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SUP 10C.3 1General material about the definition of controlled functions

Purpose

SUP 10C.3.1G

This section has general provisions that apply to the definition of all controlled functions.

Types of controlled function

SUP 10C.3.2G
SUP 10C.3.3G

All the controlled functions that the FCA has specified in this chapter are designated senior management functions. The FCA has not, in this chapter, used its power to specify controlled functions that are not designated senior management functions.

SUP 10C.3.4G

The FCA has (in SUP 10A) specified controlled functions for relevant authorised persons that are not designated senior management functions. (See SUP 10C.1.7R to SUP 10C.1.8G (Appointed representatives)).

SUP 10C.3.5G
  1. (1)

    Except as described in SUP 10C.3.4G, in this chapter, FCA controlled function and FCA-designated senior management function cover the same functions.

  2. (2)

    Therefore, a function is only covered by SUP 10C.4.3R (Table of FCA-designated senior management 2functions for relevant authorised persons) if that function meets both the following sets of requirements:

    1. (a)

      the requirements of SUP 10C.3.6R (Definition of FCA controlled function: arrangements); and

    2. (b)

      the requirements of SUP 10C.3.10R (Definition of FCA-designated senior management function).

Definition of FCA controlled function: arrangements

SUP 10C.3.6R

In accordance with section 59 of the Act (Approval for particular arrangements), a function specified in this chapter 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 10C.3.7G

Section 59(1) and (2) of the Act provide that approval is necessary for 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 10C.3.8G
  1. (1)

    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.

  2. (2)

    Arrangement includes the appointment of a person to an office, a person becoming a partner, or a person's employment (whether under a contract of service or otherwise).

  3. (3)

    An arrangement need not be a written contract but could arise by conduct, custom and practice.

SUP 10C.3.9G

If a firm is a member of a group, a person employed elsewhere in the group (for example, by the holding company) who carries out a function in relation to the firm will only perform an FCA controlled function:

  1. (1)

    if the function is performed under an arrangement entered into by the firm (under section 59(1)); or

  2. (2)

    if:

    1. (a)

      there is a contract (under section 59(2)) between the firm and the relevant group member permitting this; and

    2. (b)

      the function is performed under an arrangement entered into by the contractor.

Definition of FCA-designated senior management function

SUP 10C.3.10R

Each FCA-designated senior management function is one which comes within the definition of a senior management function.

SUP 10C.3.11G

Section 59ZA(2) of the Act says that a function is a ‘senior management function’, in relation to the carrying on of a regulated activity by a firm, if:

  1. (1)

    the function will require the person performing it to be responsible for managing one or more aspects of the firm's affairs, so far as relating to the activity; and

  2. (2)

    those aspects involve, or might involve, a risk of serious consequences:

    1. (a)

      for the firm; or

    2. (b)

      for business or other interests in the United Kingdom.

SUP 10C.3.12G

Section 59ZA(3) of the Act says that ‘managing’ includes, for these purposes, taking decisions, or participating in the taking of decisions, about how one or more aspects of the firm's affairs should be carried on.

The 12-week rule

SUP 10C.3.13R

If:

  1. (1)

    a firm appoints an individual to perform a function which, but for this rule, would be an FCA-designated senior management function;

  2. (2)

    the appointment is to provide cover for an SMF manager 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-designated senior management function does not relate to those activities of that individual.

SUP 10C.3.14G

SUP 10C.3.13R 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-designated senior management function for more than 12 weeks, the firm should apply for approval.

SUP 10C.3.15G

See SUP 10C.12.7G to SUP 10C.12.14G (time-limited approvals) for procedures for temporary appointments longer than 12 weeks.