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SUP 10C.9 1Minimising overlap with the PRA approved persons regime

Introduction

SUP 10C.9.1G

SUP 10C.9 deals with how the FCA's senior management regime for relevant authorised persons interacts with the PRA's one.

SUP 10C.9.2G

Both the FCA and the PRA may specify a function as a designated senior management function in relation to a PRA-authorised person.

SUP 10C.9.3G

If a person's job for a firm involves performing:

  1. (1)

    an FCA-designated senior management function, the firm should apply to the FCA for approval;

  2. (2)

    a PRA-designated senior management function, the firm should apply to the PRA for approval;

  3. (3)

    both an FCA-designated senior management function and a PRA-designated senior management function, the firm should apply to both the FCA and the PRA for approval (the purpose of SUP 10C.9 is to cut down the need for this sort of dual approval).

FCA controlled functions absorbed into PRA controlled functions

SUP 10C.9.4G

The FCA is under a duty, under section 59A of the Act (Specifying functions as controlled functions: supplementary), to exercise the power to specify any senior management function as an FCA controlled function in a way that it considers will minimise the likelihood that approvals need to be given by both the FCA and the PRA for the performance by a person of senior management functions in relation to the same PRA-authorised person.

SUP 10C.9.5G

The FCA and PRA have coordinated their approved person regimes to reduce the amount of overlap.

SUP 10C.9.6G
  1. (1)

    SUP 10C.9.8R applies when a firm is seeking approval from the PRA for a candidate to perform a PRA controlled function and the intention is that the candidate will also perform what would otherwise be an FCA governing function once the PRA gives its approval. SUP 10C.9.8R works by disapplying that FCA governing function.

  2. (2)

    Where (1) applies, the activities within that FCA governing function are included in the PRA controlled function for which the person has approval. Chapter Two of the part of the PRA's rulebook titled ‘Senior Management Functions’ deals with this.

SUP 10C.9.7G
  1. (1)

    SUP 10C.9.9G gives some examples of how SUP 10C.9.8R works.

  2. (2)

    The examples do not cover the other overall responsibility function because that function does not apply if the person holds any other designated senior management function for the same firm. See the table in SUP 10C.7.3G for examples of how this works.

The main rule

SUP 10C.9.8R

A 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 PRA-authorised person (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-designated senior management 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-designated senior management function in relation to B;

  3. (3)

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

  4. (4)

    as part of the application for the PRA approval referred to 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 10C.9.9G

Table: Examples of how the need for dual FCA and PRA approval in relation to PRA-authorised persons is reduced

1Example

Whether FCA approval required

Whether PRA approval required

Comments

(1) A is appointed as chief risk officer and an executive director.

No. He is not treated as performing the executive director function.

Yes

Chief risk officer is a PRA-designated senior management function. A’s functions as a director will be included in the PRA-designated senior management function. To avoid the need for FCA approval, A’s appointment as director should not take effect before PRA approval for the chief risk officer role.

(2) Same as example (1), except that A will take up the role as an executive director slightly later because the approval is needed from the firm's shareholders or governing body.

No

Yes

The answer for (1) applies. The arrangements in this section apply if the application to the PRA says that A will start to perform the potential FCA governing function around the time of the PRA approval as well as at that time.

(3) Same as example (1) but the application to the PRA does not mention that it is also intended that A is to be an executive director.

Yes, to perform the executive director function.

Yes

SUP 10C.9.8R does not apply if the application for PRA approval does not say that A will also be performing what would otherwise be an FCA governing function.

(4) A is to be appointed as chief executive and an executive director.

No. A is not treated as performing the executive director function.

Yes

Being a chief executive is a PRA-designated senior management function. A’s functions as a director will be included in the PRA controlled function.

(5) A is appointed as chief risk officer. Later, A is appointed as an executive director while carrying on as chief risk officer.

Yes, when A takes up the director role. The executive director function applies.

Yes, when A takes up the chief risk officer role.

SUP 10C.9.8R does not apply because, when the firm applied for approval for A to perform the PRA chief risk officer designated senior management function, there was no plan for A also to perform the executive director function.

(6) A is appointed as an executive director. Later, A takes on the chief risk officer function and remains as an executive director.

Yes, when A is appointed as director. The executive director function applies.

Yes, when A takes up the chief risk officer role.

When A is appointed as chief risk officer, A is still treated as carrying on the executive director function. A retains the status of an FCA-approved person.

(7) A is appointed as chief risk officer. A then stops performing that role and for a while does not perform any controlled function for that firm. Later, A is appointed as an executive director with the same firm.

Yes, when A is appointed as an executive director. The executive director function applies.

Yes, when A takes up the chief risk officer role.

SUP 10C.9.8R does not apply because there is no current PRA approval when A is being appointed as a director.

(8) A is appointed as an executive director and chief risk officer at the same time. Later, A gives up the role as chief risk officer but remains as an executive director.

No, on A’s first appointment (see example (1)). But when A gives up the role as chief risk officer, FCA approval is needed to perform the executive director function.

Form E should be used. The application should state that it is being made as a result of A ceasing to perform a PRA-designated senior management function.

Form A should be used if there have been changes in A’s fitness (SUP 10C.10.9D(4))

Yes, on A’s first appointment.

When A stops being a chief risk officer, A stops performing a PRA-designated senior management function. However, being an executive director requires FCA approval. A does not have that approval because A did not need it when A was first appointed.

The combined effect of SUP 10C.9.8R and the relevant PRA rules is that the firm has three months to secure approval by the FCA. During that interim period, A keeps the status of a PRA approved person performing the director element of the PRA chief risk designated senior management function - which is included in that function under relevant PRA rules. The relevant PRA rules say that, during this transitional period, A is still treated as performing the PRA chief risk designated senior management function and SUP 10C.9.8R says that, for as long as A is performing a PRA-designated senior management function, A does not perform the executive director function.

(9) A is appointed as the chief finance officer and an executive director at the same time. Later, A switches to being chief risk officer while remaining as an executive director.

No

Yes

The arrangements in SUP 10C.9.8R continue to apply, even though A switches between PRA-designated senior management function after the PRA's first approval.

(10) A is appointed chief risk officer and an executive director. A goes on temporary sick leave. A takes up his old job when he comes back.

No, neither on A’s first appointment nor when A comes back from sick leave.

Yes

SUP 10C.9.8R still applies on A’s return because A does not stop performing either the PRA's chief risk function or what would otherwise have been the executive director function just because A goes on temporary sick leave.

(11) A is appointed to be chairman of the governing body and chairman of the nomination committee at the same time.

No. A does not need approval to perform the chair of the nomination committee function.

Yes, on first appointment.

Being chairman of the governing body is a PRA-designated senior management function. Therefore, the answer for example (1) applies.

2(12) ‘A’ is to be appointed to perform the Head of Overseas Branch PRA-designated senior management function (SMF19) for a third-country relevant authorised person. A is also an executive director of that firm’s UK branch.

No. A is not treated as performing the executive3 director function.

Yes

A’s functions as a director will be included in the PRA controlled function.

Note: The relevant PRA rules can be found in Chapter 2 of the part of the PRA rulebook called ‘Senior Management Functions’

SUP 10C.9.10G
  1. (1)

    The potential FCA governing functions should be recorded in A’s statement of responsibilities and in the firm's management responsibilities map.

  2. (2)

    A potential FCA governing function means a function that would have been an FCA governing function but which is not an FCA governing function because of SUP 10C.9.8R.

Further guidance on the arrangements between the FCA and PRA about approvals

SUP 10C.9.11G

The PRA cannot give its approval for the performance of a PRA-designated senior management function without the consent of the FCA. The firm does not need to apply to the FCA for that consent.

SUP 10C.9.12G

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.