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DEPP 8.1 Introduction

DEPP 8.1.1 G

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 a relevant authorised person. The FCA is required to publish this statement of policy by section 63ZD of the Act.

[Note: the FCA’s statement of policy on the exercise of its power under section 63ZA of the Act to vary an approval at the request of a relevant authorised person is set out in SUP 10C]

DEPP 8.1.2 G

In DEPP 8, the power under section 63ZB of the Act described in DEPP 8.1.1G is referred to as the FCA’s “own-initiative variation of approval power”.

DEPP 8.2 Use of the own-initiative variation of approval power: general

DEPP 8.2.1 G

1The FCA may use the own-initiative variation of approval power where it considers that it is desirable to do so to advance one or more of its operational objectives. The FCA will assess this on a case-by-case basis, taking into account the specific circumstances of the firm and the SMF manager.

DEPP 8.2.2 G

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.

DEPP 8.2.3 G

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.

DEPP 8.2.4 G

The FCA may vary an approval by:

  1. (1)

    imposing a condition;

  2. (2)

    varying a condition;

  3. (3)

    removing a condition; or

  4. (4)

    limiting the period for which the approval is to have effect.

DEPP 8.2.5 G

The FCA may use the own-initiative variation of approval power in a wide range of circumstances. A number of examples are set out in DEPP 8.3. These are not exhaustive.

DEPP 8.2.6 G

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.

DEPP 8.3 Use of the own-initiative variation of approval power: specific examples

DEPP 8.3.1 G

1Examples of situations where the FCA may use the own-initiative variation of approval power include where:

  1. (1)

    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;

  2. (2)

    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;

  3. (3)

    the size, nature, scope or complexity of the firm’s activities has significantly changed since the SMF manager was first approved;

  4. (4)

    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;

  5. (5)

    it is appropriate to use the own-initiative variation of approval power as a matter of urgency (see DEPP 8.4);

  6. (6)

    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;

  7. (7)

    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.

DEPP 8.4 Use of the own-initiative variation of approval power in urgent cases

DEPP 8.4.1 G

1The FCA may impose a variation of approval to take effect immediately, or on a specified date, if it reasonably considers that this is necessary having regard to the reasons for which it is exercising the own-initiative variation of approval power.

DEPP 8.4.2 G

The FCA will consider exercising its own-initiative variation of approval power as a matter of urgency where:

  1. (1)

    the information available to it indicates serious concerns about the SMF manager or their firm that need to be addressed immediately; and

  2. (2)

    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.

DEPP 8.5 Effects of a breach of condition or time limitation

DEPP 8.5.1 G

1The effects of breaching a condition or time limitation are set out in SUP 10C and DEPP 6.2.9A.