MIGI 6
Approved Persons
MIGI 6.1
Introduction
- 01/12/2004
MIGI 6.1.1
See Notes
An individual within a firm or an appointed representative
of that firm that will carry out a 'controlled
function' in the firm or appointed representative must first be approved by
us as fit and proper to carry out that function. Direct regulation of these
individuals complements our regulation of the authorised firm itself.
- 01/12/2004
MIGI 6.1.2
See Notes
Broadly, a person is likely to be performing
a controlled function in a mortgage or insurance intermediary if he holds
a position of significant influence in the firm. If your firm is small and has a simple organisational
structure, it is likely that only those on the firm's governing body will need to be approved persons.
- 01/12/2004
MIGI 6.1.3
See Notes
This chapter:
(1) helps you determine which individuals in your firm need to be approved persons
(whether your firm is authorised or an appointed representative);
(2) explains what you need to do if these individuals are to be approved;
and
(3) explains that there are continuing obligations on approved persons once they have been approved.
- 01/12/2004
MIGI 6.2
The approved persons requirements
- 01/12/2004
What are the controlled functions?
MIGI 6.2.1
See Notes
The controlled functions are divided
into 'customer functions' and 'significant influence functions'. Only the significant
influence functions apply to insurance and
mortgage intermediaries, so the customer functions are not covered in this
Guide. There is a full list of the controlled functions in SUP 10.4.5 R to
which you should refer to help you decide which controlled functions are relevant
to your firm.
- 01/12/2004
What are the significant influence functions?
MIGI 6.2.2
See Notes
The significant influence functions are carried on by individuals
who exercise a significant influence over the conduct of a firm's affairs,
such as a director or
partner.
You need to be an approved person to
perform a significant influence function. The significant influence functions
are divided into four types:
(1) governing functions (SUP
10.6);
(2) required functions (SUP
10.7);
(3) systems and controls functions (SUP 10.8);
and
(4) significant management functions (SUP 10.9).
- 01/12/2004
How does the approved persons regime apply to sole traders?
MIGI 6.2.3
See Notes
If you are a sole trader you will only
need to be an approved person yourself if you employ other approved persons.
The employees of a sole trader carrying on insurance or mortgage mediation
activities will generally not be carrying on controlled functions. So, if you are a sole trader you are unlikely
to need any approved persons (but see also paragraph 6.2.11 below). For further
details see SUP 10.6.30 R to SUP
10.6.32 G.
- 01/12/2004
Which controlled functions are relevant to small intermediaries?
MIGI 6.2.4
See Notes
As noted above, only the significant
influence functions apply to insurance and mortgage intermediaries. Only the governing
functions and
the required functions are likely to be relevant to small mortgage and insurance intermediaries
with simple organisational structures (but see paragraphs 6.2.7 to 6.2.9 of
this Chapter).
- 01/12/2004
MIGI 6.2.5
See Notes
Fewer controlled functions apply to firms that are 'secondary insurance intermediaries' than to 'primary insurance intermediaries'. A primary insurance intermediary is one whose main business is insurance mediation activities. A secondary intermediary is one whose main business is not insurance mediation activities and who does not carry on any regulated activities other than insurance mediation activities, for example a motor dealer that also sells car insurance.
- 01/12/2004
MIGI 6.2.6
See Notes
The controlled functions that are likely to apply to mortgage and insurance intermediaries:
| Function | Description | Who performs these controlled functions? | What types of firm do these controlled functions apply to? |
| Governing Functions ( SUP 10.6 ) | Individuals responsible for directing the firm's affairs, such as a partner (CF4) or director (CF1) will be performing governing functions. The appropriate governing function will depend on the type of firm. For example, the 'Partner' function would be relevant to a partnership whereas the relevant governing function for a company would be the 'Director' function. |
All of those on the firm's governing body will perform these controlled functions. | Applies to mortgage intermediaries and to primary insurance intermediaries. Does not apply to secondary insurance intermediaries. Unlikely to apply to sole traders |
| Required Functions ( SUP 10.7 ) | The only required function likely to be relevant to smaller insurance and mortgage intermediaries is the 'Apportionment and Oversight Function' (CF8). The person approved to perform this function is responsible for apportioning significant responsibilities among the directors and senior managers and for ensuring that the firm establishes and maintains internal systems and controls that are appropriate for its business. |
If a firm has a chief executive, he or she must be approved to carry on the apportionment and oversight function. Otherwise, in small firms, this controlled function should generally be performed by someone on the firm's governing body. |
Applies to all insurance and mortgage intermediaries. Unlikely to apply to sole traders. |
- 01/12/2004
Might other controlled functions also apply to a mortgage or insurance intermediary?
MIGI 6.2.7
See Notes
Although in most cases only the controlled
functions in the above table will be relevant to a small mortgage or insurance intermediary,
other controlled functions could, in certain circumstances, also apply.
- 01/12/2004
MIGI 6.2.8
See Notes
For example, in more complex firms, if
significant managerial responsibilities are delegated to non-executive directors
or individuals who are not on the firm's governing body (see SUP 10.6.2 R and SUP
10.6.3 G), these individuals must get approval from
us if they are to perform:
- 01/12/2004
MIGI 6.2.9
See Notes
If you are approved to perform a governing
function, for example as a director, you will not require separate approval
to perform the systems and controls and significant management functions.
- 01/12/2004
Responsibility for insurance mediation
MIGI 6.2.10
See Notes
An insurance intermediary (other than
a sole trader) must make a director or senior manager responsible for the
firm's insurance mediation activities. Typically, responsibility should be
given to a person approved to perform a governing function. Where insurance
mediation is not your main business activity, responsibility for insurance
mediation should be allocated to the approved person performing the apportionment
and oversight function (CF8). In the case of a sole trader, the sole trader
him or herself will be responsible for the firm's insurance mediation activity, regardless of whether
or not he or she is an approved person. The FSA Register will identify the
person who has this responsibility. You should refer to PRU 9.1 for further details.
- 01/12/2004
Examples - controlled functions and firm types
MIGI 6.2.11
See Notes
Examples to help you identify which controlled functions are likely to apply to your firm:
| Type of firm | Relevant Controlled Functions | Points to Note |
| A small partnership that is a mortgage intermediary, a primary insurance intermediary, or both | •CF4 Partner Function (SUP 10.6.17 R) •CF8 Apportionment & Oversight Function (SUP 10.7.1 R) • Allocate responsibility for insurance mediation to one of the above (PRU 9.1.4 R) |
Systems and Control Functions and Significant Management Functions are unlikely to apply. |
| A small company that is a mortgage intermediary, a primary insurance intermediary, or both | •CF1Director Function (SUP 10.6.4 R) CF2 Non Exec Director Function (SUP 10.6.8 R), CF3 Chief Exec Function (SUP 10.6.11 R) •CF8 Apportionment & Oversight Function - (SUP 10.7.1 R) • Allocate responsibility for insurance mediation to one of the above (PRU 9.1.4 R) |
Systems and Control Functions and Significant Management Functions are unlikely to apply. |
| A sole trader that is a mortgage intermediary, an insurance intermediary, or both | • Unlikely to require any approved persons. (SUP 10.6.2 R and SUP 10.6.3 G) • Sole trader will have responsibility for insurance mediation (PRU 9.1.5 G) |
A sole trader only needs to be an approved person him or herself where he or she employs other approved persons |
| A small partnership that is a secondary insurance intermediary only | •CF8 - Apportionment & Oversight Function (SUP 10.7.1 R) • Allocate responsibility for insurance mediation to the above (SUP 10.6.3A G, SUP 10.6.3B G and SUP 10.1.23R (1), SUP 10.1.23R (2)) |
Governing Functions, Systems and Control Functions and Significant Management Functions do not apply. |
| A small company that is a secondary insurance intermediary only | •CF8 - Apportionment & Oversight Function (SUP 10.7.1 R) • Allocate responsibility for insurance mediation to the above (SUP 10.6.3A G,10.6.3B G and 10.7.4A G, 10.7.4B G) |
- 01/12/2004
MIGI 6.3
Approved persons requirements for appointed representatives
- 01/12/2004
MIGI 6.3.1
See Notes
Appointed
representatives (ARs) are also required to have approved persons, though the
requirements are different for appointed representatives than for authorised
firms and are explained below. Part I, Chapter 9 covers the general requirements
for mortgage and insurance intermediaries with ARs.
- 01/12/2004
MIGI 6.3.2
See Notes
The approved persons requirements are
different for different types of ARs.
(1)
will need to be approved persons.
All individuals that carry on, the governing
functions within:•ARs carrying
on mortgage mediation activities; and •ARs carrying
on insurance mediation activities as
their main business;
will need to be approved persons.
(2) Like secondary insurance intermediaries, 'secondary insurance
mediation ARs' require only one approved persons, who will need to apply for
and obtain approval to carry on the governing functions.
A 'secondary insurance mediation AR' is one whose main business is not insurance
mediation and who is limited by its principal to carrying on only insurance
mediation activities and no other regulated activities.
(3) Introducer ARs are not required to have any approved persons (see
Part I, paragraph 9.2.2 for an explanation of introducer ARs).
- 01/12/2004
MIGI 6.3.3
See Notes
Examples to help you identify which controlled
functions are likely to apply to your firm's ARs:
| Type of AR | Potentially Relevant Controlled Functions |
| A small partnership that is a mortgage mediation AR, a primary insurance mediation AR, or both | •CF4 Partner Function (SUP 10.6.17 R) |
| A small company that is a mortgage mediation AR, a primary insurance mediation AR, or both | •CF1 Director Function (SUP 10.6.4 R) •CF2 Non Exec Director Function (SUP 10.6.8 R) •CF3 Chief Exec Function (SUP 10.6.11 R) |
| A sole trader that is a mortgage mediation AR, a primary insurance mediation AR, or both | • Unlikely to require any approved persons (but see SUP 10.6.2 R and SUP 10.6.3 G) |
| A sole trader that is a secondary insurance mediation AR only | • Unlikely to require any approved persons (but see SUP 10.6.2 R and SUP 10.6.3 G) |
| A small partnership that is a secondary insurance mediation AR only | •CF4 Partner Function (SUP 10.6.17 R) •Only one approved person required |
| A small company that is a secondary insurance mediation AR only | •CF1 Director Function (SUP 10.6.4 R) •CF2 Non Exec Director Function (SUP 10.6.8 R), •CF3 Chief Exec Function (SUP 10.6.11 R) •Only one approved person required |
| An introducer AR introducing mortgage business, insurance business, or both | •Not required to have any approved persons |
- 01/12/2004
MIGI 6.4
Becoming an approved person
- 01/12/2004
What is the test for approval to become an approved person?
MIGI 6.4.1
See Notes
We will only approve an individual to
perform a controlled function if we are satisfied that person is a fit and
proper person to perform that controlled function. We will look at a number
of factors including an individual's honesty, integrity, reputation, competence,
capability, and financial standing. Further details can be found in The Fit
and Proper Person test for Approved Persons ( FIT).
- 01/12/2004
Applying to become an approved person
MIGI 6.4.2
See Notes
Who should
make the application?
Your firm is required to ensure that no-one performs a controlled function until we have granted approval. Applications must be submitted by, or on behalf of, the firm itself, not by the individual who wishes to become an approved person. The principal firm of an AR is responsible for submitting applications for the approval of anyone in the AR who is required to be an approved person.
Your firm is required to ensure that no-one performs a controlled function until we have granted approval. Applications must be submitted by, or on behalf of, the firm itself, not by the individual who wishes to become an approved person. The principal firm of an AR is responsible for submitting applications for the approval of anyone in the AR who is required to be an approved person.
- 01/12/2004
MIGI 6.4.3
See Notes
When should
your firm apply?
(1) Your firm will
not be authorised until individual candidates have been approved to perform
the relevant controlled functions.
(2) You will need to obtain our approval before anyone joining your
firm can
perform a controlled function, even if they were approved elsewhere. In most
circumstances, you will also need our approval before an approved person moves from one controlled
function to another within your firm.
If an approved person ceases to perform a controlled function for your firm,
you must notify us. Further details can be found in SUP 10.
- 01/12/2004
MIGI 6.4.4
See Notes
Where can
you find the relevant form?
Where your firm is
applying for authorisation as a mortgage or
insurance intermediary by NM or NGI, respectively, it should apply for approval
for any approved persons at the same time using Form HSF 2 (available at www.fsa.gov.uk/mgi/form_hsf2.pdf). We have not yet
specified which forms mortgage and insurance intermediary should use for approved
persons applications and notifications after regulation begins. You should
refer to our website for guidance if and when you need to make one of these
submissions.
- 01/12/2004
MIGI 6.4.5
See Notes
How long will
an application take?
We must respond to approved persons applications within three months. In practice, the majority of applications are processed much sooner than this.
We must respond to approved persons applications within three months. In practice, the majority of applications are processed much sooner than this.
- 01/12/2004
MIGI 6.5
Principles and Code of Practice for approved persons
- 01/12/2004
MIGI 6.5.1
See Notes
An approved person must remain fit and
proper and comply with the Statements of Principle and Code of Practice for
Approved Persons (APER). The Statements of Principle for Approved Persons
(APER
2) require, for example, that an approved person must
act with due skill, care and diligence in carrying out its controlled function. The Code of
Practice (APER 3 and APER 4) provides guidance on the factors which in our opinion should be
taken into account when assessing whether an approved person has complied
with the Statements of Principle. There are further details in APER.
- 01/12/2004
MIGI 6.5.2
See Notes
The following chapters
of this Guide are also relevant:
| • | Authorisation - Part I, Chapter 4 |
| • | Appointed representatives - Part I, Chapter 9 |
- 01/12/2004