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SUP 10A.1 Application

General

SUP 10A.1.1 R

10This chapter applies to every:5

  1. (1)

    firm that is not a relevant authorised person; and5

  2. (2)

    relevant authorised person, but only to the extent required by SUP 10A.1.16BR (Appointed representatives).5

SUP 10A.1.1A G
SUP 10A.1.2 G

This chapter is also relevant to every FCA-approved person:5

  1. (1)

    of a firm that is not a relevant authorised person; and5

  2. (2)

    of any appointed representative, including of an appointed representative of a relevant authorised person.5

SUP 10A.1.3 G

The rules in this chapter specify descriptions of FCA controlled functions under section 59 of the Act (Approval for particular arrangements).

SUP 10A.1.4 G

The directions in this chapter relate to the manner in which a firm must apply for the FCA's approval under section 59 of the Act and other procedures.

Overseas firms: UK services

SUP 10A.1.5 R

This chapter does not apply to an overseas firm in relation to regulated activities which are carried on in the United Kingdom other than from an establishment maintained by it or its appointed representative in the United Kingdom.

Overseas firms: UK establishments

SUP 10A.1.6 R

Only the following FCA controlled functions apply to an overseas firm which maintains an establishment in the United Kingdom from which regulated activities are carried on:

  1. (1)

    the director function where the person performing that function:

    1. (a)

      has responsibility for the regulated activities of a UKbranch which are likely to enable him to exercise significant influence over that branch; or

    2. (b)

      is someone whose decisions or actions are regularly taken into account by the governing body of that branch;

  2. (2)

    the non-executive director function where the person performing one of those functions:

    1. (a)

      has responsibility for the regulated activities of a UKbranch which is likely to enable him to exercise significant influence over that branch; or

    2. (b)

      is someone whose decisions or actions are regularly taken into account by the governing body of that branch;

  3. (3)

    the chief executive function;

  4. (4)

    the FCA required functions;

  5. (5)

    the systems and controls function;

  6. (6)

    the significant management function in so far as the function relates to:

    1. (a)

      designated investment business other than dealing in investments as principal, disregarding article 15 of the Regulated Activities Order; or

    2. (b)

      processing confirmations, payments, settlements, insurance claims, client money and similar matters in so far as this relates to designated investment business; and

  7. (7)

    the customer function.

Incoming EEA firms, incoming Treaty firms and UCITS qualifiers

SUP 10A.1.7 R

This chapter does not apply to:

  1. (1)

    an incoming EEA firm; or

  2. (2)

    an incoming Treaty firm; or

  3. (3)

    a UCITS qualifier;

if and in so far as the question of whether a person is fit and proper to perform a particular function in relation to that firm is reserved, under any of the Single Market Directives, the Treaty, the UCITS Directive or the auction regulation, to an authority in a country or territory outside the United Kingdom.

SUP 10A.1.8 G
  1. (1)

    SUP 10A.1.7 R reflects the provisions of section 59(8) of the Act and, in relation to an incoming Treaty firm and a UCITS qualifier, the Treaty and the UCITS Directive. It preserves the principle of Home State prudential regulation. In relation to an incoming EEA firm exercising an EEA right, or an incoming Treaty firm exercising a Treaty right, the effect is to reserve to the Home State regulator the assessment of the fitness and propriety of a person performing a function in the exercise of that right. A member of the governing body, or the notified UKbranchmanager, of an incoming EEA firm, acting in that capacity, will not therefore have to be approved by the FCA under the Act.5

  2. (2)

    For example, persons in Solvency II firms which are incoming EEA firms are not expected to be carrying out FCA functions to the extent that the person will be regarded as effectively running the firm or responsible for a Solvency II Directive ‘key function’.5

SUP 10A.1.9 G

Notwithstanding SUP 10A.1.8 G, an incoming EEA firm (other than an EEA pure reinsurer) or incoming Treaty firm will have had to consider the impact of the Host State rules with which it is required to comply when carrying on a passported activity or Treaty activity through a branch in the United Kingdom. An incoming EEA firm (other than an EEA pure reinsurer) will have been notified of those provisions under Part II of Schedule 3 to the Act in the course of satisfying the conditions for authorisation in the United Kingdom.

SUP 10A.1.10 G

An incoming EEA firm will have to consider, for example, the position of a branchmanager based in the United Kingdom who may also be performing a function in relation to the carrying on of a regulated activity not covered by the EEA right of the firm. In so far as the function is within the description of an FCA controlled function, the firm will need to seek approval for that person to perform that FCA controlled function.

Incoming EEA firms: passported activities from a branch

SUP 10A.1.11 R

Only the following FCA controlled functions apply to an incoming EEA firm with respect to its passported activities carried on from a branch in the United Kingdom:

  1. (1)

    the money laundering reporting function;

  2. (2)

    the significant management function, in so far as the function relates to:

    1. (a)

      designated investment business other than dealing in investments as principal, disregarding article 15 of the Regulated Activities Order; or

    2. (b)

      processing confirmations, payments, settlements, insurance claims, client money6 and similar matters, in so far as this relates to designated investment business; and6

    3. (c)

      [deleted]6

  3. (3)

    the customer function other than where this relates to the function in SUP 10A.10.7R (4) and (7).

SUP 10A.1.12 R

If an incoming EEA firm is an EEA pure reinsurer, then SUP 10A.1.11 R does not apply. Instead, none of the FCA controlled functions apply with respect to its passported activities carried on from a branch in the United Kingdom.

Incoming EEA firms etc with top-up permission activities from a UK branch

SUP 10A.1.13 R

In relation to the activities of a firm for which it has a top-up permission, only the following FCA controlled functions apply:

  1. (1)

    the FCA required functions, other than the apportionment and oversight function and the compliance oversight function;

  2. (2)

    the significant management function, in so far as it relates to:

    1. (a)

      designated investment business other than dealing in investments as principal, disregarding article 15 of the Regulated Activities Order; or

    2. (b)

      processing confirmations, payments, settlements, insurance claims, client money and similar matters, in so far as this relates to designated investment business; and6

    3. (c)

      [deleted]6

  3. (3)

    the customer function.

SUP 10A.1.14 R

A person does not perform the significant management function for a firm under SUP 10A.1.11 R or SUP 10A.1.13 R if that person would not have been treated as performing any FCA controlled function for that firm if that firm had been a UK firm.

Appointed representatives

SUP 10A.1.15 R

The descriptions of the following FCA controlled functions apply to an appointed representative of a firm, except in relation to CBTL business or 4an introducer appointed representative, as they apply to an FCA-authorised person:

  1. (1)

    the FCAgoverning functions, subject to SUP 10A.1.16 R and except for a tied agent of an EEAMiFID investment firm; and

  2. (2)

    the customer function other than in relation to acting in the capacity of an investment manager (see SUP 10A.10.7R (6)).

SUP 10A.1.16 R
  1. (1)

    SUP 10A.1.15 R is modified in relation to an appointed representative meeting the conditions in (2) so that only one of the following FCA governing functions:

    1. (a)

      director function; or

    2. (b)

      chief executive function; or

    3. (c)

      partner function; or

    4. (d)

      director of unincorporated association function;

    applies, as appropriate, to an individual within that appointed representative who will be required to be an FCA-approved person.

  2. (2)

    The conditions are that:

    1. (a)

      the scope of appointment of the appointed representative includes insurance mediation activity in relation to non-investment insurance contracts or credit-related regulated activity3, but no other regulated activity; and

    2. (b)

      the principal purpose of the appointed representative is to carry on activities other than regulated activities.

SUP 10A.1.16A R

3This chapter applies to an appointed representative that has a limited permission to carry on a regulated activity prescribed for the purposes of section 39(1E)(a) of the Act as follows:

  1. (1)

    FCA controlled functions apply to the appointed representative as set out in SUP 10A.1.15 R and SUP 10A.1.16 R in relation to the carrying on of the regulated activity, for which it does not have permission, comprised in the business for which its principal has accepted responsibility;

  2. (2)
    1. (a)

      unless it is a not-for-profit debt advice body, the apportionment and oversight function applies in relation to the carrying on of the regulated activity for which it has limited permission;

    2. (b)

      if it is a not-for-profit debt advice body and a CASS large debt management firm, the CASS operational oversight function applies in relation to the carrying on of debt management activity.

SUP 10A.1.16B R
SUP 10A.1.16C G
  1. (1)

    5References in this chapter to a firm include a relevant authorised person, but only to the extent required by SUP 10A.1.16BR.

  2. (2)

    References in SUP 10A.1.15R and SUP 10A.1.16R to FCA governing functions and other controlled functions are to controlled functions in this chapter, not in SUP 10C (FCA senior management regime for approved persons in relevant authorised persons).

SUP 10A.1.16D G
  1. (1)

    5Under section 59(6A) of the Act, if the FCA is satisfied that, in relation to the carrying on of a regulated activity by a relevant authorised person, a controlled function is a senior management function, the FCA must designate the function in its rules as a senior management function.

  2. (2)

    Generally, the FCA does not think that a person performing a function in SUP 10A.1.16BR will have sufficient responsibility for managing the affairs of the appointed representative’sprincipal (as opposed to managing the affairs of the appointed representative itself) to perform a senior management function.

  3. (3)

    Therefore:

    1. (a)

      the FCA has not designated any of the functions in SUP 10A.1.16BR as a senior management function; and

    2. (b)

      none of the functions in SUP 10A.1.16BR are designated senior management functions.

  4. (4)

    SUP 10C.1.8G (Approved persons in relation to appointed representatives of relevant authorised persons) explains that it is unlikely that SUP 10C (FCA senior management regime for approved persons in relevant authorised persons) will apply to approved persons working in appointed representatives of relevant authorised persons in addition to this chapter.

Members of a profession

SUP 10A.1.17 R
  1. (1)

    This chapter, except in respect of the FCA required functions, does not apply to an authorised professional firm in respect of its non-mainstream regulated activities, subject to (2).

  2. (2)

    Where the authorised professional firmhas appointed FCA-approved persons to perform the FCA governing functions with equivalent responsibilities for the firm'snon-mainstream regulated activities and other regulated activities, for the firm'snon-mainstream regulated activities this chapter applies with respect to the FCA governing functions and the FCA required functions (other than the apportionment and oversight function) only.

Oil market participants, service companies, energy market participants, subsidiaries of local authorities or registered social landlords and insurance intermediaries.

SUP 10A.1.18 R

The descriptions of FCA significant-influence functions, other than the FCA required functions, and, if the firm is a MiFID investment firm, the FCA governing functions do not extend to activities carried on by a firm whose principal purpose is to carry on activities other than regulated activities and which is:

  1. (1)

    an oil market participant; or

  2. (2)

    a service company; or

  3. (3)

    an energy market participant; or

  4. (4)

    a wholly owned subsidiary of:

    1. (a)

      a local authority; or

    2. (b)

      a registered social landlord; or

  5. (5)

    a firm with permission to carry on insurance mediation activity in relation to non-investment insurance contracts but no other regulated activity (except advising on P2P agreements)7.

SUP 10A.1.19 G

It will be a matter of fact in each case whether, having regard to all the circumstances, including in particular where the balance of the business lies, a firm's principal purpose is to carry on activities other than regulated activities. If a firm wishes to rely on SUP 10A.1.18 R, it should be in a position to demonstrate that its principal purpose is to carry on activities other than regulated activities.

Insolvency practitioners

SUP 10A.1.20 R

This chapter does not apply to a function performed by:

  1. (1)

    a person acting as an insolvency practitioner within the meaning of section 388 of the Insolvency Act 1986; or

  2. (2)

    a person acting as a nominee in relation to a voluntary arrangement under Parts I (Company Voluntary Arrangements) and VIII (Individual Voluntary Arrangements) of the Insolvency Act 1986; or

  3. (3)

    a person acting as an insolvency practitioner within the meaning of Article 3 of the Insolvency (Northern Ireland) Order 1989; or

  4. (4)

    a person acting as a nominee in relation to a voluntary arrangement under Parts II (Company Voluntary Arrangements) and VIII (Individual Voluntary Arrangements) of the Insolvency (Northern Ireland) Order 1989.

Bidders in emissions auctions

SUP 10A.1.21 G

For a firm that is exempt from MiFID under article 2(1)(i) and whose only permission is bidding in emissions auctions, the only FCA controlled functions that apply to it are:

  1. (1)

    the FCA governing functions;

  2. (2)

    the money laundering reporting function;

  3. (3)

    the customer function; and

  4. (4)

    (where it has exercised an opt-in to CASS in accordance with CASS 1.4.9 R and is a CASS medium firm or a CASS large firm) the CASS operational oversight function.

This is because the FCA-approved person regime specifies a number of functions by incorporation of requirements in SYSC; however, a firm carrying on auction regulation bidding is only subject to SYSC to a limited extent in relation to that activity. This means that the FCA required functions do not apply to auction regulation bidding, except for the money laundering reporting function. Similarly, the significant management function does not apply in relation to auction regulation bidding because, in carrying on that activity, a firm is not subject to SYSC 2.1.1 R or SYSC 4.1.1 R and is not undertaking proprietary trading.

Territorial scope of SUP 10A in relation to benchmark submission

SUP 10A.1.22 R

1Notwithstanding anything to the contrary in SUP 10A.1.5 R, SUP 10A.1.6 R and SUP 10A.1.13 R the application of SUP 10A to the benchmark submission function is as set out in MAR 8.2.3 R.

SUP 10A.1.23 G

1 MAR 8.2.3 R says that the obligation on a benchmark submitter to appoint a benchmark manager applies if it maintains an establishment in the United Kingdom. Therefore, SUP 10A applies to the benchmark submission function whether or not the activity of providing information in relation to a specified benchmark (or any other regulated activity) or the benchmark submission function are carried on from that establishment.

Internally managed corporate AIFs

SUP 10A.1.24 G

2In accordance with section 59(7C) of the Act this chapter does not apply to an internally managed AIF which is a body corporate and not a collective investment scheme9.

Credit firms with limited permission3

SUP 10A.1.25 R
  1. (1)

    3Subject to (2) and (3), this chapter, except in respect of the apportionment and oversight function, does not apply to a firm that has limited permission in relation to the carrying on of the relevant credit activity (as defined in paragraph 2G of Schedule 6 to the Act) for which it has limited permission.

  2. (2)

    Subject to (3), this chapter does not apply to a not-for-profit debt advice body.

  3. (3)

    This chapter applies to a not-for-profit debt advice body that is a CASS large debt management firm with respect to the CASS operational oversight function only.

Swiss general insurers

SUP 10A.1.26 R

8For Swiss general insurers, references in this chapter to parts of the PRA Rulebook for ‘Solvency II firms’ are to be read as references to the corresponding parts of the PRA Rulebook applying to non directive insurers.

SUP 10A.1.27 G

8 Swiss general insurers are in the large non directive insurers sector of the PRA Rulebook and the PRA applies to them, in relation to their controlled functions, provisions equivalent to those applying to third country branches in the Solvency II firms sector of the PRA Rulebook. The FCA includes them as third country undertakings of Solvency II firms and so they must follow the requirements for Solvency II firms set out in SUP 10A.

SUP 10A.2 Purpose

SUP 10A.2.1 G

The immediate purpose of SUP 10A.3 to SUP 10A.11 is to specify, under section 59 of the Act, descriptions of the FCA controlled function which are listed in SUP 10A.4.4 R. The underlying purpose is to establish, and mark the boundaries of, the "FCA-approved persons regime".

SUP 10A.2.2 G

SUP 10A does not deal with the PRA'sapproved persons regime.

SUP 10A.2.3 G

The FCA has certain powers in relation to PRA-approved persons, such as the requirement to give its consent in certain cases to the PRA granting approval for the performance of a PRA controlled function. SUP 10A does not deal with these.

SUP 10A.3 Provisions related to the Act

SUP 10A.3.1 R

A function is an FCA controlled function only to the extent that it is performed under an arrangement entered into by:

  1. (1)

    a firm; or

  2. (2)

    a contractor of the firm;

in relation to the carrying on by the firm of a regulated activity.

SUP 10A.3.2 G

Sections 59(1) and (2) of the Act provide that approval is necessary in respect of an FCA controlled function which is performed under an arrangement entered into by a firm, or its contractor (typically an appointed representative), in relation to a regulated activity.

SUP 10A.3.3 G

Arrangement is defined in section 59(10) of the Act as any kind of arrangement for the performance of a function which is entered into by a firm or any of its contractors with another person and includes the appointment of a person to an office, his becoming a partner, or his employment (whether under a contract of service or otherwise). For the provisions in this chapter relating to outsourcing, see SUP 10A.13.5 G and SUP 10A.13.6 G.

SUP 10A.3.4 G

If, however, a firm is a member of a group, and the arrangements for the performance of an FCA controlled function of the firm are made by, for instance, the holding company, the person performing the function will only require approval if there is an arrangement (under section 59(1)) or a contract (under section 59(2)) between the firm and holding company permitting this. This need not be a written contract but could arise, for example, by conduct, custom and practice.

SUP 10A.3.5 G

The arrangement must be “in relation to” the carrying on of a regulated activity. Regulated activities are defined in the Glossary by reference to the Regulated Activities Order. This order prescribes the activities which are regulated activities for the purposes of the Act.

SUP 10A.4 Specification of functions

SUP 10A.4.1 R

Each of the functions described in SUP 10A.4.4 R (the table of FCA controlled function) is an FCA controlled function.

SUP 10A.4.2 R

Part 1 of the table of FCA controlled functions applies in relation to an FCA-authorised person. It also applies in relation to an appointed representative for the purposes of SUP 10A.1.15 R to SUP 10A.1.16BR4 (Appointed representatives) whether its principal is an FCA-authorised person or a PRA-authorised person. Part 2 applies in relation to a PRA-authorised person, except in relation to CBTL business.2

2
SUP 10A.4.2A G

6For the purposes of SUP 10A (and SYSC, APER, COCON and DEPP) a large non-directive insurer is treated as and included in the Glossary definition of a Solvency II firm. For large non-directive insurers, references to parts of the PRA Rulebook applicable to Solvency II Firms are to be read as references to the corresponding parts of the PRA Rulebook applying to large non directive insurers.

SUP 10A.4.3 G

The fact that a person may be FCA-approved for one purpose does not have the effect of bringing all his activities within that FCA controlled function.

SUP 10A.4.4 R

FCA controlled functions

Part 1 (FCA controlled functions for FCA-authorised persons and appointed representatives)

Type

CF

Description of FCA controlled function

FCA governing functions*

1

Director function

2

Non-executive director function

3

Chief executive function

4

Partner function

5

Director of unincorporated association function

6

Small friendly society function

FCA required functions*

8

Apportionment and oversight function

10

Compliance oversight function

10A

CASS operational oversight function

11

Money laundering reporting function

40

Benchmark submission function 1

50

Benchmark administration function 1

Systems and controls function*

28

Systems and controls function

Significant management function*

29

Significant management function

Customer-dealing function 3

3

30

Customer function

*FCA significant-influence functions

Part 2 (FCA controlled functions for PRA-authorised persons)

(See Note 1)

Type

CF

Description of FCA controlled function

4 FCA governing functions*

1

Director function

(see Note 2)

42a

Chair of the nomination committee function(See Note 2 36)

42b

Chair of the with-profits committee function(See Note 2 36)

63

Chief executive function (see Note 3A)

45

Director of an unincorporated association function 5 (See Note 2 3B6)

66

Small friendly society function (see Note 3C)

6

4

10

Compliance oversight function

10A

CASS operational oversight function

11

Money laundering reporting function

40

Benchmark submission function 1

50

Benchmark administration function 1

451

Actuarial conduct function (third country)

(see Note 4)

4 Systems and controls function*

28

Systems and control function

(see Note 5)

Significant management function*

29

Significant management function

Customer-dealing function

30

Customer function

*FCA significant-influence functions

4 Note 1: Part 2 of this table does not apply to appointed representatives of PRA-authorised persons, Part 1 applies instead. (See SUP 10A.4.2R.)

4 Note 2: Solvency II firms (including large non-directive insurers) and small non-directive insurers6.

Note 3: Solvency II firms (including large non-directive insurers) only.6

4

6 Note 3A: small non-directive insurers only.

6 Note 3B: Solvency II firms (including large non-directive insurers) and small non-directive insurers.

6 Note 3C: small non-directive insurers and large non-directive insurers only.

4 Note 4: Third country insurance or reinsurance undertakings which are Solvency II firms only.

4 Note 5: Only Solvency II firms that are:

(a) third-country insurance or reinsurance undertakings; or

(b) ISPVs.

SUP 10A.5 Significant-influence functions

What are the FCA significant-influence functions?

Definition of FCA significant-influence function

SUP 10A.5.2 R

Each FCA significant-influence function is one which comes within the definition of a significant-influence function.

SUP 10A.5.3 R

A 1significant-influence function, in relation to the carrying on of a regulated activity by a firm, means a function that is likely to enable the person responsible for its performance to exercise a significant influence on the conduct of the firm's affairs, so far as relating to the activity.1

SUP 10A.5.4 G

[deleted]1

SUP 10A.5.5 G

Whether an FCA controlled function is likely to result in the person responsible for its performance exercising significant influence on the conduct of the firm's affairs is a question of fact in each case. The FCA has identified the FCA significant-influence functions as satisfying this condition.

Periods of less than 12 weeks

SUP 10A.5.6 R

If:

  1. (1)

    a firm appoints an individual to perform a function which, but for this rule, would be an FCA significant-influence function;

  2. (2)

    the appointment is to provide cover for an approved person whose absence is:

    1. (a)

      temporary; or

    2. (b)

      reasonably unforeseen; and

  3. (3)

    the appointment is for less than 12 weeks in a consecutive 12-month period;

the description of the relevant FCA significant-influence function does not relate to those activities of that individual.

SUP 10A.5.7 G

SUP 10A.5.6 R enables cover to be given for, as an example, holidays and emergencies and avoids the need for the precautionary approval of, for example, a deputy. However, as soon as it becomes apparent that a person will be performing an FCA controlled function for more than 12 weeks, the firm should apply for approval.

SUP 10A.6 FCA governing functions

Introduction

SUP 10A.6.1 G
  1. (1)

    Every firm will have one or more persons responsible for directing its affairs. These persons will be performing the FCA governing functions and will be required to be FCA-approved persons unless the application provisions in SUP 10A.1, or the particular description of an FCA controlled function, provide otherwise. For example, each director of a company incorporated under the Companies Acts will perform an FCA governing function. However, if the firm is a PRA-authorised person, the governing functions apply in the manner set out in (2) and (3). Note that for the purposes of SUP 10A (and SYSC, APER, COCON and DEPP) a large non-directive insurer is treated as and included in the definition of a Solvency II firm3.

    2
  2. (2)

    3For a Solvency II firm, the FCA governing functions CF1, CF2a, CF2b, CF5 and (for large non-directive insurers only) CF6 may apply and for a small non-directive insurer, the FCA governing functions CF1, CF3, CF5 or CF6 may apply. These functions will apply3 if the person carrying out the function is not approved to carry out a PRA controlled function or the other conditions in SUP 10A.11.12R (minimising overlap with the PRA approved persons regime) are not satisfied.2

  3. (3)

    For a Solvency II firm and a small non-directive insurer3, if the person is approved to carry out a PRA controlled function and the conditions in SUP 10A.11.12R are satisfied, the relevant FCA function is instead absorbed into the PRA controlled function that the person is approved for (by virtue of its inclusion in PRA Rulebook: Solvency II firms: Insurance – Senior Insurance Management Functions3, 2.5; Non-Solvency II firms: Non-Solvency II firms – Senior Insurance Management Functions, 2.6 and Non-Solvency II firms: Large Non-Solvency II firms – Senior Insurance Management Functions, 2.5)3.

    2
SUP 10A.6.2 G

A sole trader does not fall within the description of the governing functions.

SUP 10A.6.2A G
  1. (1)

    2As explained in more detail in the rest of this section, a number of FCA governing functions do not apply to a PRA-authorised person.

  2. (2)

    However, (1) does not apply to an FCA governing function under SUP 10A.1.15R to SUP 10A.1.16BR (Appointed representatives). The FCA governing functions continue to apply for appointed representatives of a PRA-authorised person.

  3. (3)

    For example, the chief executive function does not apply to a PRA-authorised person. A PRA controlled function applies instead.

  4. (4)

    However, the chief executive function may apply to someone who is the chief executive of an appointed representative of a PRA-authorised person.

  5. (5)

    See SUP 10A.1.15R to SUP 10A.1.16BR and SUP 10A.4.2R for the main rules that deal with what controlled functions apply to appointed representatives.

What the FCA governing functions include

SUP 10A.6.3 R

Each of the FCA governing functions includes:

  1. (1)

    (where apportioned under SYSC 2.1.1 R or SYSC 4.3.1 R and SYSC 4.4.3 R (or, for a full-scope UK AIFM apportioned under article 60(1) of the AIFMD level 2 regulation))1

    1. (a)

      the systems and controls function (if it applies to the firm); and

    2. (b)

      the significant management function;

  2. (2)

    (in respect of bidding in emissions auctions) that part of the customer function specified in SUP 10A.10.7R (7) (bidder’s representative).

This does not apply to the non-executive director function or the function described in SUP 10A.6.8 R.

SUP 10A.6.4 G
  1. (1)

    The effect of SUP 10A.6.3 R is that a person who is approved to perform an FCA governing function will not have to be specifically FCA-approved to perform the systems and controls function or the significant management function or the part of the customer function specified in SUP 10A.10.7R (7). However, a person who is approved to perform an FCA governing function will have to be additionally FCA-approved before he can perform any of the FCA required functions or the customer function (except the part specified in SUP 10A.10.7R (7)).

  2. (2)

    SUP 10A.6.3 R does not apply to the non-executive director function. It does not apply to the director function if the only part of that function that the FCA-approved person is performing is the function described in SUP 10A.6.8 R.

SUP 10A.6.5 G

See MIPRU 2.2 for how the FCA's approved persons regime is adjusted for a firm carrying on insurance mediation activity.2

SUP 10A.6.6 G

[deleted]2

Director function (CF1)

SUP 10A.6.7 R

If a firm is a body corporate (other than a limited liability partnership), the director function is the function of acting in the capacity of a director (other than non-executive director) of that firm.

SUP 10A.6.8 R
  1. (1)

    If a firm is a body corporate (other than a limited liability partnership), the director function is also the function of acting in the capacity of a person:

    1. (a)

      who is a director, partner, officer, member (if the parent undertaking or holding company is a limited liability partnership), senior manager, or employee of a parent undertaking or holding company of the firm; and

    2. (b)

      whose decisions or actions are regularly taken into account by the governing body of the firm.

  2. (2)

    (1) does not apply if that parent undertaking or holding company has a Part 4A permission or is regulated by an EEA regulator.

  3. (3)

    (1) does not apply to the function falling into SUP 10A.6.13 R (non-executive director of the parent undertaking or holding company).

SUP 10A.6.9 G

Examples of where SUP 10A.6.8 R might apply include (but are not limited to):

  1. (1)

    a chairman of an audit committee of a parent undertaking or holding company of a UK firm where that audit committee is working for that UK firm (that is, functioning as the audit committee for the group); or

  2. (2)

    a director (other than a non-executive director) of a parent undertaking or holding company of a UK firm exercising significant influence by way of his involvement in taking decisions for that UK firm; or

  3. (3)

    an individual (such as a senior manager) of a parent undertaking or holding company of a UK firm who is responsible for and/or has significant influence in setting the objectives for and the remuneration of executive directors of that UK firm; or

  4. (4)

    an individual who is a director (other than a non-executive director) or a senior manager of a parent undertaking or holding company of a UK firm who is accustomed to influencing the operations of that UK firm, and acts in a manner in which it can reasonably be expected that an executive director or senior manager of that UK firm would act; or

  5. (5)

    an individual of an overseas firm which maintains an establishment in the United Kingdom from which regulated activities are carried on, where that individual has responsibilities for those regulated activities which are likely to enable him to exercise significant influence over the UKbranch.

SUP 10A.6.10 G

A director can be a body corporate and may accordingly require approval as an FCA-approved person in the same way as a natural person may require approval.

SUP 10A.6.11 G
  1. (1)

    The director function applies in relation to a PRA-authorised person, as set out below3.

    2
  2. (2)

    3For a Solvency II firm or a small non-directive insurer3, the FCAdirector function may apply if the person carrying out the function is not approved to carry out a PRA controlled function or the other conditions in SUP 10A.11.12R (minimising overlap with the PRA approved persons regime) are not satisfied.2

SUP 10A.6.11A R

2For the purposes of SUP 10A.6.7R and SUP 10A.6.8R (the director function), ‘director’ includes an executive member of a committee to which the Council of the Society directly delegates authority to carry out the Society's regulatory functions.

Non-executive director function (CF2)

SUP 10A.6.12 R

If a firm is a body corporate, the non-executive director function is the function of acting in the capacity of a non-executive director of that firm.

SUP 10A.6.13 R
  1. (1)

    If a firm is a body corporate, the non-executive director function is also the function of acting in the capacity of a person:

    1. (a)

      who is a non-executive director of a parent undertaking or holding company; and

    2. (b)

      whose decisions or actions are regularly taken into account by the governing body of the firm.

  2. (2)

    However, (1) does not apply if that parent undertaking or holding company has a Part 4A permission or is regulated by an EEA regulator.

SUP 10A.6.14 G

Examples of where SUP 10A.6.13 R might apply include (but are not limited to):

  1. (1)

    an individual who is a non-executive director of a parent undertaking or holding company who takes an active role in the running of the business of a UK firm, for example, as a member of a board or committee (on audit or remuneration) of that firm; or

  2. (2)

    an individual who is a non-executive director of a parent undertaking or holding company having significant influence in setting and monitoring the business strategy of the UK firm; or

  3. (3)

    an individual who is a non-executive director of a parent undertaking or holding company of a UK firm involved in carrying out responsibilities such as scrutinising the approach of executive management, performance, or standards of conduct of the UK firm; or

  4. (4)

    an individual who is a non-executive director of a parent undertaking or holding company of a UK firm who is accustomed to influence the operations of the UK firm, and acts in a way in which it can reasonably be expected that a non-executive director of the UK firm would act; or

  5. (5)

    an individual who is a non-executive director of an overseas firm which maintains a branch in the United Kingdom from which regulated activities are carried on where that individual has responsibilities for those regulated activities which are likely to enable him to exercise significant influence over the UKbranch.

SUP 10A.6.15 G

The non-executive director function does not apply in relation to a PRA-authorised person. PRA approval is required instead.

Chair of the nomination committee (CF2a) and chair of the with-profits committee functions (CF2b) (Solvency II firms only)

SUP 10A.6.15A R
  1. (1)

    2For a Solvency II firm only, if the firm has a nomination committee, the chair of the nomination committee function is the function of acting in the capacity of a non-executive chairman of that committee.

  2. (2)

    The chair of the nomination committee function does not apply to a Solvency II firm that is a third-country insurance or reinsurance undertaking.2

SUP 10A.6.15B R
  1. (1)

    2For a Solvency II firm only, if the firm has a with-profits committee, the chair of the with-profits committee function is the function of acting in the capacity of a non-executive chairman of the committee.

  2. (2)

    The chair of the with-profits committee function does not apply to a Solvency II firm that is a third-country insurance or reinsurance undertaking.2

SUP 10A.6.15C G
  1. (1)

    2For a Solvency II firm, the chair of the nomination committee function and the chair of the with-profits committee function may not apply if the person carrying out the function is approved to carry out a PRA controlled function and the conditions in SUP 10A.11.12R (minimising overlap with the PRA approved persons regime) are satisfied.

  2. (2)

    In that case, the relevant FCA function is instead absorbed into the PRA controlled function that the person is approved for (by virtue of its inclusion in PRA Rulebook: Solvency II firms: Senior Insurance Managers Regime, 2.5). 2

Guidance on persons in a parent undertaking or holding company exercising significant influence

SUP 10A.6.16 G
  1. (1)

    This paragraph explains the basis on which the director function and the non-executive director function are applied to persons who have a position with the firm'sparent undertaking or holding company under SUP 10A.6.8 R or SUP 10A.6.13 R.

  2. (2)

    The basic position is set out in SUP 10A.3.4 G. As is the case with all controlled functions, SUP 10A.6.8 R and SUP 10A.6.13 R are subject to the overriding provisions in SUP 10A.3.1 R, which sets out the requirements of section 59(1) and (2) of the Act. This means that unless the firm has an arrangement permitting the performance of these roles by the persons concerned, these persons will not be performing these controlled functions. Therefore, the FCA accepts that there will be cases in which a person performing these roles will not require approval. However where there is such an arrangement the function may apply.

Chief executive function (CF3)

SUP 10A.6.17 R

The chief executive function is the function of acting in the capacity of a chief executive of a firm.

SUP 10A.6.18 G

This function is having the responsibility, alone or jointly with one or more others, under the immediate authority of the governing body:

  1. (1)

    for the conduct of the whole of the business (or relevant activities); or

  2. (2)

    in the case of a branch in the United Kingdom of an overseas firm, for the conduct of all of the activities subject to the UKregulatory system.

SUP 10A.6.19 G

For a branch in the United Kingdom of an overseas firm, the FCA would not normally expect the overseas chief executive of the firm as a whole to be FCA-approved for this function where there is a senior manager under him with specific responsibility for those activities of the branch which are subject to the UKregulatory system. In some circumstances, the person within the firm responsible for UK operations may, if the function is likely to enable him to exercise significant influence over the branch, also perform the chief executive function (see SUP 10A.7.4 G).

SUP 10A.6.20 G

A person performing the chief executive function may be a member of the governing body but need not be. If the chairman of the governing body is also the chief executive, he will be discharging this function. If the responsibility is divided between more than one person but not shared, there is no person exercising the chief executive function. But if that responsibility is discharged jointly by more than one person, each of those persons will be performing the chief executive function.

SUP 10A.6.21 G

Note that a body corporate may be a chief executive. If so, it will need to be approved (if the firm in question is an FCA-authorised person) to perform the chief executive function.

SUP 10A.6.22 G

The chief executive function does not apply in relation to a PRA-authorised person. PRA approval is required instead.

Partner function (CF4)

SUP 10A.6.23 R
  1. (1)

    If a firm is a partnership, the partner function is the function of acting in the capacity of a partner in that firm.

  2. (2)

    If the principal purpose of the firm is to carry on one or more regulated activities, each partner performs the partner function.

  3. (3)

    If the principal purpose of the firm is other than to carry on regulated activities:

    1. (a)

      a partner performs the partner function to the extent only that he has responsibility for a regulated activity; and

    2. (b)

      a partner in a firm will be taken to have responsibility for each regulated activity except where the partnership has apportioned responsibility to another partner or group of partners.

SUP 10A.6.24 G

Any apportionment referred to in SUP 10A.6.23R (3)(b) will have taken place under SYSC 2.1.1 R or SYSC 4.3.1 R and SYSC 4.4.3 R. The FCA may ask to see details of the apportionment but will not require, as a matter of course, a copy of the material which records this (see SYSC 2.2).

SUP 10A.6.25 G

The effect of SUP 10A.1.17 R is that regulated activity in SUP 10A.6.23 R (and elsewhere) is to be taken as not including an activity that is a non-mainstream regulated activity. Therefore, a partner whose only regulated activities are incidental to his professional services, in a partnership whose principal purpose is to carry on other than regulated activities, need not be an FCA-approved person. What amounts to the principal purpose of the firm is a matter of fact in each case having regard to all the circumstances, including the activities of the firm as a whole. Any regulated activities which such a partner carries on are not within the description of the partner function.

SUP 10A.6.26 R

If a firm is a limited liability partnership, the partner function extends to the firm as if the firm were a partnership and a member of the firm were a partner.

SUP 10A.6.27 R

If a partnership is registered under the Limited Partnership Act 1907, the partner function does not extend to any function performed by a limited partner.

SUP 10A.6.28 G

The partner function does not apply in relation to a PRA-authorised person. PRA approval is required instead.

Director of unincorporated association function (CF5)

SUP 10A.6.29 R

If a firm is an unincorporated association, the director of unincorporated association function is the function of acting in the capacity of a director of the unincorporated association. In a Solvency II firm and a small non-directive insurer3 the function does not include acting in the capacity of a non-executive director.2

SUP 10A.6.30 G

The director of unincorporated association function applies in relation to a PRA-authorised person as set out in SUP 10A.6.1G above3.

2

Small friendly society function (CF6)

SUP 10A.6.31 R
  1. (1)

    If a firm is a non-directive friendly society, the small friendly society function is the function of directing its affairs, either alone or jointly with others. In a large non-directive insurer and a small non-directive insurer the function does not include acting in the capacity of a non-executive director.3

  2. (2)

    If the principal purpose of the firm is to carry on regulated activities, each person with responsibility for directing its affairs performs the FCA controlled function.

  3. (3)

    If the principal purpose of the firm is other than to carry on regulated activities, a person performs the small friendly society function only to the extent that he has responsibility for a regulated activity.

SUP 10A.6.32 R
  1. (1)

    Each person on the non-directive friendly society'sgoverning body will be taken to have responsibility for its regulated activities, unless the firm has apportioned this responsibility to one particular individual to whom it is reasonable to give this responsibility.

  2. (2)

    The individual need not be a member of the governing body.

SUP 10A.6.33 G

Typically a non-directive friendly Society will appoint a “committee of management” to direct its affairs. However, the governing arrangements may be informal and flexible. If this is the case, the FCA would expect the society to resolve to give responsibility for the carrying on of regulated activities to one individual who is appropriate in all the circumstances. That individual may, for example, have the title of chief executive or similar. The individual would have to be an FCA-approved person under SUP 10A.6.31 R.

SUP 10A.6.34 G

In practice, the FCA expects that most non-directive friendly societies will be PRA-authorised persons. Where that is the case, the small friendly society function apply as set out in SUP 10A.6.1G above3.

SUP 10A.7 FCA required functions

Apportionment and oversight function (CF8)

SUP 10A.7.1 R
  1. (1)

    The apportionment and oversight function is the function of acting in the capacity of a director or senior manager responsible for 4the apportionment function and/or4 the oversight function set out in SYSC 2.1.3R or SYSC 4.4.5R.4

  2. (2)

    The apportionment and oversight function does not apply in relation to a Solvency II firm or a small non-directive insurer5.

    4
SUP 10A.7.2 G

In requiring someone to apportion responsibility, neither4 a common platform firm nor a Solvency II firm4 or small non-directive insurer5 should 4apply for that person or persons to be FCA-approved to perform the apportionment and oversight function (see SUP 10A.7.1 R, SYSC 2.1.3 R and SYSC 1 Annex 1).

SUP 10A.7.3 G

The fact that there is a person performing the apportionment and oversight function, and who has responsibility for activities subject to regulation by the FCA, may have a bearing on whether a manager who is based overseas will be performing an FCA controlled function. It is a factor to take into account when assessing the likely influence of the overseas manager.

SUP 10A.7.4 G

Generally, in relation to a UK establishment of an overseas firm or a firm which is part of an overseas group, where an overseas manager’s responsibilities in relation to the United Kingdom are strategic only, he will not need to be an FCA-approved person. However, where, in accordance with SYSC 3 or SYSC 4 to SYSC 10, he is responsible for implementing that strategy in the United Kingdom, and has not delegated that responsibility to a senior manager in the United Kingdom, he is likely to be performing an FCA controlled function for example, the chief executive function or a PRA controlled function.

SUP 10A.7.5 G

A firm carrying on insurance mediation activity, other than a sole trader, must allocate to a director or senior manager the responsibility for the firm'sinsurance mediation activity (MIPRU 2.2.1 R). MIPRU 2.2.2 R (2) provides that the firm may allocate this responsibility to the person performing the apportionment and oversight function.

SUP 10A.7.6 G

Where the person performing the apportionment and oversight function is also responsible for the firm'sinsurance mediation activity, the words “(insurance mediation)” will be inserted after this FCA controlled function (see MIPRU 2.2.5 G).

SUP 10A.7.7 G

As explained in SUP 10A.11 (Minimising overlap with the PRA approved persons regime), the application of the apportionment and oversight function is sometimes disapplied for a PRA-authorised person.

Compliance oversight function (CF10)

SUP 10A.7.8 R

The compliance oversight function is the function of acting in the capacity of:2

  1. (1)

    a director or senior manager who is allocated the function set out in SYSC 3.2.8 R,3SYSC 6.1.4 R (2) or SYSC 6.1.4C R3; or2

    3
  2. (2)

    for a full-scope UK AIFM, a person allocated the function in article 61(3)(b) of the AIFMD level 2 regulation.2

CASS operational oversight function (CF10a)

SUP 10A.7.9 R

In relation to a CASS medium firm and a CASS large firm (other than a CASS large debt management firm)3, the CASS operational oversight function is the function of acting in the capacity of a person to whom is allocated the function set out in CASS 1A.3.1A R.

SUP 10A.7.9A R

In relation to a CASS large debt management firm, the CASS operational oversight function is the function of acting in the capacity of a person to whom is allocated the function in CASS 11.3.4 R.

Money laundering reporting function (CF11)

SUP 10A.7.10 R

The money laundering reporting function is the function of acting in the capacity of the money laundering reporting officer of a firm.

SUP 10A.7.11 G

A firm's obligations in respect of its money laundering reporting officer are set out elsewhere in the Handbook (see SYSC 3.2.6I R and SYSC 6.3.9 R and for their scope, see the application provisions in SYSC 1 Annex 1).

Benchmark submission function (CF40)

SUP 10A.7.12 R

1The benchmark submission function is the function of acting in the capacity of a person to whom is allocated the function set out in MAR 8.2.3R (1) (Organisational and governance arrangements).

Benchmark administration function (CF50)

SUP 10A.7.13 R

1The benchmark administration function is the function of acting in the capacity of a person to whom is allocated the function set out in MAR 8.3.5R (1) (Requirements for benchmark administrators).

Actuarial conduct function in Solvency II third-country insurance or reinsurance undertakings

SUP 10A.7.14 R

4The actuarial conduct function (third country) is that part of the function of acting in the capacity of an actuary appointed (by a Solvency II firm which is a third-country insurance or reinsurance undertaking) under rule 7.1(2) of the PRA Rulebook: Solvency II Firms: Third Country Branches that relates to compliance with FCA requirements and standards under the regulatory system.

SUP 10A.8 Systems and controls functions

Systems and controls function (CF28)

SUP 10A.8.1 R

The systems and controls function is the function of acting in the capacity of an employee of the firm with responsibility for reporting to the governing body of a firm, or the audit committee (or its equivalent) in relation to:

  1. (1)

    its financial affairs;

  2. (2)

    setting and controlling its risk exposure (see SYSC 3.2.10 G and SYSC 7.1.6 R);

  3. (3)

    adherence to internal systems and controls, procedures and policies (see SYSC 3.2.16 G and SYSC 6.2).

10A.8.1A R

2For a Solvency II firm which is an insurance special purpose vehicle or a third-country insurance or reinsurance undertaking, the systems and controls function is modified as follows:

  1. (1)

    it does not include any of the activities described in any PRA controlled function if that controlled function applies to the firm;

  2. (2)

    it does not include activities allocated to and carried on by another person who is a PRA approved person; and

  3. (3)

    it only includes that part of the function that relates to compliance with FCA requirements and standards under the regulatory system.

SUP 10A.8.2 R

The systems and controls function does not apply in relation to bidding in emissions auctions carried on by a firm that is exempt from MiFID under article 2(1)(i).

SUP 10A.8.3 G
  1. (1)

    The systems and controls function does not apply in relation to a PRA-authorised person. PRA approval is required instead.2

  2. (2)

    The exception is a Solvency II firm which is an insurance special purpose vehicle or a third-country insurance or reinsurance undertaking. For such firms, FCA approval may be required but only to the extent that the activities are not already covered by a PRA controlled function that applies to the firm or are not activities allocated to and carried on by another person who is a PRA approved person.2

  3. (3)

    Also, for firms in (2), the function is expressly limited to that part of the function that relates to compliance with FCA requirements and standards under the regulatory system.2

  4. (4)

    For firms in (2), references in SUP 10A.8.1R to SYSC should also be read as including references to comparable provisions in the PRA Rulebook: Solvency II Firms: Third Country Branches and Solvency II Regulations, as appropriate.2

SUP 10A.8.4 G

Where an employee performs the systems and controls function the FCA would expect the firm to ensure that the employee had sufficient expertise and authority to perform that function effectively. A director or senior manager would meet this expectation.

Full scope UK AIFM

SUP 10A.8.5 G

1For a full-scope UK AIFM, the requirement to have an employee responsible for reporting to the governing body of the firm or the audit committee for matters in SUP 10A.8.1R (2) and SUP 10A.8.1R (3) is derived from the AIFMD level 2 regulation, which imposes obligations on such firms to have a permanent risk management function and, where appropriate and proportionate for their business, an internal audit function.

SUP 10A.9 Significant management functions

Application

SUP 10A.9.1 R

SUP 10A.9 applies only to a firm which:

  1. (1)

    under SYSC 2.1.1 R, chapters 2, 3 and 5 of the Allocation of Responsibilities parts of3 the PRA Rulebook applicable to Solvency II Firms and Non-Solvency II firms3 or SYSC 4.1.1 R, apportions a significant responsibility, within the description of the significant management function, to a senior manager of a significant business unit; or

    22
  2. (2)

    undertakes proprietary trading.4

    2
  3. (3)

    [deleted]4

    2
SUP 10A.9.2 G

The FCA anticipates that there will be only a few firms needing to seek approval for an individual to perform the significant management function set out in SUP 10A.9.1R (1). In most firms, those approved for the FCA governing functions, FCA required functions and, where appropriate, the systems and controls function or the equivalent PRA controlled functions, are likely to exercise all the significant influence at senior management level.

SUP 10A.9.3 G

A proprietary trader undertakes activities with the firm'smoney and has the ability to commit the firm. By virtue of this role, all proprietary traders have potential to be able to exercise significant influence on the firm for the purposes of the definition of significant-influence function. Therefore, it is the FCA's expectation that all firms will assess all their proprietary traders to ascertain the ones for whom approval is required.

SUP 10A.9.4 G

The scale, nature and complexity of the firm's business may be such that a firm apportions, under SUP 10A.9.1R (1), a significant responsibility to an individual who is not approved to perform the FCA governing functions, FCA required functions or, where appropriate, the systems and controls function or the equivalent PRA controlled functions. If so, the firm should consider whether the functions of that individual fall within the significant management function. For the purposes of the description of the significant management functions, the following additional factors about the firm should be considered:

  1. (1)

    the size and significance of the firm's business in the United Kingdom; for example, a firm carrying on designated investment business may have a large number of approved persons (for example, in excess of 100 individuals); or a firm carrying on general insurance business may have gross written premiums in excess of £100m;

  2. (2)

    the number of regulated activities carried on, or proposed to be carried on, by the firm and (if relevant) other members of the group;

  3. (3)

    its group structure (if it is a member of a group);

  4. (4)

    its management structure (for example, matrix management); and

  5. (5)

    the size and significance of its international operations, if any.

SUP 10A.9.5 G

When considering whether a business unit is significant, the firm should take into account all relevant factors in the light of the firm's current circumstances and its plans for the future, including:

  1. (1)

    the risk profile of the unit; or

  2. (2)

    its use or commitment of a firm's capital; or

  3. (3)

    its contribution to the profit and loss account; or

  4. (4)

    the number of employees or approved persons in the unit; or

  5. (5)

    the number of customers of the unit; or

  6. (6)

    any other factor which makes the unit significant to the conduct of the firm's affairs so far as relating to the regulated activity.

SUP 10A.9.6 G

The question may arise whether a manager who is based overseas will be performing the significant management function under SUP 10A.9.9 R and should, therefore, be an FCA-approved person. This is especially true where the firm operates matrix management. The fact there is a person performing the apportionment and oversight function, and who has responsibility for activities subject to regulation by the FCA, may have a bearing on this. It is a factor to take into account when assessing the likely influence of the overseas manager.

SUP 10A.9.7 G

Generally, in relation to a branch of a firm, or a firm which is part of an overseas group, where an overseas manager is responsible for strategy, he will not need to be approved for the significant management function. However, where he is responsible for implementing that strategy in the United Kingdom, and has not delegated that responsibility to a senior manager in the United Kingdom, he is likely to be performing that FCA controlled function.

SUP 10A.9.8 G

See also SUP 10A.7.3 G to SUP 10A.7.6 G in relation to matrix management.

Significant management function (CF29)

SUP 10A.9.9 R

The significant management function is the function of acting as a senior manager with significant responsibility for a significant business unit that:

  1. (1)

    carries on designated investment business or other activities not falling within (2) to (4);

  2. (2)

    effects contracts of insurance (other than contractually based investments);

  3. (2A)

    carries on credit-related regulated activity;1

  4. (3)

    makes material decisions on the commitment of a firm's financial resources, its financial commitments, its assets acquisitions, its liability management and its overall cash and capital planning;

  5. (4)

    processes confirmations, payments, settlements, insurance claims, client money and similar matters.4

  6. (5)

    [deleted]4

SUP 10A.9.10 R

The significant management function also includes the function of acting as a proprietary trader.

SUP 10A.9.11 R

The significant management function does not include any of the activities described in any other FCA controlled function or PRA controlled function if that other controlled function applies to the firm.

SUP 10A.9.12 G

5A senior manager carrying on the significant management function under SUP 10A.9.9 R with significant responsibility for a significant business unit that carries on activities other than designated investment business for the purposes of SUP 10A.9.9R (1) could, for example, be the head of a unit carrying on the activities of: 4personal lending, corporate lending, salvage or loan recovery, or proprietary trading, or a member of a committee (that is, a person who, together with others, has authority to commit the firm) making decisions in these functions.

SUP 10A.9.13 G

A proprietary trader also undertakes activities which may have a significant influence on the firm. Such activities may require approval for CF29 under SUP 10A.9.10 R.

SUP 10A.9.14 G

A firm carrying on insurance mediation activity, other than a sole trader, must allocate to a director or senior manager the responsibility for the firm'sinsurance mediation activity (MIPRU 2.2.1 R). MIPRU 2.2.2 R (3) provides that the firm may allocate this responsibility to the person performing the significant management function.

SUP 10A.9.15 G

Where the person performing the significant management function is also responsible for the firm'sinsurance mediation activity, the words “(insurance mediation)” will be inserted after this FCA controlled function (see MIPRU 2.2.5 G).

SUP 10A.10 Customer-dealing functions

Introduction

SUP 10A.10.1 R

SUP 10A.10 applies with respect to activities carried on from an establishment maintained by the firm (or by its appointed representative) in the United Kingdom.

SUP 10A.10.2 G

Without SUP 10A.10.1 R, the description of the customer function would extend to this function wherever it was performed. The effect of SUP 10A.10.1 R is that the description is limited, in relation to regulated activities with an overseas element, in a manner which is broadly consistent with the scope of conduct of business regulation.

SUP 10A.10.3 G

The customer function has to do with giving advice on, dealing and arranging deals in and managing investments; it has no application to banking business such as deposit taking and lending, nor to general insurance business or credit-related regulated activity1.

The basic rule about the customer function

SUP 10A.10.4 R

The customer function is one which comes within the definition of a customer-dealing function.

SUP 10A.10.5 R

The3 customer-dealing function, in relation to the carrying on of a regulated activity by a firm ("A"), means a function that will involve the person performing it in dealing with:3

  1. (1)

    customers of A; or

  2. (2)

    property of customers of A;

SUP 10A.10.6 G

The FCA interprets the phrase “dealing with” as including having contact with customers and extending beyond “dealing” as used in the phrase “dealing in investments”. “Dealing in” is used in Schedule 2 to the Act to describe in general terms the regulated activities which are specified in Part II of the Regulated Activities Order.

Customer function (CF 30)

SUP 10A.10.7 R

The customer function is the function of:

  1. (1)

    advising on investments other than a non-investment insurance contract (but not where this is advising on investments in the course of carrying on the activity of giving basic advice on a stakeholder product) and performing other functions related to this such as dealing and arranging;

  2. (2)

    giving advice to clients solely in connection with corporate finance business and performing other functions related to this;

  3. (3)

    giving advice or performing related activities in connection with pension transfers, pension conversions2 or pension opt-outs2for retail clients;

    2
  4. (4)

    giving advice to a person to become, or continue or cease to be, a member of a particular Lloyd's syndicate;

  5. (5)

    dealing, as principal or as agent, and arranging (bringing about) deals in investments other than a non-investment insurance contract with, for, or in connection with customers where the dealing or arranging deals is governed by COBS 11 (Dealing and managing);

  6. (6)

    acting in the capacity of an investment manager and carrying on functions connected to this;

  7. (7)

    in relation to bidding in emissions auctions, acting as a ‘bidder’s representative’ within the meaning of subparagraph 3 of article 6(3) of the auction regulation.

SUP 10A.10.8 R

The customer function does not extend to an individual who is performing the functions in SUP 10A.10.7R (1) to SUP 10A.10.7R (2) or SUP 10A.10.7R (5) to (7) and who is based overseas and who, in a 12-month period, spends no more than 30 days in the United Kingdom to the extent that he is appropriately supervised by a person approved for this function.

SUP 10A.10.9 G

The FCA would expect an individual from overseas to be accompanied on a visit to a customer. TC 2.1.9 R (2) provides that the firm will have to be satisfied that the individual has at least three years of up-to-date, relevant experience obtained outside the United Kingdom. However, the remaining provisions of TC 2.1.9 R (2) are disapplied in these circumstances (except for an individual who gives advice to retail clients on retail investment products, gives advice on P2P agreements to retail clients4 or is a broker fund adviser). The effect of this is that such individuals need not attain the relevant regulatory module of an appropriate qualification (see TC 2.1.9 R (2)).

SUP 10A.10.10 G

The customer function in SUP 10A.10.7R (5) does not extend to the individual who, on the instructions of the customer, simply inputs the customer's instructions into an automatic execution system where no discretion is or may be exercised by the individual performing the activity. Nor does it extend to merely introducing a customer to a firm or distributing advertisements.

SUP 10A.10.11 G

An individual may advise on investments prior to being assessed as competent in accordance with the rules in the Senior Management Arrangements, Systems and Controls sourcebook (SYSC) and, where relevant, the Training and Competence sourcebook (TC). The firm should record when that person subsequently becomes competent.

SUP 10A.11 Minimising overlap with the PRA approved persons regime

Introduction

SUP 10A.11.1 G

SUP 10A.11 deals with how the FCA'sapproved persons regime applies to PRA-authorised persons. SUP 10A.11 therefore only applies if the firm in question is a PRA-authorised person.

SUP 10A.11.2 G

Both the FCA and the PRA may specify a function as a controlled function in relation to a PRA-authorised person. However, only the FCA has power to specify a customer-dealing function as a controlled function.

SUP 10A.11.3 G

Therefore, if a person's job for a firm involves:

  1. (1)

    an FCA controlled function, the firm should apply to the FCA for approval;

  2. (2)

    a PRA controlled function, the firm should apply to the PRA for approval;

  3. (3)

    both an FCA controlled function and a PRA controlled function, the firm should apply to both the FCA and the PRA for approval (the purpose of SUP 10A.11 is to cut down the need for this sort of dual approval).

SUP 10A.11.4 G

The PRA cannot give its approval for the performance of a PRA controlled function without the consent of the FCA. The firm does not need to apply to the FCA for that consent. The PRA must as soon as practicable notify the FCA of the receipt or withdrawal of an application to the PRA.

SUP 10A.11.5 G

Under section 59B of the Act (Role of FCA in relation to PRA decisions) the FCA may arrange with the PRA that in agreed cases the PRA may give approval without obtaining the consent of the FCA. No such arrangements are currently in force.

SUP 10A.11.6 G

The FCA and PRA have coordinated their approved persons regime to reduce the amount of overlap. These arrangements do not1 relate to the customer-dealing functions1.

SUP 10A.11.7 G

[deleted]3

1

Guidance on how SUP 10A.11 works

SUP 10A.11.8 G
  1. (1)

    [deleted]3

    1
  2. (2)

    For a Solvency II firm and a small non-directive insurer3 only, SUP 10A.11.12R disapplies the FCA governing functions for a person who is approved to perform a PRA controlled function, subject to the conditions in SUP 10A.11.12R.1

  3. (3)

    The FCA functions disapplied in accordance with the FCA2governing functions overlap rule for Solvency II firms and small non-directive insurers3 (SUP 10A.11.12R) are absorbed into the relevant PRA controlled function by virtue of their inclusion in PRA Rulebook: Insurance – Solvency II firms: Senior Insurance Management Functions, 2.5; Non-Solvency II firms: Non-Solvency II firms – Senior Insurance Management Functions, 2.6, and Non-Solvency II firms: Large Non-Solvency II firms – Senior Insurance Management Functions, 2.5)3.

    1
SUP 10A.11.9 G

[deleted]3

1
SUP 10A.11.10 G

[deleted]3

The main rule

1
SUP 10A.11.11 R

[deleted]3

1
SUP 10A.11.12 R

1A person (referred to as “A” in this rule) is not performing an FCA governing function (referred to as the ‘particular’ FCA governing function in this rule) in relation to a Solvency II firm or a small non-directive insurer3 (referred to as “B” in this rule), at a particular time, if:

  1. (1)

    A has been approved by the PRA to perform any PRA controlled function in relation to B;

  2. (2)

    throughout the whole of the period between the time of the PRA approval in (1) and the time in question, A has been the subject of a current PRA approved person approval to perform a PRA controlled function in relation to B;

  3. (3)

    at the time of the PRA approval in (1), A was not subject to a current FCA approved person approval to perform the particular FCA controlled function in relation to B;

  4. (4)

    as part of the application for the PRA approval in (1), B notified the PRA that A would start to perform what would otherwise have been the particular FCA governing function (referred to as the “potential” FCA governing function in this rule) at or around the time of the PRA approval in (1); and

  5. (5)

    A started to perform the potential FCA governing function at or around the time of the PRA approval in (1) and has continued to perform it up to the time in question.

SUP 10A.12 Procedures relating to FCA-approved persons

Forms

SUP 10A.12.1 G

The forms listed in SUP 10A.12.2 G are referred to in SUP 10A.12 (Procedures relating to FCA-approved persons) to SUP 10A.17 (Further questions).

SUP 10A.12.2 G

Table: FCA-approved persons forms

Form

Purpose

Handbook requirement

the relevant Form A

The relevant online form on the FCA and PRA'sonline notification and application system3 or the form in SUP 10A Annex 4D (See Note)

1 1

Application to perform controlled functions under the approved persons regime

SUP 10A.13.3 D

Form B

SUP 10A Annex 5 R

Notice to withdraw an application to perform controlled functions under the approved persons regime

SUP 10A.13.19 R

Form C

SUP 10A Annex 6 R

Notice of ceasing to perform controlled functions

SUP 10A.14.8 R

Form D

SUP 10A Annex 7 R

Notification of changes in personal information or application details

SUP 10A.14.15 R

Form E

The relevant online form on the FCA and PRA'sonline notification and application system3 system or the form in SUP 10A Annex 8D (See Note)

1 1

Internal transfer of an approved person

SUP 10A.14.4 D

Note: The form in the SUP annex shown is to be used by credit unions, and by other firms only in the event of a failure of the information technology systems used by the FCA. See the relevant "Handbook requirement"

SUP 10A.12.3 G

A summary of the forms and their purposes is in SUP 10A Annex 2.

SUP 10A.12.4 G

Unless the context otherwise requires, in SUP 10A.12 (Procedures relating to FCA-approved persons) to SUP 10A.17 (Further questions) where reference is made to a firm, this also includes an applicant for Part 4A permission, and other persons seeking to carry on regulated activities as an authorised person.

SUP 10A.12.5 G

Forms B, C, D and E can only be submitted in respect of an FCA-approved person by the firm that submitted an FCA-approved person's original application (the relevant Form A).

SUP 10A.12.6 G

Copies of Forms A, B, C, D and E may be obtained from the FCA website. Credit unions can obtain copies from the FCA's Contact Centre. To contact the FCA's2Contact Centre for approved persons enquiries:

2 2
  1. (1)

    telephone 0300 500 0597;2or

    2
  2. (2)

    e-mail firm.queries@fca.org.uk; or

  3. (3)

    fax 020 7066 0017; or

  4. (4)

    write to:

    Customer Contact Centre

    The Financial Conduct Authority

    25 The North Colonnade

    Canary Wharf

    LONDON E14 5HS.

SUP 10A.13 Application for approval and withdrawing an application for approval

When to apply for approval

SUP 10A.13.1 G

In accordance with section 59 of the Act (Approval for particular arrangements), where a candidate will be performing one or more FCA controlled functions, a firm must take reasonable care to ensure that the candidate does not perform these functions unless he has prior approval from the FCA.

Failure to apply for approval

SUP 10A.13.2 G

If a person performs an FCA controlled function without approval it is not only the firm that is accountable. Under section 63A of the Act (Power to impose penalties), if the FCA is satisfied that:

  1. (1)

    a person (“P”) has at any time performed an FCA controlled function without approval; and

  2. (2)

    at that time P knew, or could reasonably be expected to have known, that P was performing an FCA controlled function without approval;

it may impose a penalty on P of such amount as it considers appropriate.

How to apply for approval

SUP 10A.13.3 D

An application by a firm for the FCA's approval under section 59 of the Act (Approval for particular arrangements) must be made by completing Form A (except where SUP 10A.14.4 D requires a Form E).

SUP 10A.13.4 G

SUP 10A.16.1 D explains how applications should be submitted.

Who should make the application?

SUP 10A.13.5 G
  1. (1)

    In accordance with section 60 of the Act (Applications for approval), applications must be submitted by, or on behalf of, the firm itself, not by:

    1. (a)

      the FCAcandidate; or

    2. (b)

      (where the FCAcandidate works for the firm'sparent undertaking or holding company) by the firm'sparent undertaking or holding company.

  2. (2)

    Usually this will be the firm that is employing the FCAcandidate to perform the FCA controlled function. Where a firm has outsourced the performance of an FCA controlled function, the details of the outsourcing determine where responsibility lies and whom the FCA anticipates will submit FCA-approved persons application forms. SUP 10A.13.6 G describes some common situations. The firm which is outsourcing is referred to as "A" and the person to whom the performance of the FCA controlled function has been outsourced, or which makes the arrangement for the FCA controlled function to be performed, is referred to as "B". In each situation, A must take reasonable care to ensure that, in accordance with section 59(2) of the Act, no person performs an FCA controlled function under an arrangement entered into by its contractor in relation to the carrying on by A of a regulated activity, without approval from the FCA. See also SYSC 3.2.4 G and SYSC 8.1.1 R, and SYSC 13.9 for insurers.

SUP 10A.13.6 G

Outsourcing arrangements

Outsourcing arrangements

Submitting form

Firm A to firm B

The FCA will consider A to have taken reasonable care if it enters into a contract with B under which B is responsible for ensuring that the relevant FCA controlled functions are performed by FCA-approved persons, and that it is reasonable for A to rely on this

Firm B submits FCA-approved persons forms on behalf of firm A

Outsourcing by A to B (both being a member of the same United Kingdom group and each having its registered office in the United Kingdom)

See SUP 10A.3.4 G

See SUP 15.7.8 G

(i) A to B, where B is a non-authorised person not part of the same group as A

(ii) A to B, where A is a branch of an overseas firm in the United Kingdom, and B is an overseas undertaking of the same group

(iii) A to B, where A is a UK authorised subsidiary of an overseas firm and B is an overseas undertaking of the same group

Responsibility for (as opposed to the performance of) any activity outsourced to B will remain with A. See SYSC 3.2.4 G and SYSC 8

A ensures that an individual approved by the FCA or the PRA under a controlled function that is a significant-influence function has responsibility for the outsourced arrangement and A submits a form in relation to that individual

SUP 10A.13.7 G

Where the notification of an appointed representative (SUP 12.7.1 R) is linked to an application for approval (SUP 10A.13 (Applications for approval and withdrawing an application for approval)), any delay in receiving the notification under SUP 12.7.1 R may delay the FCA's approval of the individuals employed by that appointed representative who will be performing FCA controlled functions for the firm.

Processing an application

SUP 10A.13.8 G

The Act sets out the time that the FCA has to consider an application and come to a decision.

SUP 10A.13.9 G

In any case where the application for approval is made by a person applying for permission under Part 4A of the Act, the FCA has until the end of whichever of the following periods ends last:

  1. (1)

    the period within which an application for that permission must be determined; and

  2. (2)

    the period of three months from the time it receives a properly completed application.

SUP 10A.13.10 G

In any other case it is the period of three months from the time it receives a properly completed application.

SUP 10A.13.11 G

The FCA must either grant the application or, if it proposes not to grant an application, issue a warning notice (see DEPP 2). The FCA will deal with cases more quickly than this whenever circumstances allow and will try to meet the standard response times published on the website and in its Annual Report. However, if an application is incomplete when received, or the FCA has knowledge that, or reason to believe that, the information is incomplete, then the processing time will be longer than the published standard response times.

SUP 10A.13.12 G

Application forms must always be completed fully and honestly. Further notes on how to complete the form are contained in each form. If forms are not completed fully and honestly, applications will be subject to investigation and the FCAcandidate's suitability to be approved to undertake an FCA controlled function will be called into question. A person who provides information to the FCA that is false or misleading may commit a criminal offence, and could face prosecution under section 398 of the Act regardless of the status of their application.

SUP 10A.13.13 G

If there is a delay in processing the application within the standard response time, the FCA will tell the firm making the application as soon as this becomes apparent.

SUP 10A.13.14 G

Before making a decision to grant the application or give a warning notice, the FCA may ask the firm for more information about the FCA candidate. If it does this, the three-month period in which the FCA must determine a completed application:

  1. (1)

    will stop on the day the FCA requests the information; and

  2. (2)

    will start running again on the day on which the FCA finally receives all the requested information.

SUP 10A.13.15 G

The FCA may grant an application only if it is satisfied that the FCA candidate is a fit and proper person to perform the FCA controlled function stated in the application form. Responsibility lies with the firm making the application to satisfy the FCA that the FCA candidate is fit and proper to perform the FCA controlled function applied for.

SUP 10A.13.16 G

For further guidance on criteria for assessing whether a FCA candidate is fit and proper, see FIT.

Decisions on applications

SUP 10A.13.17 G

Whenever it grants an application, the FCA will confirm this in writing to all interested parties.

SUP 10A.13.18 G

If the FCA proposes to refuse an application in relation to one or more FCA controlled functions, it must follow the procedures for issuing warning and decision notices to all interested parties. The requirements relating to warning and decision notices are in DEPP 2.

Withdrawing an application for approval

SUP 10A.13.19 R

A firm notifying the FCA of its withdrawal of 1an application for approval must notify the FCA, using Form B, in the form set out in SUP 10A Annex 5R.

SUP 10A.13.20 G

Under section 61(5) of the Act (Determination of applications), the firm may withdraw an application only if it also has the consent of the candidate and the person by whom the candidate is or would have been employed, if this is not the firm making the application.

SUP 10A.14 Changes to an FCA-approved person's details

Moving within a firm

SUP 10A.14.1 G

An FCA-approved person's job may change from time to time as a result, for instance, of a change in personal job responsibilities or a firm'sregulated activities. Where the changes will involve the person performing one or more FCA controlled functions different from those for which approval has already been granted, then an application must be made to the FCA for approval for the person to perform those FCA controlled functions. The firm must take reasonable care to ensure that an individual does not begin performing an FCA controlled function until the FCA has granted FCA-approved person status to that individual in respect of that FCA controlled function. Similarly, a firm must get the FCA's approval if a person is to start performing an FCA controlled function in relation to that firm when he already has the PRA's approval to perform a PRA controlled function in relation to that firm.

SUP 10A.14.2 G

If an FCA-approved person or a PRA-approved person is ceasing to perform FCA controlled functions or PRA controlled function, as well as applying for approval in respect of FCA controlled functions, SUP 10A.14.4 D generally applies. Further details can be found in SUP 10A Annex 2.

SUP 10A.14.3 G

If a person is to perform an FCA controlled function for a firm for which he already performs a PRA controlled function or FCA controlled function as an approved person but he is not at the same time ceasing to perform an FCA controlled function or PRA controlled function, a firm should use Form A. It is not mandatory to complete all parts of the form. See the notes relevant to each form for full details.

SUP 10A.14.4 D
  1. (1)

    A firm must use Form E where an approved person is both ceasing to perform one or more controlled functions and needs to be approved in relation to one or more FCA controlled functions within the same firm or group.

  2. (2)

    A firm must not use Form E if: 2

    1. (a)

      the approved person has never before been approved to perform for any firm:2

      1. (i)

        an FCA controlled function that is2 a significant-influence function; or2

      2. (ii)

        an FCA-designated senior management function; or2

      3. (iii)

        a PRA controlled function;2

    2. (b)

      the approved person2 has not been subject to a current approved person approval from the FCA or PRA to perform:2

      1. (i)

        an FCA controlled function that is2 a significant-influence function; or

      2. (ii)

        an FCA-designated senior management function; or2

      3. (iii)

        a PRA controlled function;2

      in relation to any firm for more than six months; or2

    3. (c)

      any of the following apply (where applicable):2

      1. (i)

        a notification referred to in SUP 10C.10.9D(4)(b) or (c) (notification obligations under the Act applying to relevant authorised persons) has been made or should be made; or2

      2. (ii)

        any of the circumstances in SUP 10A.14.10R (Qualified Form C) apply;2

      in relation to any:2

      1. (iii)

        controlled functions which that person is ceasing to perform (as referred to in (1)); or2

      2. (iv)

        any controlled function that they are continuing to perform for that firm or a firm in the same group.2

  3. (3)

    A firm must not use Form E if a notification has been made or should be made under:2

    1. (a)

      SUP 10A.14.17R (Changes in fitness to be notified under Form D);2

    2. (b)

      SUP 10C.14.18R (the corresponding requirement for relevant authorised persons); or2

    3. (c)

      3the corresponding PRA requirements to (a).3

      22

    (whichever is applicable)2 in relation to any controlled functions that that person is ceasing to perform (as referred to in (1)) or any controlled function that he is continuing to perform in relation to that firm or a firm in the same group.

SUP 10A.14.5 G

SUP 10A.16.1 D explains how applications should be submitted.

Moving between firms

SUP 10A.14.6 G

If it is proposed that an FCA-approved person will no longer be performing an FCA controlled function under an arrangement entered into by one firm or one of its contractors, but will be performing the same or a different FCA controlled function under an arrangement entered into by a new firm or one of its contractors (whether or not the new firm is in the same group as the old firm), the new firm will be required to make a fresh application for the performance of the FCA controlled function by that person.

SUP 10A.14.7 G

In certain circumstances, when the FCA already has the information it would usually require, a shortened version of the relevant Form A may be completed. See the notes relevant to each form for full details.

Ceasing to perform an FCA controlled function

SUP 10A.14.8 R
  1. (1)

    A firm must submit to the FCA a completed Form C, in the form set out in SUP 10A Annex 6R, no later than seven business days after an FCA-approved person ceases to perform an FCA controlled function.2

  2. (2)

    If:2

    1. (a)

      the firm is also making an application for approval for that approved person to perform a controlled function within the same firm or group; and2

    2. (b)

      ceasing to perform the FCA controlled function in (1) has triggered a requirement to make that application for approval:2

      1. (i)

        to the FCA using Form E (rather than a Form A) under SUP 10A or SUP 10C; or2

      2. (ii)

        to the PRA using the PRA’s Form E in accordance with the corresponding PRA requirements;2

      it must make the notification under (1) using that Form E.2

SUP 10A.14.9 G

SUP 10A.16.2 R explains how notifications should be submitted.

SUP 10A.14.10 R
  1. (1)

    A firm must notify the FCA as soon as practicable after it becomes aware, or has information which reasonably suggests, that it will submit a qualified Form C in respect of an FCA-approved person.

  2. (2)

    Form C is qualified if the information it contains:

    1. (a)

      relates to the fact that the firm has dismissed, or suspended, the FCA-approved person from its employment; or

    2. (b)

      relates to the resignation by the FCA-approved person while under investigation by the firm, the FCA or any other regulatory body; or

    3. (c)

      otherwise reasonably suggests that it may affect the FCA's assessment of the FCA-approved person's fitness and propriety.

SUP 10A.14.11 G

Notification under SUP 10A.14.10 R may be made by telephone, email or fax and should be made, where possible, within one business day of the firm becoming aware of the information. If the firm does not submit Form C, it should inform the FCA in due course of the reason. This could be done using Form D, if appropriate.

SUP 10A.14.12 G

A firm is responsible for notifying the FCA if any FCA-approved person has ceased to perform an FCA controlled function under an arrangement entered into by its appointed representative or former appointed representative.

SUP 10A.14.13 G

A firm can submit Form C or Form E to the FCA in advance of the cessation date. When a person ceases the arrangement under which he performs an FCA controlled function, he will automatically cease to be an FCA-approved person in relation to that FCA controlled function. A person can only be an FCA-approved person in relation to a specific FCA controlled function. Therefore, a person is not an FCA-approved person during any period between ceasing to perform one FCA controlled function (when he is performing no other FCA controlled function) and being approved in respect of another FCA controlled function.

SUP 10A.14.14 G

Sending forms promptly will help to ensure that any fresh application can be processed within the standard response times.

Changes to an approved person's personal details

SUP 10A.14.15 R

If an FCA-approved person's title, name or national insurance number changes, the firm for which the person performs an FCA controlled function must notify the FCA on Form D, in the form set out in SUP 10A Annex 7R, of that change within seven business days of the firm becoming aware of the matter.

SUP 10A.14.16 G

The duty to notify in SUP 10A.14.15 R does not apply to changes to an FCA-approved person's private address.

SUP 10A.14.17 R

If a firm becomes aware of information which would reasonably be material to the assessment of an FCA-approved person's, or a FCA candidate's, fitness and propriety (see FIT), it must inform the FCA on Form D, or (if it is more practical to do so and with the prior agreement of the FCA) by e-mail or fax, as soon as practicable.

SUP 10A.14.18 G

SUP 10A.16.2 R applies to the submission of Form D.

SUP 10A.14.19 G

Failing to disclose relevant information to the FCA may be a criminal offence under section 398 of the Act.

SUP 10A.14.20 R

The duty to notify in SUP 10A.14.17 R extends to any circumstances that would normally be declared when giving the information required for section 5 of Form A or matters considered in FIT 2.

SUP 10A.14.21 G
  1. (1)

    If, in relation to a firm which has completed the relevant Form A (SUP 10A Annex 4D), any of the details relating to arrangements and FCA controlled functions are to change, the firm must notify the FCA on Form D (SUP 10A Annex 7R).

  2. (2)

    The notification under (1) must be made as soon as reasonably practicable after the firm becomes aware of the proposed change.

  3. (3)

    This also applies in relation to an FCA controlled function for which an application was made using Form E.

  4. (4)

    This rule also applies to a firm in respect of an approved person, to whom the grandfathering arrangements relating to the coming into force of the Act applied as if the firm had completed the relevant Form A for that person.

SUP 10A.14.22 G

SUP 10A.16.2 R also applies to the submission of Form D under SUP 10A.14.21 G.

SUP 10A.14.23 G

An example of where a firm should use Form D is when an individual who is appointed by one appointed representative becomes employed by another appointed representative but continues to perform the customer function for the firm. The firm should notify the FCA by completing Section 1.07 of Form D.

SUP 10A.14.24 R

[deleted]2

SUP 10A.14.25 G

[deleted]2

SUP 10A.14.26 R

[deleted]2

2

SUP 10A.15 References and accurate information

References

SUP 10A.15.1 R
  1. (1)

    If a firm (A):

    1. (a)

      is considering appointing a person to perform any FCA controlled function;

    2. (b)

      requests another firm (B), as a current or former employer of that person, for a reference or other information in connection with that appointment; and

    3. (c)

      indicates to B the purpose of the request;

    B must, as soon as reasonably practicable, give to A all relevant information of which it is aware.

  2. (2)

    When giving the information to A under (1), B must have regard to the purpose of the request and, in particular, to:

    1. (a)

      any outstanding liabilities of that person from commission payments;

    2. (b)

      any relevant outstanding or upheld complaint from an eligible complainant against that person;

    3. (c)

      section 5 of the relevant Form A in SUP 10A Annex 4 (Application to perform controlled functions under approved persons regime);

    4. (d)

      FIT 2 (Main assessment criteria); and

    5. (e)

      if SUP 16.8.1 G (1) (Persistency reports from insurers) applies to B, the persistency of any life policies sold by that person.

SUP 10A.15.2 G

The requirement in SUP 10A.15.1R (1) for firm (B) to give to firm (A) all relevant information of which it is aware concerning a personfirm A is considering appointing to perform any of the FCA controlled functions, also applies where firm A has outsourced the collection of that information to another (unregulated) third party, where firm B has been made aware that the unregulated third party is acting on behalf of firm A.

SUP 10A.15.3 G

A firm supplying a reference in accordance with SUP 10A.15.1 R owes a duty to its former employee and the recipient firm to exercise due skill and care in the preparation of the reference. The reference should be accurate and based on documented fact. The firm may give frank and honest views, but only after taking reasonable care both as to factual content, and as to the opinions expressed, and verifying the information upon which they are based.

SUP 10A.15.3A G

2 SUP 10A.15.1R applies even if A (the firm asking for a reference) is a firm to which SUP 10C (FCA senior management regime for approved persons in relevant authorised persons) applies rather than this chapter.

The need for complete and accurate information

SUP 10A.15.4 G

The obligations to supply information to:

  1. (1)

    the FCA under either SUP 10A.14.8 R or SUP 10A.14.10 R;

  2. (2)

    another firm under SUP 10A.15.1 R;

apply notwithstanding any agreement (for example a 'COT 3' Agreement settled by the Advisory, Conciliation and Arbitration Service (ACAS)) or any other arrangements entered into by a firm and an employee upon termination of the employee's employment. A firm should not enter into any such arrangements or agreements that could conflict with its obligations under this section.

SUP 10A.15.5 G

Failing to disclose relevant information to the FCA may be a criminal offence under section 398 of the Act.

SUP 10A.16 How to apply for approval and give notifications

SUP 10A.16.1 D
  1. (1)

    This direction applies to an application under Form A or Form E.

  2. (2)

    Subject to (2A), an1 application by a firm other than a credit union must be made by submitting the Form online at fca.org.uk using the form specified on the FCA's and PRA'sonline notification and application system3.

    122
  3. (2A)

    An application by a firm whose application for permission or whose Part 4A permission covers only credit-related regulated activities must be made using the form in SUP 10A Annex 4 or SUP 10A Annex 8 and must be submitted in the way set out in SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification).1

  4. (3)

    An application by a credit union must be made using the form in SUP 10A Annex 4D or SUP 10A Annex 8D and must be submitted in the way set out in SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification).

  5. (4)

    Where a firm is obliged to submit an application online under (2), if the information technology systems used by the FCA fail and online submission is unavailable for 24 hours or more, until such time as facilities for online submission are restored a firm must use the form in SUP 10A Annex 4D or SUP 10A Annex 8D and submit it in the way set out in SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification).

SUP 10A.16.2 R
  1. (1)

    This rule applies to a notification under Form C or Form D.

  2. (2)

    A notification must be made in accordance with SUP 10A.16.1 D, except that the annexes to SUP 10A in which the forms are to be found are SUP 10A Annex 6R or SUP 10A Annex 7, rather than the Annexes mentioned in SUP 10A.16.1 D.

SUP 10A.16.3 G

If the information technology systems used by the FCA fail and online submission is unavailable for 24 hours or more, the FCA and PRA will endeavour to publish a notice on their websites confirming that online submission is unavailable and that the alternative methods of submission set out in SUP 10A.16.1D (4) and SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification) should be used.

SUP 10A.16.4 G

Where SUP 10A.16.1D (4) or the equivalent situation under SUP 10A.16.2 R applies to a firm, GEN 1.3.2 R (Emergency) does not apply.

SUP 10A.17 Further questions

SUP 10A.17.1 G

A list of frequently asked questions and answers is at SUP 10A Annex 1.

SUP 10A.17.2 G

If the firm or its advisers have further questions, they should contact the FCA's Contact Centre (see SUP 10A.12.6 G).

SUP 10A Annex 1 Frequently asked questions

G

Question

Answer

1 Type of firm

1-1

Does this chapter apply to all types of firm? If not, where can I find the equivalent material?

No, SUP 10A does not apply to relevant authorised persons (broadly speaking, banks, credit unions, building societies and investment firms that are PRA-authorised persons). The requirements for these firms can be found in SUP 10C. However, this chapter does cover approved persons in appointed representatives of such firms.

Requirements of the regime

1

Does pre-approval apply to individuals taking up a new FCA controlled function within the same firm?

Yes. Pre-approval applies in all circumstances (see section 59 of the Act (Approval for particular arrangements)) except under the temporary (12 weeks) provision. See SUP 10A.5.6 R and question 2.

2

What are the procedures for ‘emergency situations’?

Individuals may perform an FCAsignificant-influence function for up to 12 weeks in any consecutive 12-month period without requiring approval. When it becomes clear that a person will be performing the function on a permanent basis, then an application for approval should be made. However, there is no provision for individuals to perform the customer function on a continuing basis without approval (SUP 10A.5.6 R).

3

Can a person be approved for more than one FCA controlled function?

Yes. A firm will need to seek approval in respect of each FCA controlled function a person is to perform.

4

Do the FCA controlled functions apply to an incoming EEA firm that is providing cross border services into the United Kingdom?

No. The FCA-approved persons regime does not apply to cross border services (SUP 10A.1.5 R).

5

May any activity be outsourced by a firm?

Yes. But if that activity constitutes a regulated activity, the person to whom it is outsourced will itself need permission.

6

Can an FCA significant-influence function be outsourced?

It is a question of fact in each case as to who is performing an FCA significant-influence function. These functions are mostly described at a high level of responsibility, for example, the director of a company or a partner in a partnership. The persons performing these functions cannot avoid their ultimate responsibility and, therefore, the need for approval. However, some of the FCA significant-influence functions may be performed by a person who is specifically brought in to do the job, for example the chief executive function (where it is to be performed by a body corporate).

7

Do Lloyd’s underwriting agents still require registration with Lloyd’s?

Yes. Approval for a controlled function is not sufficient.

8

What should a firm do if it is unsure whether an individual needs approval?

The firm should contact the FCA's Customer Contact Centre. See SUP 10A.12.6 G.

Submitting an application

9

Who applies for approval?

The firm. See section 60 of the Act (Applications for approval).

10

What is the role of the FCA candidate in the application process?

Before the firm submits the relevant Form A or Form E, it must verify the information contained in it. As part of this verification, the Form provides for the FCA candidate to confirm the accuracy of the information given by the firm so far as it relates to him.

11

What checks should a firm make on a FCA candidate before submitting an application for approval from the FCA?

The FCA expects firms to perform due and diligent enquiries into their FCA candidates before they submit an application to the FCA for approval. The FCA's approval process is not a substitute for the checks that a firm should be carrying out on its prospective recruits. It is for the firm to determine what checks are appropriate but, in making its decision, a firm should have regard to the FCA controlled function to which the application relates. Firms' enquiries should include checks to verify relevant qualifications and previous employment. Note also the provisions of EG 6.

12

Should these checks include a check of criminal records?

It is for senior management to decide what checks should be made. In deciding if it is necessary to carry out a check of criminal records, the firm should consider that the FCA does not routinely carry out these checks during the approval process. By virtue of the rehabilitation exceptions orders, the FCA and the industry also have a right to ask about the spent criminal convictions specified in those Orders, as well as any unspent criminal convictions, in order to assess the suitability of FCA candidates for approved person status (see section 5 of the relevant Form A (Application to perform controlled functions under the approved persons regime)). Note also the provisions of EG 6(Publicity).

13

What is the "fit and proper" test for approval?

Section 61(1) of the Act (Determination of applications) provides that the FCA may grant an application only if it is satisfied that the FCA candidate is a fit and proper person to perform the relevant function. In determining this question, the Act sets out the matters to which the FCA may have regard (section 61(2)) and the FCA has given guidance on this in FIT.

14

If a firm is unsure whether or not something may have an impact upon an individual’s fitness and propriety, should it be disclosed?

Yes, always. The deliberate non-disclosure of material facts is taken very seriously by the FCA as it is seen as possible evidence of current dishonesty. Therefore, if in doubt, disclose.

15

What happens if adverse information comes to light after the application form has been submitted or after the individual has been FCA-approved?

The firm must inform the FCA at the earliest opportunity. See SUP 10A.14.17 R.

16

Will the FCA consider an application in respect of a FCA candidate who has not yet signed a contract with the firm?

Yes, as the FCA will consider the arrangement under which the FCA candidate will perform the function. However, the FCA will not consider speculative or provisional applications - such as for the FCA candidates in an election to a mutual society Board. The FCA must be informed immediately of any material changes to the information provided on the application form which arises before the application has been determined. All changes must be communicated to the FCA by the firm making the application (see SUP 15.6.4 R). Failure to notify the FCA may result in a delay in processing or rejection or both.

17

How can credit unions get a supply of application forms (Forms A to F)?

These can be ordered from the FCA's Customer Contact Centre. There is no charge for an application form.

18

Is there a separate fee for making an application for FCA-approved person status?

No.

19

Must all gaps in previous employment be explained?

Yes.

FCA procedure

20

Does the FCA verify the information provided to it?

Yes, as far as possible, information is verified.

21

Will the FCA handle information confidentially?

Yes. The FCA is obliged to handle all information confidentially and is subject to the provisions of the Data Protection Act 1998.

22

How long will the FCA take to process an application for FCA-approved person status?

The length of time taken to process the application will vary as it is dependent upon the application under consideration. The FCA publishes standard response times on its website at www.fca.org.uk setting out how long the application process is expected to take in practice. From time to time, the FCA also publishes its performance against these times. However, if, for example, information is missing from the application, or the information provided gives the FCA cause for concern, or the FCA already has in its possession relevant information which gives rise to concerns, processing time will almost always be longer. In each case, the FCA will notify the firm of any extension to the processing times.

23

Will the firm and individual be notified if there is a delay in processing the application form?

Yes. The FCA will contact the firm explaining the position and, where appropriate, giving the reasons for delay. It will then be the responsibility of the firm to keep the FCA candidate and any other interested party informed.

24

How are non-routine cases handled?

Refer to DEPP 2.

25

Can the FCA apply conditions to an FCA-approved person?

No. The application can either be granted or refused. The Act provides no equivalent to the limitations or requirements which may be included in permissions. If the application is refused, the firm may re-apply in respect of the same individual but a different FCA controlled function. If it is considering doing this, the firm is encouraged to discuss the matter with the FCA. Where there are reasonable grounds for doing so, the FCA may require a firm to provide information about an FCA-approved person (see section 165 of the Act (Power to require information)).

26

Will the firm be issued with confirmation of approval?

Yes. The firm will be sent a letter setting out the effective date of approval together with the FCA controlled function for which the individual has been FCA-approved. It will then be the firm's responsibility to inform the individual and any other interested party, for example any appointed representative.

Withdrawing an application

27

Can a firm withdraw its application?

Yes, but only with the consent of the FCA candidate. See section 61(5) of the Act (Determination of applications).

28

What happens if the individual refuses to consent to the withdrawal of the application?

The FCA will consider with all interested parties what to do. If it proposes to refuse the application, it will give a warning notice to all interested parties. See section 62 of the Act (Applications for approval: procedure and right to refer to the Tribunal).

29

Can the firm withdraw only part of an application ? for instance, in relation to a specific FCA controlled function?

The FCA will allow the firm to amend its application at any time before determination with the consent of all other interested parties. Whether the amendment will have the effect of amounting to a fresh application will be considered on a case by case basis.

Conduct of FCA-approved persons

30

How and when must the firm report to the FCA potentially adverse information about an FCA-approved person's fitness and propriety?

Normally, the firm should report such matters to the FCA on Form D once it is reasonably satisfied as to the information’s validity (SUP 10A.14.17 R). (See also, Chapter 11 of the Principle for Businesses sourcebook (PRIN) and Statement of Principle 4 in Chapter 2 of the Statements of Principle and Code of Practice for Approved Persons (APER).) However, if an FCA-approved person is dismissed, is suspended, or resigns while under investigation by the firm, the FCA or another regulatory body, or there are any other matters that might affect the individual’s fitness and propriety to perform an FCA controlled function, the firm should inform the FCA (SUP 10A.14.10 R) that it will be submitting a Form C containing adverse information. Full details must then be provided within seven business days, on the Form C (SUP 10A.14.8 R).

31

For how long are individuals accountable to the FCA after ceasing to be an FCA-approved person?

A person is guilty of misconduct if, while an FCA-approved person, he fails to comply with a Statement of Principle or is knowingly concerned in the contravention by a firm of a requirement in the Act or the Handbook or certain other requirements. But the FCA may not bring proceedings after three years from when it first knew of the misconduct.

How does the customer function relate to the training and competence requirements?

Activity

Products/sectors in TC Appendix 1

FCA controlled function

SUP

Advising only,

Undertaking an activity

Advising and dealing

Managing investments

2-9A2

10-11

12-13

14

customer function (CF 30)

10A.10.4 R

SUP 10A Annex 2 Approved person regime: summary of forms and their use for applications for approval to perform an FCA-controlled function

G

Function

Form

Submission

person about to perform an FCA controlled function if he has never been approved by the FCA or PRA before.

A

Submitted by the firm making the application before activities requiring approval commence.

Candidate is to perform an FCA significant-influence function and either has current approval to perform an FCA controlled function that is a 1significant-influence function, an FCA-designated senior management function1or a PRA controlled function, or has had such an approval within the previous six months.

Shortened Form

A

if conditions met

Submitted by the firm making the application before activities requiring approval commence.

Candidate is to perform the customer function and is either an FCA-approved person or a PRA-approved person, or was one within the previous six months.

Shortened Form

A

if conditions met

Submitted by the firm making the application before activities requiring approval commence.

Candidate ceased to be an approved person more than six months ago.

A

Submitted by the firm making the application before activities requiring approval commence.

Candidate is seeking to perform a significant-influence function and either:1

(1) has never had approval from the FCA or PRA to perform an FCA controlled function that is a significant-influence function, an FCA designated senior management function or a PRA controlled function1 or

(2)1 ceased to have approval from the FCA or PRA to perform such function more than six months ago.

A

Submitted by the firm making the application before activities requiring approval commence.

Firm withdrawing 1an outstanding application to perform an FCA controlled function1.

B

Submitted by the firm: signed by all interested parties.

Person ceasing to perform an FCA controlled function.

C (unless it should be notified under Form E)

Submitted by the firm within seven business days of approved person ceasing to perform controlled function(s).

If an FCA-approved person's title, name or national insurance number changes, or there is information which may be material to the continuing assessment of an approved person's fitness and propriety.

D

Submitted by firm within seven business days of the firm becoming aware of the matter.

Person remaining with the same firm but changing FCA controlled functions (excluding where the person is changing from a customer function to a significant-influence function).

E

Submitted by firm to the FCA before changes take place.

Person remaining with the same firm but changing from a customer function to an FCA significant-influence function.

A

See examples in this table relating to the use of Form A

Person remaining with the same firm but giving up a PRA controlled function and taking up an FCA controlled function.

E

Submitted by firm to the FCA before changes take place.

Person remaining with the same firm in the circumstances described in Example 6 in the table in SUP 10A.11.10 G (giving up a PRA controlled function triggering need for FCA approval).

E

Submitted by firm to the FCA in hard copy in advance of giving up the PRA governing function.

Person remaining with the same firm but giving up an FCA significant-influence function and taking up a PRA controlled function.

E

Submitted by firm to the PRA before changes take place (see the PRA's Handbook).

SUP 10A Annex 3 [Not used]

[Not used]

SUP 10A Annex 4 Form A: Application to perform controlled functions under the approved person regime

D

This annex consists only of one or more forms. Note that there are separate forms for Solvency II firms, large and small non-directive insurers, incoming EEA firms, applicants for a Part 4A permission or variation of permission that would result in an initial authorisation under MiFID, applicants for a Part 4A permission that would result in the applicant becoming exempt under article 3 of MiFID and other firms. Swiss general insurers must use the forms for large non-directive insurers not the form for Solvency II firms.3 It also includes the scope of responsibilities form which must be included as an attachment to Form A in certain cases.1 An applicant applying for a Part 4A permission or variation of permission that would result in an initial authorisation under MiFID or in the applicant becoming exempt under article 3 of MiFID is only required to use the “Long Form A – UK and Overseas Firms (not Incoming EEA) for MiFID authorisation applications” in relation to members of the management body or persons effectively directing its business.

Form A: Notes for completion (March 2016)

Form A: Notes for completion for Long Form A – UK and Overseas Firms (not Incoming EEA) for MiFID authorisations applications (January 2017)

Long Form A - UK and Overseas Firms (not Incoming EEA)

Long Form A – UK and Overseas Firms (not Incoming EEA) for MIFID authorisation applications:

Long Form A – UK and Overseas Firms (not Incoming EEA) for MIFID authorisation applications

Long Form A for Solvency II firms (excluding incoming EEA firms and large non-directive insurers)2:

Long Form A - Solvency II firms only 2

Short Form A for Solvency II firms (excluding incoming EEA firms and large non-directive insurers)2:

Short Form A - Solvency II firms only 2

Short Form A: UK and Overseas Firms (not incoming EEA) (March 2016)

Short Form A: Incoming EEA firms (March 2016)

Long Form A for large non-directive insurers:2

Long Form A - large non-directive insurers 2

Short Form A for large non-directive insurers:2

Short Form A - large non-directive insurers

Long Form A for small non-directive insurers:2

Long Form A - small non-directive insurers

Short Form A for small non-directive insurers:2

Short Form A - small non-directive insurers 2

Scope of responsibilities form for Solvency II firms2:

Solvency II Firms: Scope of responsibilities 2

Scope of responsibilities form for large non-directive insurers:2

Scope of responsibilities form - large non-directive insurers 2

Scope of responsibilities form for small non-directive insurers:2

Scope of responsibilities form - small non-directive insurers 2

Long Form A - Incoming EEA only

Long Form A - UK Firms (Relevant Authorised Persons only)

Long Form A: UK firms (March 2016)

Long Form A for firms which are not Solvency II firms (including large non-directive insurers) or small non-directive insurers2

(and are not incoming EEA firms or2

Relevant Authorised persons)1

Short Form A for firms which are not Solvency II firms (including large non-directive insurers) or small non-directive insurers2 (and are not incoming EEA firms or2

Relevant Authorised persons)1

Long Form A for incoming EEA firms2

Short Form A for incoming EEA firms2

3 1 1 1

SUP 10A Annex 5 Form B: Notice to withdraw an application to perform controlled functions (including senior management functions)11

SUP 10A Annex 5R R

SUP 10A Annex 6 Form C: Notice of ceasing to perform controlled functions (including senior management functions)11

SUP 10A Annex 6 R R

This annex consists of only one or more forms. Forms can be completed online now by visiting: www.fca.org.uk/firms/authorisation1

The forms are also to be found through the following address: Supervision forms - SUP 10A Annex 6

1 2 1

SUP 10A Annex 7 Form D: Notification of changes in personal information or application details and conduct breaches/disciplinary action related to conduct22

R

SUP 10A Annex 8 Form E: Internal transfer of an approved person

D

This annex consists only of one or more forms. This annex consists only of one or more forms. Note that there are separate forms for Solvency II firms, large and small non-directive insurers3 and other firms. Swiss general insurers must use the form for large non-directive insurers not the form for Solvency II firms.3 It also includes the scope of responsibilities form which must be included as an attachment to Form E in certain cases. Forms are to be found through the following address: Supervision forms - SUP 10A Annex 8

Form E for Solvency II firms:

Form E - Internal transfer of an approved person (for Solvency II firms only)

Form E for small non-directive insurers:2

Form E - small non-directive insurers 2

Form E for large non-directive insurers:2

Form E - large non-directive insurers 2

Scope of responsibilities form can be found at SUP 10A Annex 4D.1

Form E for firms which are not Solvency II firms (including large non-directive insurers) or small non-directive insurers2 (and are not Relevant Authorised persons)

1

SUP 10A Annex 9 Form G: The Retail Investment Adviser Complaints Alerts Form

SUP 10A Annex 9 R

[deleted]1

2