An individual within a firm or an appointed representative of that firm that will perform 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.

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.

This chapter:

1. (1)

   helps you determine which individuals in your firm need to be approved persons (whether your firm is authorised or an appointed representative);

2. (2)

   explains what you need to do if these individuals are to be approved; and

3. (3)

   explains that there are continuing obligations on approved persons once they have been approved.

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.

The significant influence functions are performed 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. (1)

   governing functions (SUP 10.6);

2. (2)

   required functions (SUP 10.7);

3. (3)

   systems and controls functions (SUP 10.8); and

4. (4)

   significant management functions (SUP 10.9).

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 performing 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.

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).

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.

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.

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:

1. (1)

   systems and controls functions (see SUP 10.8 and SYSC 3.2); or

2. (2)

   significant management functions (see SUP 10.9 and SYSC 2.1).

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.

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.

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.

The approved persons requirements are different for different types of ARs.

1. (1)

   All individuals that perform the governing functions within:

   All individuals that perform 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. (2)

   Like secondary insurance intermediaries, 'secondary insurance mediation ARs' require only one approved persons, who will need to apply for and obtain approval to perform 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. (3)

   Introducer ARs are not required to have any approved persons (see Part I, paragraph 9.2.2 for an explanation of introducer ARs).

Where an AR is undertaking insurance mediation activities (including 'introducing') the Principal is required to notify us of a contact name for the AR, which will then be shown on the FSA Register. The Principal designates a person 'Responsible for its Insurance Mediation business' (RIM) under PRU 9.1 who will also be responsible for the insurance mediation activities of the AR (PRU 9.1.6 G). The AR's contact person will be able to direct a customer to the RIM, if necessary. This is explained in Part I, Chapter 9, paragraph 9.2.18.

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).

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.

When should your firm apply?

1. (1)

   Your firm will not be authorised until individual candidates have been approved to perform the relevant controlled functions.

2. (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.

Where can you find the relevant form?

Your firm should apply using Approved Persons Form A, which is available at www.fsa.gov.uk/pages/Library/Communication/Forms/approved.shtml.

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.

Can I submit the forms electronically?

Yes, you can do this through our Firms Online service. First, you must ensure your firm is registered to use this service, details of which are available at: www.fsa.gov.uk/pages/Doing/Regulated/Firms/

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 performing 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.