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MIGI 6.2 The approved persons requirements

What are the controlled functions?

MIGI 6.2.1G

The controlled functions are divided into 'customer functions' and 'significant influence functions'. Only the significant influence functions apply to insurance and mortgage intermediaries, so the customer functions are not covered in this Guide. There is a full list of the controlled functions in SUP 10.4.5 R to which you should refer to help you decide which controlled functions are relevant to your firm.

What are the significant influence functions?

MIGI 6.2.2G

The significant influence functions are performed by individuals who exercise a significant influence over the conduct of a firm's affairs, such as a director or partner. You need to be an approved person to perform a significant influence function. The significant influence functions are divided into four types:

  1. (1)

    governing functions (SUP 10.6);

  2. (2)

    required functions (SUP 10.7);

  3. (3)

    systems and controls functions (SUP 10.8); and

  4. (4)

    significant management functions (SUP 10.9).

How does the approved persons regime apply to sole traders?

MIGI 6.2.3G

If you are a sole trader you will only need to be an approved person yourself if you employ other approved persons. The employees of a sole trader carrying on insurance or mortgage mediation activities will generally not be performing controlled functions. So, if you are a sole trader you are unlikely to need any approved persons (but see also paragraph 6.2.11 below). For further details see SUP 10.6.30 R to SUP 10.6.32 G.

Which controlled functions are relevant to small intermediaries?

MIGI 6.2.4G

As noted above, only the significant influence functions apply to insurance and mortgage intermediaries. Only the governing functions and the required functions are likely to be relevant to small mortgage and insurance intermediaries with simple organisational structures (but see paragraphs 6.2.7 to 6.2.9 of this Chapter).

MIGI 6.2.5G

Fewer controlled functions apply to firms that are 'secondary insurance intermediaries' than to 'primary insurance intermediaries'. A primary insurance intermediary is one whose main business is insurance mediation activities. A secondary intermediary is one whose main business is not insurance mediation activities and who does not carry on any regulated activities other than insurance mediation activities, for example a motor dealer that also sells car insurance.

MIGI 6.2.6G

The controlled functions that are likely to apply to mortgage and insurance intermediaries:

Function

Description

Who performs these controlled functions?

What types of firm do these controlled functions apply to?

Governing Functions (SUP 10.6)

Individuals responsible for directing the firm's affairs, such as a partner (CF4) or director (CF1) will be performing governing functions.

The appropriate governing function will depend on the type of firm. For example, the 'Partner' function would be relevant to a partnership whereas the relevant governing function for a company would be the 'Director' function.

All of those on the firm's governing body will perform these controlled functions.

Applies to mortgage intermediaries and to primary insurance intermediaries.

Does not apply to secondary insurance intermediaries.

Unlikely to apply to sole traders

Required Functions (SUP 10.7)

The only required function likely to be relevant to smaller insurance and mortgage intermediaries is the 'Apportionment and Oversight Function' (CF8).

The person approved to perform this function is responsible for apportioning significant responsibilities among the directors and senior managers and for ensuring that the firm establishes and maintains internal systems and controls that are appropriate for its business.

If a firm has a chief executive, he or she must be approved to carry on the apportionment and oversight function.

Otherwise, in small firms, this controlled function should generally be performed by someone on the firm's governing body.

Applies to all insurance and mortgage intermediaries.

Unlikely to apply to sole traders.

Might other controlled functions also apply to a mortgage or insurance intermediary?

MIGI 6.2.7G

Although in most cases only the controlled functions in the above table will be relevant to a small mortgage or insurance intermediary, other controlled functions could, in certain circumstances, also apply.

MIGI 6.2.8G

For example, in more complex firms, if significant managerial responsibilities are delegated to non-executive directors or individuals who are not on the firm's governing body (see SUP 10.6.2 R and SUP 10.6.3 G), these individuals must get approval from us if they are to perform:

  1. (1)

    systems and controls functions (see SUP 10.8 and SYSC 3.2); or

  2. (2)

    significant management functions (see SUP 10.9 and SYSC 2.1).

MIGI 6.2.9G

If you are approved to perform a governing function, for example as a director, you will not require separate approval to perform the systems and controls and significant management functions.

Responsibility for insurance mediation

MIGI 6.2.10G

An insurance intermediary (other than a sole trader) must make a director or senior manager responsible for the firm's insurance mediation activities. Typically, responsibility should be given to a person approved to perform a governing function. Where insurance mediation is not your main business activity, responsibility for insurance mediation should be allocated to the approved person performing the apportionment and oversight function (CF8). In the case of a sole trader, the sole trader him or herself will be responsible for the firm's insurance mediation activity, regardless of whether or not he or she is an approved person. The FSA Register will identify the person who has this responsibility. You should refer to PRU 9.1 for further details.

Examples - controlled functions and firm types

MIGI 6.2.11G

Examples to help you identify which controlled functions are likely to apply to your firm:

Type of firm

Relevant Controlled Functions

Points to Note

A small partnership that is a mortgage intermediary, a primary insurance intermediary, or both

CF4 Partner Function (SUP 10.6.17 R)

CF8 Apportionment & Oversight Function (SUP 10.7.1 R)

• Allocate responsibility for insurance mediation to one of the above (PRU 9.1.4 R)

Systems and Control Functions and Significant Management Functions are unlikely to apply.

A small company that is a mortgage intermediary, a primary insurance intermediary, or both

CF1 Director Function (SUP 10.6.4 R) CF2 Non Exec Director Function (SUP 10.6.8 R), CF3 Chief Exec Function (SUP 10.6.11 R)

CF8 Apportionment & Oversight Function - (SUP 10.7.1 R) (if the firm has a Chief Exec this function should be allocated to them)

• Allocate responsibility for insurance mediation to one of the above (PRU 9.1.4 R)

Systems and Control Functions and Significant Management Functions are unlikely to apply.

A sole trader that is a mortgage intermediary, an insurance intermediary, or both

• Unlikely to require any approved persons. (SUP 10.6.2 R and SUP 10.6.3 G)

• Sole trader will have responsibility for insurance mediation (PRU 9.1.5 G)

A sole trader only needs to be an approved person him or herself where he or she employs other approved persons, this is unlikely to be the case for firms that are only mortgage or insurance intermediaries or both.

A small partnership that is a secondary insurance intermediary only

CF8 - Apportionment & Oversight Function (SUP 10.7.1 R)

• Allocate responsibility for insurance mediation to the above (SUP 10.6.3A G, SUP 10.6.3B G and SUP 10.1.23R (1), SUP 10.1.23R (2))

Governing Functions, Systems and Control Functions and Significant Management Functions do not apply.

A small company that is a secondary insurance intermediary only

CF8 - Apportionment & Oversight Function (SUP 10.7.1 R)

• Allocate responsibility for insurance mediation to the above (SUP 10.6.3A G,10.6.3B G and 10.7.4A G, 10.7.4B G)