This chapter applies to:

1. (1)

   a person who wishes to become an authorised person under the Act and who is, or is considering, applying to the FSA for Part IV permission to carry on regulated activities in the United Kingdom;

2. (2)

   an EEA firm, a Treaty firm or a UCITS qualifier that wishes to establish a branch or provide cross-border services into the United Kingdom using EEA rights, Treaty rights or UCITS Directive rights, or apply for a top-up permission;2

3. (3)

   a candidate, but only as a matter of general relevance. 21

An EEA firm, a Treaty firm and UCITS qualifier should refer to SUP 10.1 (Application) for the special application of the approved persons regime to firms which are exercising their passport rights, Treaty rights or rights as a UCITS qualifier.

In this chapter, references to a 'firm' should be read as including an applicant for Part IV permission, or an EEA firm a Treaty firm or a UCITS qualifier, unless the context otherwise requires.

This chapter gives guidance on the provisions of the Act and the Handbook under which a firm must obtain the prior approval of certain persons to perform controlled functions on its behalf.

A controlled function is a function specified by the FSA which cannot be performed by a person under an arrangement entered into by a firm, or one of its contractors, until approval for this has been given by the FSA. Approval from the FSA is required for each controlled function to be performed by a person.

An approved person is a person whose performance of one or more controlled functions has been approved by the FSA.

A person who performs a controlled function is likely to be an individual, but in some cases the function may be performed by others, such as a body corporate. References to a person in this chapter, and the rest of the Handbook, should always be read as including these other entities.

This regime covers persons who perform controlled functions in the capacity of an appointed representative or an employee of such an appointed representative. For further details on appointed representatives, see SUP 10.1.16 R and SUP 12 (Appointed Representatives).

An introducer, that is, in outline, a person, other than an appointed representative, who is appointed by a firm to effect introductions between customers and the firm but not to give advice on investments, will not, for this reason alone, need to be an approved person although certain obligations will apply (for example, see COB 5 (Advising and selling).

The controlled functions which have been specified by the FSA are those functions which the FSA sees as key to the operation of the provisions of Part V of the Act (Performance of Regulated Activities) and the provisions made under Part V. Those provisions include:

1. (1)

   the Statements of Principle and Code of Practice for Approved Persons issued under section 64 of the Act (Conduct: statements and codes) (see APER); and

2. (2)

   the fit and proper test referred to in section 61 of the Act (Determination of applications) (see FIT).

The purpose of the direct approval of persons who perform controlled functions is to complement the regulation of the firm for which the approved person performs the function.1

The FSA may grant an application by a firm for a candidate to perform one or more controlled functions only if it is satisfied that he is fit and proper to perform the function to which the application relates (see AUTH 6.3.11 G and AUTH 6.3.13 G).2

The list of controlled functions which the FSA has specified in accordance with section 59 of the Act (Approval for particular arrangements) is set out in SUP 10 (Approved persons) and in Form A, a copy of which is included in the application pack for Part IV permission, and which also may be found in SUP 10 Annex 4.1

In accordance with section 60 of the Act (Application for approval), applications for approved persons must be submitted by, or on behalf of, the firm, not by the candidate.

A summary of FSA procedures is in AUTH 6 Annex 2 G.

Where a firm has outsourced the performance of a controlled function, the details of the outsourcing will determine who may apply for the candidate's approval. Further details are in SUP 10.12.4 G.

The FSA encourages EEA firms and Treaty firms that wish to carry on regulated activities in the United Kingdom to submit any necessary applications for approved person status as early as possible. This will help to ensure that there are no delays in the EEA firm or Treaty firm complying with applicable provisions and commencing its regulated activities. For further details on the application of the approved persons regime to EEA firms and Treaty firms see SUP 10.1 (Application).

The Act allows the FSA three months from the time it receives a properly completed application for approval under section 59 of the Act (Approval for particular arrangements) to consider it and come to a decision. However, if the applicant for Part IV permission is not yet an authorised person, approved person status will only be effective from the date the applicant for Part IV permission receives permission.

Because approved person status is only effective from the date Part IV Permission is given, it is possible that this may take up to twelve months from the date of application if the application for Part IV permission is incomplete. See AUTH 3.9.30 G (How long will an application take?) for guidance on how long this process may take.

Before making a decision either to approve or to give a warning notice, the FSA may request further information about the candidate from the applicant for Part IV permission. If it does this, the three month approval period:1

1. (1)

   will stop on the day the FSA requests the information; and

2. (2)

   will start running again from the point at which it stopped, on the final day on which the FSA receives all the requested information.

The FSA may grant an application only if it is satisfied that the candidate is a fit and proper person to perform the controlled function stated in the application form.

For further guidance on criteria for assessing fitness and propriety, see FIT.2

Whenever it approves an application, the FSA will confirm this in writing to all interested parties.

A list of frequently asked questions and answers relating to new firms is at AUTH 6 Annex 1 G.

If the firm has questions unanswered by AUTH 6 Annex 1 G, it should contact the FSA's Authorisation and Approvals Department (Individual approvals team):

1. (1)

   telephone 020 7066 0019; or

2. (2)

   write to: Authorisation and Approvals Department (Individual approvals team), The Financial Services Authority 25 The North Colonnade Canary Wharf London E14 5HS; or

3. (3)

   e-mail iva@fsa.gov.uk 1

There are four positions which require notification to the FSA but not approval by the FSA. These relate to overseas firms (but excluding EEA firms) with branches in the United Kingdom. These are:

1. (1)

   the firm's worldwide chief executive where the person holding the position is situated outside the United Kingdom;

2. (2)

   the person, if not the worldwide chief executive, within the overseas firm with a purely strategic responsibility for UK operations;

3. (3)

   for a bank: the two or more persons who effectively direct its business in accordance with IPRU(BANK) GN 3.3.1 R;1

4. (4)

   for an insurer: the authorised UK representative. 1

For further details relating to those positions which require notification only, see SUP 15.4 (Notified persons).1