SUP 10.9 Significant management functions

The FSA anticipates that there will be only a few firms needing to seek approval for an individual to perform the6significant management function set out in SUP 10.9.1 R (1).10 In most firms, those approved for the governing functions, required functions and, where appropriate, the systems and controls function,6 are likely to exercise all the significant influence at senior management level.

10A proprietary trader undertakes activities with the firm's money and has the ability to commit the firm. By virtue of this role, all proprietary traders have potential to be able to exercise significant influence on the firm for the purposes of section 59(4) and (5) of the Act. It is therefore the FSA's expectation that all firms will assess all their proprietary traders to ascertain the ones for whom approval is required.

The10 scale, nature and complexity of the firm's business may be such that a firm apportions under SUP 10.9.1 R (1) a significant responsibility to an individual who is not approved to perform the governing functions, required functions or, where appropriate, the systems and controls function.6 If so,v the firm should consider whether the functions of that individual fall within the6significant management function. For the purposes of the description of the significant management functions, the following additional factors about the firm should be considered:

1. (1)

   the size and significance of the firm's business in the United Kingdom; for example, a firm carrying on designated investment business may have a large number of approved persons (for example, in excess of 100 individuals); or a firm carrying on general insurance business may have gross written premiums in excess of £100mn;

2. (2)

   the number of regulated activities carried on, or proposed to be carried on, by the firm and (if relevant) other members of the group;

3. (3)

   its group structure (if it is a member of a group);

4. (4)

   its management structure (for example matrix management); and

5. (5)

   the size and significance of its international operations, if any.

When considering whether a business unit is significant, the firm should take into account all relevant factors in the light of the firm's current circumstances and its plans for the future, including:

1. (1)

   the risk profile of the unit; or

2. (2)

   its use or commitment of a firm's capital; or

3. (3)

   its contribution to the profit and loss account; or

4. (4)

   the number of employees or approved persons in the unit; or

5. (5)

   the number of customers of the unit; or

6. (6)

   any other factor which makes the unit significant to the conduct of the firm's affairs so far as relating to the regulated activity.

The question may arise whether a manager who is based overseas will be performing the significant management function6 under SUP 10.9.10 R (1)10 and should therefore be an approved person. This is especially true where the firm operates matrix management. The fact there is a person performing the apportionment and oversight function, and who has responsibility for activities subject to regulation by the FSA, may have a bearing on this. It is a factor to take into account when assessing the likely influence of the overseas manager.

Generally, in relation to a branch of a firm, or a firm which is part of an overseas group, where an overseas manager is responsible for strategy, he will not need to be an approved person under SUP 10.9.10 R. However, where he is responsible for implementing that strategy in the United Kingdom, and has not delegated that responsibility to a senior manager in the United Kingdom, he is likely to be performing that controlled function.

See also SUP 10.7.3 G to SUP 10.7.4B G6 in relation to matrix management.

6A senior manager carrying on the significant management function under SUP 10.9.10 R (1)10 with significant responsibility for a significant business unit that carries on activities other than designated investment business for the purposes of SUP 10.9.10 R (1)(a) could, for example, be the head of a unit carrying on the activities of: retail banking, personal lending, corporate lending, salvage or loan recovery, or proprietary trading, or a member of a committee (that is, a person who, together with others, has authority to commit the firm) making decisions in these functions.

10A proprietary trader also undertakes activities which may have a significant influence on the firm. Such activities may require approval for CF29 under SUP 10.9.10 R (1A).

356A firm carrying on insurance mediation activity7, other than a sole trader, must allocate to a director or senior manager the responsibility for the firm's insurance mediation activity (MIPRU 2.2.1 R)7.56MIPRU 2.2.2 R (3))56 provides that the firm may allocate this responsibility to the person performing the significant management function.6

3Where the person performing the significant management function 6is also responsible for the firm's insurance mediation activity, the words "(insurance mediation)" will be inserted after this controlled function (see 56MIPRU 2.2.5 G56).