CRED 6
The Approved persons regime
CRED 6.1
Application and purpose
- 01/12/2004
CRED 6.1.1
See Notes
This
chapter applies to all credit
unions and approved
persons. It also applies to applicants seeking to become authorised as a credit union.
- 01/12/2004
CRED 6.1.2
See Notes
The purpose of this chapter is to provide guidance on the provisions
concerning approved persons as
they relate to credit unions.
- 01/12/2004
CRED 6.1.3
See Notes
- 28/08/2007
CRED 6.1.4
See Notes
Guidance on all the provisions of the manuals concerning approved persons is provided below, but the following points summarise the key parts of the proposals:
- (1) FSA has specified various functions which are seen as key to the operation of a credit union and which are referred to as controlled functions.
- (2) A controlled function may be performed only by a person who is a fit and proper person to perform the function to which the approval relates.
- (3) The purpose of these provisions is to complement the regulation of credit unions themselves.
- (4) The manuals provide full details concerning all aspects of the application process, the criteria for assessment, the range of controlled functions and disciplinary action.
- 01/12/2004
CRED 6.2
The Statements of Principle of Code of Practice for Approved Persons (APER)
- 01/12/2004
CRED 6.2.1
See Notes
The purpose of this section is to provide
a guide to the Statements
of Principle and Code
of Practice for Approved Persons (APER) which are issued for the guidance of approved persons in the
conduct of their functions and follows the structure of the statements and
code.
- 01/12/2004
Introduction
CRED 6.2.2
See Notes
- 01/12/2004
CRED 6.2.3
See Notes
APER 1.2 explains that section
64(2) of the Act provides
that if the FSA issues Statements of Principles it
must also issue a code of practice for the purpose of helping to determine
whether a person's conduct
complies with these Statements
of Principle. The code has been issued for that purpose. It
also sets out some guiding principles concerning the application of the Statements of Principle and
the Code of Practice for
Approved Persons. Statements
of Principle 1, 2, 3 and 4 apply to all approved persons performing a controlled function for
a credit union,
and Statements of Principle 5,
6, and 7 apply to those approved to perform significant influence functions. All controlled functions performed
for a credit union are significant influence functions (APER
1.2.4 G).
- 01/12/2004
The Statements of Principle
CRED 6.2.4
See Notes
APER 2.1 sets out the seven Statements of Principle which apply to approved persons. These are all designed to ensure that approved persons undertake their roles efficiently and with integrity. All seven Principles may apply to approved persons performing functions for credit unions.
- 01/12/2004
CRED 6.2.5
See Notes
The table in APER 2.1.2 P sets out the full text of the Statements of Principle. These are repeated below for ease of reference.
- (1) An approved person must act with integrity in carrying out his controlled function.
- (2) An approved person must act with due skill, care and diligence in carrying out his controlled function.
- (3) An approved person must observe proper standards of market conduct in carrying out his controlled function.
- (4) An approved person must deal with the FSA and with other regulators in an open and cooperative way and must disclose appropriately any information of which the FSA would reasonably expect notice.
- (5) An approved person performing a significant influence function must take reasonable steps to ensure that the business of the firm for which he is responsible in his controlled function is organised so that it can be controlled effectively.
- (6) An approved person performing a significant influence function must exercise due skill, care and diligence in managing the business of the firm for which he is responsible in his controlled function.
- (7) An approved person performing a significant influence function must take reasonable steps to ensure that the business of the firm for which he is responsible in his controlled function complies with the regulatory requirements imposed on that business.
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Code of Practice for Approved persons
CRED 6.2.6
See Notes
APER 3.1 provides an introduction to the Code of Practice for Approved Persons and provides guidance on its operation. The key points for those involved with credit unions are as follows:
- (1) An approved person will be in breach of a Statement of Principle only where his conduct was deliberate or where his standard of conduct was below that which would be reasonable in the circumstances.
- (2) All the Statements of Principle may apply to approved persons performing a controlled function for a credit union.
- 01/12/2004
Factors relevant to Statements of Principle
CRED 6.2.7
See Notes
APER 3.2 - APER 3.3 set out factors to be taken into account in determining whether
or not an approved person's conduct
complies with the Statements
of Principle. Since all controlled
functions relevant to credit
unions are significant
influence functions, all these factors are relevant to credit unions.
- 01/12/2004
CRED 6.2.8
See Notes
APER 4.1
APER 4.7 set out the seven Statements
of Principle in turn, and provide guidance on conduct which, in the opinion
of the FSA,
does not comply with each of the Statements
of Principle or, in the case of APER 4.3, conduct which will tend to show compliance with the relevant Statement of Principle.
- 01/12/2004
Enforcement procedures
CRED 6.2.9
See Notes
Details of the disciplinary measures which may be taken against approved persons are located in DEPP. Approved persons should note that disciplinary action may be taken either for their personal misconduct or for conduct which results in a credit union breaching any provisions to which it is subject.
- 28/08/2007
CRED 6.3
Approved persons
- 01/12/2004
CRED 6.3.1
See Notes
The purpose of this section is to provide
a guide to those parts of the Supervision manual (SUP) concerning approved persons as they apply to credit unions, and follows
the structure of that manual. This section should be read in conjunction with SUP
10.
- 01/12/2004
Introduction
CRED 6.3.2
See Notes
SUP 10.1.1 R - SUP 10.1.26 R provides an introduction to the application of the approved persons regime. The effect of the rules is that a credit union must apply to the FSA for the approval of one or more individuals to perform the functions which are known as controlled functions. In broadest outline these controlled functions are roles which enable an individual to exert significant influence on the conduct of the credit union's affairs. A complete list of these functions is set out in SUP 10.4.5 R, although not all of these are relevant to credit unions. This guide concentrates only on the controlled functions which are relevant for the majority of credit unions. The largest credit unions should consider whether a wider range of controlled functions is relevant to them.
- 01/12/2004
Purpose of the regime
CRED 6.3.3
See Notes
SUP 10.2 outlines
the purpose of the direct regulation of individuals which is to supplement
the regulation of credit
unions themselves. Individuals will need to be approved to undertake
tasks which are key to the operation of a credit union.
- 01/12/2004
Controlled functions
CRED 6.3.4
See Notes
SUP 10.3 provides,
in this context, that a function is a controlled
function only when it is undertaken by a credit union in relation to a regulated activity. Controlled functions fall
within two groups. The significant
influence functions describe the roles performed by the governing body and senior managers of the firm who exert a significant
influence over the regulated
activities of the firm.
The customer functions describe
the roles of individuals who deal with customers or
with the property of customers.
These customer functions do
not extend to activities in relation to accepting deposits or general insurance and therefore
will not be relevant to credit
unions with permission for accepting deposits only.
- 01/12/2004
Specification of functions
CRED 6.3.5
See Notes
SUP 10.4 specifies
all the controlled functions and
provides that its requirements apply only in relation to the performance of
the controlled functions for
which an individual is approved.
- 01/12/2004
CRED 6.3.6
See Notes
The complete list of all controlled functions is
located in SUP 10.4.5 R. Guidance on those controlled functions most
likely to be relevant to credit
unions is provided below:
- 01/12/2004
CRED 6.3.7
See Notes
SUP 10.6: the governing functions:
- (1) SUP 10.6.4 R: the Director function This is the function of acting in the capacity of a director of a credit union.
- (2) SUP 10.6.8 R: the non-executive director function It is unusual for a credit union to appoint non-executive directors as such. But this function would include membership of a credit union's supervisory committee and any other committee which scrutinises the approach of executive management, the credit union's performance, and its standards of conduct.
- (3) SUP 10.6.11 R: the chief executive function Acting in the capacity of chief executive, whether or not using that title. This role includes anyone having the responsibility, alone or jointly with one or more others, under the immediate authority of the committee of management, for the conduct of the whole of the business.
- 01/12/2004
CRED 6.3.8
See Notes
SUP 10.7: the required functions:
- (1) SUP 10.7.1 R: the apportionment and oversight function. The apportionment of responsibilities (see CRED 4.2 and SYSC 2.1.1 R). The function of dealing with apportionment of responsibilities under SYSC 2.1.1 R, and of overseeing the establishment and maintenance of systems and controls under SYSC 3.1.1 R.
- (2) SUP 10.7.13 R: the money laundering reporting function. The function of acting in the capacity of the money laundering reporting officer of a credit union.
- 01/12/2004
CRED 6.3.9
See Notes
SUP 10.8: the systems and controls functions:
- (1) SUP 10.8.1 R the finance function The function of acting in the capacity of a senior manager with responsibility for reporting to the committee of management in relation to its financial affairs.
- (2) SUP 10.8.3 R: the risk assessment function The function of acting in the capacity of a senior manager with responsibility for reporting to the committee of management on the setting and controlling of its risk exposure.
- (3) SUP 10.8.6 R: the internal audit function The function of acting in the capacity of a senior manager with responsibility for reporting to the committee of management in relation to its adherence to internal systems and controls, procedures and policies.
- 01/12/2004
CRED 6.3.10
See Notes
SUP 10.9: the significant management functions: These controlled functions will only apply to the credit union if the functions are not being performed by a member of the committee of management and the credit union has followed the guidance in SUP 10.9.3 G.
- 01/12/2004
CRED 6.3.11
See Notes
SUP 10.10.11 R:
gives guidance on forms and procedures relating to approved persons.
- 01/12/2004
CRED 6.3.12
See Notes
The following are the forms that will most commonly be needed by credit unions.
| Form A | SUP 10 Annex 4 | Application to perform controlled functions under the approved person regime. |
| Form B | SUP 10 Annex 5 | Notice to withdraw an application to perform controlled functions under the approved persons regime. |
| Form C | SUP 10 Annex 6 | Notice of ceasing to perform controlled functions. |
| Form D | SUP 10 Annex 7 | Notification of changes in personal information or application details. |
| Copies of these forms may be obtained from the FSA website or from the Individual Vetting and Approval Department. | ||
- 01/12/2004
CRED 6.3.13
See Notes
SUP 10.12 outlines
procedures concerning the application for approval and withdrawing an application
for approval. Applications should be made by the credit union and not by individual applicants.
Details are provided concerning the procedure that FSA will adopt when granting or refusing
applications.
- 01/12/2004
CRED 6.3.14
See Notes
SUP 10.13 outlines
procedures concerning changes to an approved
person's details. Where changes to an approved person's role involve the person performing one
or more different controlled
functions from those for which they have been given approval,
then a new application must be made to FSA.
This will be for approval to perform the new controlled functions.
- 01/12/2004
CRED 6.3.15
See Notes
- 01/12/2004
CRED 6.4
Assessing fitness and propriety
- 01/12/2004
Purpose
CRED 6.4.1
See Notes
The purpose of this section is to set
out and describe the criteria that the FSA will
consider when assessing the fitness and propriety of a person in respect of whom an application
is being made for approval to undertake a controlled function under the approved persons regime
(SUP
10). The criteria specified here will also be used
to assess the continuing fitness and propriety of persons who have already been approved.
- 01/12/2004
Background
CRED 6.4.2
See Notes
- (1) FIT 1.2 explains that the FSA may grant an application for approval for a person to perform a controlled function only if it is satisfied that the candidate is fit and proper to perform the controlled function to which the application relates.
- (2) It also indicates that the FSA may withdraw its approval if it considers that an individual is no longer fit and proper to perform the controlled function to which the approval relates.
- 01/12/2004
Assessing fitness and propriety
CRED 6.4.3
See Notes
FIT 1.3 explains that the FSA will have regard to a range of factors when assessing the fitness and propriety of a person to perform a particular controlled function, but that the most important criteria will be the person's:
- (1) honesty, integrity and reputation;
- (2) competence and capability; and
- (3) financial soundness.
- 01/12/2004
CRED 6.4.4
See Notes
FIT 2.1-FIT 2.3 provide further details of the criteria referred to in CRED
6.4.3 G and the primary matters
which FSA will
take account in assessing them.
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