SUP 10 Annex 1 Frequently asked questions

1

Does pre-approval apply to individuals taking up a new controlled function within the same firm?

Yes. Pre-approval applies in all circumstances (see section 59 of the Act (Approval for particular arrangements)) except under the temporary ('12 weeks') provision. See SUP 10.5.5 R and question 2.

2

What are the procedures for 'emergency situations'?

Individuals may perform the 6significant influence function for up to 12 weeks in any consecutive 12 month period without requiring approval. When it becomes clear that a person will be performing the function on a permanent basis, then an application for approval should be made. However, there is no provision for individuals to perform the customer function2 on a continuing basis without approval. See SUP 10.5.5 R.

3

Can a person be approved for more than one controlled function?

Yes. A firm will need to seek approval in respect of each controlled function a person is to perform.

4

Do the controlled functions apply to an incoming EEA firm that is providing cross border services into the United Kingdom?

No. The approved persons regime does not apply to cross border services. See SUP 10.1.6 R.

5

May any activity be outsourced by a firm?

Yes. But if that activity constitutes a regulated activity, the person to whom it is outsourced will itself need permission.

6

Can a significant influence function be outsourced?

It is a question of fact in each case who is performing a significant influence function. These functions are mostly described at a high level of responsibility, that is, for example, the director of a company or a partner in a partnership. The persons performing these functions cannot avoid their ultimate responsibility and therefore the need for approval. However, some of the significant influence functions may be performed by a person who is specifically brought in to do the job, for example the chief executive function (where it is to be performed by a body corporate) and the actuarial and with-profits actuary functions.1

7

Do Lloyd's underwriting agents still require registration with Lloyd's?

Yes. Approval for a controlled function is not sufficient.

8

What should a firm do if it is unsure whether an individual needs approval?

The firm should contact the Individuals, Mutuals and Policy 5Department2. See SUP 10.11.6 G.

Submitting an application

9

Who applies for approval?

The firm. See section 60 of the Act (Applications for approval).

10

What is the role of the candidate in the application process?

Before the firm submits the relevant 5Form A, it must verify the information contained in it. As part of this verification, the Form provides for the candidate to confirm the accuracy of the information given by the firm so far as it relates to him.

11

What checks should6a firm make on a candidate before submitting an application for approval from the FSA?

The FSA expects firms to perform due and diligent enquiries into their candidatesbefore they submit an application to us for approval. Our approval process is not a substitute for the checks that a firm should be carrying out on its prospective recruits. It is for the firm to determine what checks are appropriate but in making its decision, a firm should have regard to the controlled function to which the application relates 6Firms' enquiries should include checks to verify relevant qualifications and previous employment3. Note also the provisions3 of EG 64.

11A

Should these checks include a check of criminal records?

It is for senior management to decide what checks should be made. In deciding if it is necessary to carry out a check of criminal records, the firm should consider that the FSA does not routinely carry out these checks during the approval process.6 By virtue of the Rehabilitation Exceptions Orders, the FSA and the industry also have a right to ask about the spent criminal convictions specified in those Orders, as well as any unspent criminal convictions, in order to assess the suitability of10 candidates for approved person status (see section 55 of the relevant5 Form A (Application to perform controlled functions under the approved persons regime)). Note also the provisions of EG 6 (Publicity)4.

12

What is the "fit and proper" test for approval?

Section 61(1) of the Act (Determination of applications) provides that the FSA may grant an application only if it is satisfied that the candidate is a fit and proper person to perform the relevant function. In determining this question, the Act sets out the matters to which the FSA may have regard (section 61(2)) and the FSA has given guidance on this in FIT.

13

If a firm is unsure whether or not something may have an impact upon an individual's fitness and propriety, should it be disclosed?

Yes, always. The deliberate non-disclosure of material facts is taken very seriously by the FSA as it is seen as possible evidence of current dishonesty. Therefore, if in doubt, disclose.

14

What happens if adverse information comes to light after the application form has been submitted or after the individual has been approved?

The firm must inform the FSA at the earliest opportunity. See SUP 10.13.16 R.

15

Will the FSA consider an application in respect of a candidate who has not yet signed a contract with the firm?

Yes, as the FSA will consider the arrangement under which the candidate will perform the function. However, the FSA will not consider speculative or provisional applications - such as for the candidates in an election to a mutual society Board.The FSA must be informed immediately of any material changes to the information provided on the application form which arises before the application has been determined. All changes must be communicated to the FSA by the firm making the application (seeSUP 15.6.4 R). Failure to notify the FSA may result in a delay in processing or rejection or both.

16

How can credit unions7 get a supply of application forms (Forms A to F)?7

These can either be ordered through the Individuals, Mutuals and Policy5 Department2 by email to iva@fsa.gov.uk or from the FSA's Firm Contact Centre.7 There is no charge for an application form.

17

Is there a separate fee for making an application for approved person status?

No.

18

Must all gaps in previous employment be explained?

Yes.

FSA procedures

19

Does the FSA verify the information provided to it?

Yes, as far as possible, information is verified.

20

Will the FSA handle information confidentially?

Yes. The FSA is obliged to handle all information confidentially and is subject to the provisions of the Data Protection Act 1998.

21

How long will the FSA take to process an application for approved person status?

The length of time taken to process the application will vary as it is dependent upon the application under consideration. The FSA publishes standard response times on its website at www.fsa.gov.uk setting out how long the application process is expected to take in practice. From time to time, the FSA also publishes its performance against these times. However, if,8 for example, information is missing8 from the application, or the information provided gives the FSA cause for concern, 8or the FSA already has in its possession relevant information which gives rise to concerns, processing time will almost always be longer. In each case, the FSA will notify the firm of any extension to the processing times.

22

Will the firm and individual be notified if there is a delay in processing the application form?

Yes. The FSA will contact the firm explaining the position and, where appropriate, giving the reasons for delay. It will then be the responsibility of the firm to keep the candidate and any other interested party informed.

23

How are non-routine cases handled?

Refer toDEPP 24.

24

Can the FSA apply conditions to an approved person?

No. The application can either be granted or refused. The Act provides no equivalent to the limitations or requirements which may be included in permissions. If the application is refused, the firm may re-apply in respect of the same individual but a different controlled function. If it is considering doing this, the firm is encouraged to discuss the matter with the FSA.Where there are reasonable grounds for doing so, the FSA may require a firm to provide information about an approved person (see section 165 of the Act (Power to require information)).

25

Will the firm be issued with confirmation of approval?

Yes. The firm will be sent a letter setting out the effective date of approval together with the controlled function for which the individual has been approved. It will then be the firm's responsibility to inform the individual and any other interested party, for example any appointed representative.

Withdrawing an application

26

Can a firm withdraw its application?

Yes, but only with the consent of the candidate. See section 61(5) of the Act (Determination of applications).

27

What happens if the individual refuses to consent to the withdrawal of the application?

The FSA will consider with all interested parties what to do. If it proposes to refuse the application, it will give a warning notice to all interested parties. See section 62 of the Act (Applications for approval: procedure and right to refer to the Tribunal).

28

Can the firm withdraw only part of an application - say, in relation to a specific controlled function?

The FSA will allow the firm to amend its application at any time before determination with the consent of all other interested parties. Whether the amendment will have the effect of amounting to a fresh application will be considered on a case by case basis.

Conduct of approved persons

29

How and when must the firm report to the FSA potentially adverse information about an approved person's fitness and propriety?

Normally, the firm should report such matters to the FSA on Form D once it is reasonably satisfied as to the information's validity. See SUP 10.13.16 R. See also, Principle for Businesses 11 (PRIN) and Statements of Principle 4 (APER). However, if an approved person is dismissed, is suspended, or resigns while under investigation by the firm, the FSA or another regulatory body, or there are any other matters that might affect the individual's fitness and propriety to perform a controlled function, the firm should inform the FSA (SUP 10.13.7 R) that it will be submitting a Form C containing adverse information. Full details must then be provided within seven business days, on the Form C. See SUP 10.13.6 R.

30

For how long are individuals accountable to the FSA after ceasing to be an approved person?

A person is guilty of misconduct if, while an approved person, he fails to comply with a Statement of Principle or is knowingly concerned in the contravention by a firm of a requirement in the Act or the Handbook. But the FSA may not bring proceedings after three9 years from when it first knew of the misconduct.

Advising only,

Undertaking an activity,

Advising and dealing

Managing investments32

2-9,

10-11,

12-13,

143

customer function (CF 30)2

10.10.4R2