediately to require and/or prohibit certain actions by the SMF manager to ensure these concerns are addressed.