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Status: You are viewing the version of the handbook as on 2019-12-18.

SUP 10C.5B FCA governing functions: Group entities

Group entity senior manager function (SMF7)

SUP 10C.5B.1R
  1. (1)

    1The group entity senior manager function is the function of having a significant influence on the management or conduct of one or more aspects of the affairs of a firm in relation to its regulated activities.

  2. (2)

    This controlled function does not include having such influence in the course of performance of another designated senior management function for that firm.

  3. (3)

    This controlled function only applies if it is performed by:

    1. (a)

      a person employed by; or

    2. (b)

      an officer of:

    any of the following:

    1. (c)

      a parent undertaking or holding company of the firm; or

    2. (d)

      another undertaking which is a member of the firm’s group.

Basis on which group entity senior manager function is included

SUP 10C.5B.2G
  1. (1)

    1This provision explains the basis on which the group entity senior manager function is included as a controlled function.

  2. (2)

    The basic position is set out in SUP 10C.3.9G. As is the case with all controlled functions in this chapter, the definition of the group entity senior manager function is subject to the overriding provisions in SUP 10C.3.6R, which sets out the requirements of section 59(1) and (2) of the Act.

  3. (3)

    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 the group entity senior manager function.

  4. (4)

    Therefore, the FCA accepts that there will be cases in which a person performing the role described in SUP 10C.5B.1R will not require approval.

  5. (5)

    However where there is such an arrangement the function may apply.

When the group entity senior manager function applies

SUP 10C.5B.3G
  1. (1)

    1Individuals in the management of a group in which a firm is a subsidiary do not automatically come within the group entity senior manager function because their job relates to the firm.

  2. (2)

    The FCA does not aim or expect to approve individuals to perform this function for every firm to which the function potentially applies under SUP 10C Annex 1 (What functions apply to what type of firm) just because the firm is part of a group.

  3. (3)

    The FCA would not consider it to be unusual for there to be no one performing the group entity senior manager function for a firm that is a subsidiary in a group.

SUP 10C.5B.4G

1Whether someone performs the group entity senior manager function should be assessed on a case-by-case basis. The factors to be taken into account include:

  1. (1)

    the organisational structures of the group and the firm;

  2. (2)

    the split of key responsibilities between the group and firm boards and senior management; and

  3. (3)

    whether SMF managers based in the firm have an appropriate level of authority within the group to ensure that the firm complies with the requirements of the regulatory system.

SUP 10C.5B.5G
  1. (1)

    1An individual based elsewhere in a group whose responsibilities in relation to a subsidiary in the group that is a firm are limited to developing the group’s overall strategy is unlikely to be performing the group entity senior manager function.

  2. (2)

    The function is more likely to apply to individuals who are directly responsible for implementing the group’s strategy in the firm.

  3. (3)

    Therefore, if an individual based elsewhere in the group:

    1. (a)

      is directly responsible for taking decisions about how the firm should conduct its regulated activities; and

    2. (b)

      has not delegated this responsibility to an SMF manager based in the firm;

    it is likely that they will require approval to perform the group entity senior manager function (or, as described in SUP 10C.5B.6G, another designated senior management function).

  4. (4)

    If however the firm’s governing body has sufficient discretion in how it applies and responds to proposals coming from group committees or individuals based in parent entities, approval would generally not be required. In this case the individual will be carrying on a group-level function rather than performing a function on behalf of the firm.

  5. (5)

    So, where:

    1. (a)

      a firm has in place the required SMF managers based in the firm; and

    2. (b)

      those SMF managers are effective and have sufficient control over the firm;

    the FCA would not routinely expect the firm to have persons performing the group entity senior manager function in place.

SUP 10C.5B.6G
  1. (1)

    1SUP 10C.5B.1R(2) means that an individual who is approved to perform another designated senior management function for a firm will often not need to be approved to perform the group entity senior manager function for that firm as well.

  2. (2)

    So for example if the individual has responsibility for the firm’s finances they may be performing the chief finance officer function. If that is the case the individual will not be performing the group entity senior manager function by carrying out the functions of a chief finance officer.

  3. (3)

    Similarly an individual who is approved to perform another designated senior management function for the firm may have influence that comes from holding that post in matters falling outside the core duties of that post. For example a chief finance officer of a firm will have important input into decisions that fall outside the core financial control function. That influence does not mean that they are performing the group entity senior manager function.

SUP 10C.5B.7G

1The group entity senior manager function is potentially relevant:

  1. (1)

    whether the individual is located in or outside the United Kingdom; and

  2. (2)

    whether the group is headquartered in the United Kingdom or overseas.

SUP 10C.5B.8G
  1. (1)

    1The parent of a subsidiary firm cannot itself perform the group entity senior manager function.

  2. (2)

    A shareholder in the parent will also not perform this function unless the shareholder is also a director, officer or employee of the parent and is exerting significant influence over the firm through that role.