SIFA 7
Approved Persons
SIFA 7.1
Approved Persons
- 01/12/2004
SIFA 7.1.1
See Notes
An authorised
firm has approved persons and other staff. Approved persons carry out controlled
functions and so have responsibilities for the firm complying with and working
within the FSA Handbook of Rules and Guidance.
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SIFA 7.1.2
See Notes
Controlled functions
are functions that meet the conditions under section 59 of FSMA. These conditions
are that the function:
•allows the person
responsible to exercise a significant influence over the firm's affairs, or•involves the
person responsible in dealing with i.e. having contact with, customers; or•involves the
person responsible in dealing with customers' property.
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SIFA 7.1.3
See Notes
We must approve
a person before they perform one or more controlled functions for your firm.
The purpose of the direct approval of people who perform controlled functions
is to complement the regulation of the authorised firm for which the approved
person(s) performs the functions.
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SIFA 7.1.4
See Notes
You need to
apply to have a person approved to perform a controlled function as follows:
•before a firm
is authorised we must approve the individuals who are going to carry out controlled
functions and then register them for the appropriate controlled functions;
and•you need to
complete and submit a new form to obtain FSA approval if someone joins the
firm (including as a partner or director), changes a controlled function or
moves to a different firm.There is a special provision to cover absence of
up to 12 weeks for senior functions where approval is not required (SUP
10.5.5 R and SUP
10.5.6 G).
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SIFA 7.2
Controlled Functions
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SIFA 7.2.1
See Notes
The full list of controlled functions
can be found under SUP 10.4.5 R. The functions
with most relevance to small firms are likely to be the:
•governing functions
(CF 1-7) e.g. director, chief executive, partner, sole trader;•required functions
(CF 8-12) e.g. apportionment and oversight, compliance officer, money laundering
reporting officer; and•customer functions
(CF 21-27) e.g. investment adviser.
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SIFA 7.2.2
See Notes
The most common controlled customer functions
in smaller investment intermediaries are CF21 (Investment adviser function)
and CF22 (Investment adviser trainee function). But some may also have functions
CF23 (Corporate finance adviser function), CF24 (Pension transfer specialist
function), and CF27 (Investment management function).
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SIFA 7.2.3
See Notes
The 'governing functions' and the 'required
functions' are also known as 'significant influence functions' because the
persons performing these functions are likely to exercise significant influence
over the business.
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SIFA 7.2.4
See Notes
SYSC 2.1.3 R provides
that a firm must allocate to an individual (usually the chief executive) the
functions of apportioning responsibilities and of overseeing the establishment
and maintenance of systems and controls. SYSC 3.2.8 R provides
that a firm must allocate to a director or senior manager the function of
overseeing the firm's compliance. The Money Laundering Sourcebook (ML) provides
that a firm must have a money laundering reporting officer (unless it is a
sole trader with no employees).
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SIFA 7.2.5
See Notes
The number of approved persons carrying
out controlled functions CF21-27 registered by a firm is a factor in the level
of fees the firm pays.
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SIFA 7.3
Becoming and Ceasing to be an Approved Person
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SIFA 7.3.1
See Notes
There are five standard forms (A-E) relevant
to approved persons and they are grouped together under the heading 'Supervision
manual - Approved persons regime forms'. The forms are included in the
Supervision Manual as Annexes 4 to 8 of Chapter 10. The forms are available
from our website under 'FSA Library' and 'Forms'. Firms can also register
with the FSA to submit the approved persons forms using Firms Online. You
can obtain details of how to access Firms Online and how to register for this
facility from the 'Doing business with the FSA' part of our website.
| Form | When to use the forms: |
| A | To perform a controlled function. The person who is to be appointed to perform the controlled function should complete the form and it should be authorised by an individual with a governing function within the firm. Form A is also used if an already approved person is increasing their functions but sections 4 and 5 of the Form will not always require completion. |
| B | To withdraw an application to perform a controlled function (i.e. to withdraw the application before it has been approved by the FSA). Both the firm and the candidate must sign this form. |
| C | To cease to perform a controlled function or to reduce the number of functions that an individual performs (i.e. to withdraw controlled functions from an approved person). Only the firm is required to sign this form. |
| D | To change an approved person's details. |
| E | To notify a person remaining with the same firm but changing a controlled function (e.g. to apply for a change from CF22 trainee investment adviser to CF21 investment adviser). |
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SIFA 7.4
How Long Will An Application Take?
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SIFA 7.4.1
See Notes
Under section 61 of FSMA, we must respond
to applications to be an approved person within three months. In practice,
the guideline time scale is much shorter, with the majority of applications
being processed within seven working days.
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SIFA 7.4.2
See Notes
It is important that you satisfy yourself
that the individual is fit and proper for his role before submitting the form
to us. You are responsible for the accuracy of the data and completion of
the form. You must also ensure that all the questions on the form are answered
completely, as failure to disclose information will prejudice the person's
approval.
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SIFA 7.5
Which Parts Of The Handbook Are Relevant?
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SIFA 7.5.1
See Notes
Full details of the approved persons
regime and the application process are in Chapter 6 of the Authorisation manual
(AUTH) and Chapter 10 of the Supervision manual (SUP). For example, you may
wish to refer to the following sections:
•
SUP
10.11.2 G and SUP 10 Annex 2 G highlight
which form you should use and when.•
SUP 10.3 to SUP 10.10 describe the 27
controlled functions and the boundaries of the approved persons regime.•
SUP 10.11 to SUP 10.14 set out the procedures
for applying for approval, changing the details that we hold about an approved
person, and withdrawing from approval.•
AUTH
6 Annex 1 G and SUP 10 Annex 1 G answer frequently asked questions on the requirements of the approved
persons regime.
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SIFA 7.6
The Approval Process
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SIFA 7.6.1
See Notes
Approval is only granted by the FSA if
it is satisfied that the individual candidate is a fit and proper person to
perform the controlled function applied for. The minimum standards for becoming
and remaining an approved person are set out in the Fit and Proper test for
Approved Persons module of the Handbook (FIT).
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SIFA 7.6.2
See Notes
The main assessment criteria are set
out at FIT Chapter 2. The 'fit and proper' test takes into consideration an
individual's:
•honesty, integrity
and reputation;•competence and
capability; and•financial soundness.
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SIFA 7.6.3
See Notes
In determining a person's competence
and capability the FSA will have regard (among other matters) to whether:
•The person satisfies
the relevant requirements of the Training and Competence sourcebook (TC) in
relation to the controlled function the person is intended to perform.•The person has
demonstrated by experience and training that they will be able to perform
the controlled function. For example, you must demonstrate previous experience
in the type of business for which you are applying. For a small firm of investment
intermediaries we would generally expect that at least one of the principals
or directors had at least three years in the financial services industry,
with at least one of these years in the independent market.
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SIFA 7.6.4
See Notes
In assessing whether individuals are
fit and proper, we also take into account regulated activities of the firm
which the individual will perform, the permissions applied for by that firm
and the markets in which it operates.
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SIFA 7.7
Principles For Approved Persons
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SIFA 7.7.1
See Notes
The Principles for firms (see Chapter
5 of the Guide) are matched by a set of seven principles for Approved Persons.
The Statements of Principle and Code of Practice for Approved Persons sourcebook
(APER) includes the Statements of Principle in APER 2 and the Code of Practice in APER 3. 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.
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SIFA 7.7.2
See Notes
The Principles set out the standards
of conduct expected of an approved person:
| Statements Of Principle | |
| • | An approved person must act with integrity in carrying out his controlled function. |
| • | An approved person must act with due skill, care and diligence in carrying out his controlled function. |
| • | An approved person must observe proper standards of market conduct in carrying out his controlled function. |
| • | An approved person must deal with the FSA and with other regulators in an open and co-operative way and must disclose appropriately any information of which the FSA would reasonably expect notice. |
| • | 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. |
| • | 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. |
| • | 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 relevant standards and requirements of the regulatory system. |
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SIFA 7.8
Further Information And Other Issues
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SIFA 7.8.1
See Notes
If you cannot find an answer to your
question from the information and factsheets on our website, you should contact
our Individual Vetting and Applications Department by telephone on 020 7066
0019 or by email iva@fsa.gov.uk.
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SIFA 7.9
Record Keeping Requirements: Apportionment Of Responsibilities
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SIFA 7.9.1
See Notes
Frequently, firms give their chief executive
the function of apportioning responsibilities and overseeing the establishment
and maintenance of systems and controls (SYSC 2.1).
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SIFA 7.9.2
See Notes
You must keep an up-to-date record of
how responsibilities have been apportioned between directors and senior managers
(SYSC
2.2.1 R). This may take the form, for example, of an
organisation chart or diagram (SYSC
2.2.2 G).
| The following sections of the Guide are also relevant: | |
| • | 'Authorisation'- Chapter 6 |
| • | 'Notifications' - Chapter 12.2 |
| If you do mortgage or general insurance business you should also refer to MIGI 6. | |
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