5 SUP 10C deals with the approved persons regime for SMCR firms themselves13.

This chapter is also relevant to every FCA-approved person:5

1. (1)

   of a firm that is not an SMCR firm13; and5

2. (2)

   of any appointed representative, including of an appointed representative of an SMCR firm13.5

The rules in this chapter specify descriptions of FCA controlled functions under section 59 of the Act (Approval for particular arrangements).

The directions in this chapter relate to the manner in which a firm must apply for the FCA's approval under section 59 of the Act and other procedures.

SUP 10A.1.7 R reflects the provisions of section 59(8) of the Act and, in relation to an incoming Treaty firm and a UCITS qualifier, the Treaty and the UCITS Directive. It preserves the principle of Home State prudential regulation. In relation to an incoming EEA firm exercising an EEA right, or an incoming Treaty firm exercising a Treaty right, the effect is to reserve to the Home State regulator the assessment of the fitness and propriety of a person performing a function in the exercise of that right. A member of the governing body, or the notified UKbranchmanager, of an incoming EEA firm, acting in that capacity, will not therefore have to be approved by the FCA under the Act.513

1. (2)

   [deleted]

   5

Notwithstanding SUP 10A.1.8 G, an incoming EEA firm13or incoming Treaty firm will have had to consider the impact of the Host State rules with which it is required to comply when carrying on a passported activity or Treaty activity through a branch in the United Kingdom. An incoming EEA firm13will have been notified of those provisions under Part II of Schedule 3 to the Act in the course of satisfying the conditions for authorisation in the United Kingdom.

An incoming EEA firm will have to consider, for example, the position of a branchmanager based in the United Kingdom who may also be performing a function in relation to the carrying on of a regulated activity not covered by the EEA right of the firm. In so far as the function is within the description of an FCA controlled function, the firm will need to seek approval for that person to perform that FCA controlled function.

1. (1)

   5References in this chapter to a firm include an SMCR firm13, but only to the extent required by SUP 10A.1.16BR.

2. (2)

   References in SUP 10A.1.15R and SUP 10A.1.16R to FCA governing functions and other controlled functions are to controlled functions in this chapter, not in SUP 10C (FCA senior 13managers regime for approved persons in SMCR firms13).

1. (1)

   5Under section 59(6A) of the Act, if the FCA is satisfied that, in relation to the carrying on of a regulated activity by an SMCR firm13, a controlled function is a senior management function, the FCA must designate the function in its rules as a senior management function.

2. (2)

   Generally, the FCA does not think that a person performing a function in SUP 10A.1.16BR will have sufficient responsibility for managing the affairs of the appointed representative’sprincipal (as opposed to managing the affairs of the appointed representative itself) to perform a senior management function.

3. (3)

   Therefore:

   1. (a)

      the FCA has not designated any of the functions in SUP 10A.1.16BR as a senior management function; and

   2. (b)

      none of the functions in SUP 10A.1.16BR are designated senior management functions.

4. (4)

   SUP 10C.1.8G (Appointed representatives13) explains that it is unlikely that SUP 10C (FCA senior managers13 regime for approved persons in SMCR firms13) will apply to approved persons working in appointed representatives of an SMCR firm13 in addition to this chapter.

It will be a matter of fact in each case whether, having regard to all the circumstances, including in particular where the balance of the business lies, a firm's principal purpose is to carry on activities other than regulated activities. If a firm wishes to rely on SUP 10A.1.18 R, it should be in a position to demonstrate that its principal purpose is to carry on activities other than regulated activities.

For a firm that is exempt from MiFID under article 2(1)(j)10 and whose only permission is bidding in emissions auctions, the only FCA controlled functions that apply to it are:

1. (1)

   the FCA governing functions;

2. (2)

   the money laundering reporting function; and10

3. (3)

   the customer function.10

4. (4)

   [deleted]10

This is because the FCA-approved person regime specifies a number of functions by incorporation of requirements in SYSC; however, a firm carrying on auction regulation bidding is only subject to SYSC to a limited extent in relation to that activity. This means that the FCA required functions do not apply to auction regulation bidding, except for the money laundering reporting function. Similarly, the significant management function does not apply in relation to auction regulation bidding because, in carrying on that activity, a firm is not subject to 13SYSC 4.1.1 R and is not undertaking proprietary trading.

1. (1)

   12For a firm which only has a permission for administering a benchmark, the following FCA controlled functions do not apply:

   1. (a)

      the apportionment and oversight function;

   2. (b)

      the compliance oversight function;

   3. (c)

      the money laundering reporting function; and

   4. (d)

      the systems and controls function.

2. (2)

   That is because:

   1. (a)

      the FCA controlled functions in (a) to (c) above do not apply because those functions are specified by incorporation of requirements in SYSC and the relevant parts of SYSC do not apply in relation to benchmark activities (which includes administering a benchmark);

   2. (b)

      the FCA controlled function in (d) above does not apply in relation to benchmark activities (see SUP 10A.8.2R).

3. (3)

   The functions in (a) to (d) still apply to a firm which administers a benchmark as well as carrying on other regulated activities. However, they do not apply in respect of its activities as a regulated benchmark administrator.

4. (4)

   Various other FCA controlled functions are only relevant to firms which carry on particular types of activity and will not be relevant to a firm (F) which does not carry on any regulated activities other than administering a benchmark. For instance:

   1. (a)

      the CASS operational oversight function will not be relevant to F because that function is only relevant to CASS medium firmsCASS large firms and CASS large debt management firms; F will not hold client money and will therefore not be a CASS medium firm, a CASS large firm or a CASS large debt management firm;

   2. (b)

      the customer function involves performing various types of activity none of which would be performed by a firm which does not carry on any regulated activities other than administering a benchmark;

   3. (c)

      the small friendly society function will only be relevant to certain firms.

5. (5)

   The functions in SUP 10A.1.21AG(1)(a) to (d) do not apply to a benchmark contributor in relation to its contribution of input data to a BMR benchmark administrator.

6. (6)

   That is because:

   1. (a)

      the functions in SUP 10A.1.21AG(1)(a) to (c) are specified by incorporation of requirements in SYSC and the relevant parts of SYSC do not apply in relation to benchmark activities (which includes contributing input data to a BMR benchmark administrator); and

   2. (b)

      the FCA controlled function in SUP 10A.1.21AG(1)(d) above does not apply in relation to benchmark activities (see SUP 10A.8.2R).

2In accordance with section 59(7C) of the Act this chapter does not apply to an internally managed AIF which is a body corporate and not a collective investment scheme9.

15 SUP 10A.1.28R to SUP 10A.1.30R mean a firm whose permission includes a regulated claims management activity will not need to seek additional approved person approvals, because those activities became regulated activities in April 2019.

15 SUP 10A.1.28R to SUP 10A.1.30R are not relevant to a firm which has permission to carry on only regulated claims management activities because SUP 10A.1.1R excludes it from this chapter altogether.

The immediate purpose of SUP 10A.3 to SUP 10A.11 is to specify, under section 59 of the Act, descriptions of the FCA controlled function which are listed in SUP 10A.4.4 R. The underlying purpose is to establish, and mark the boundaries of, the "FCA-approved persons regime".

Sections 59(1) and (2) of the Act provide that approval is necessary in respect of an FCA controlled function which is performed under an arrangement entered into by a firm, or its contractor (typically an appointed representative), in relation to a regulated activity.

Arrangement is defined in section 59(10) of the Act as any kind of arrangement for the performance of a function which is entered into by a firm or any of its contractors with another person and includes the appointment of a person to an office, his becoming a partner, or his employment (whether under a contract of service or otherwise). For the provisions in this chapter relating to outsourcing, see SUP 10A.13.5 G and SUP 10A.13.6 G.

If, however, a firm is a member of a group, and the arrangements for the performance of an FCA controlled function of the firm are made by, for instance, the holding company, the person performing the function will only require approval if there is an arrangement (under section 59(1)) or a contract (under section 59(2)) between the firm and holding company permitting this. This need not be a written contract but could arise, for example, by conduct, custom and practice.

The arrangement must be “in relation to” the carrying on of a regulated activity. Regulated activities are defined in the Glossary by reference to the Regulated Activities Order. This order prescribes the activities which are regulated activities for the purposes of the Act.

The fact that a person may be FCA-approved for one purpose does not have the effect of bringing all his activities within that FCA controlled function.

The FCA significant-influence functions, which are specified in SUP 10A.4.1 R, comprise the FCA governing functions (SUP 10A.6), the FCA required functions (SUP 10A.7), the systems and controls function (SUP 10A.8) and the significant management function (SUP 10A.9). SUP 10A.5 applies to each of the FCA significant-influence functions.

Whether an FCA controlled function is likely to result in the person responsible for its performance exercising significant influence on the conduct of the firm's affairs is a question of fact in each case. The FCA has identified the FCA significant-influence functions as satisfying this condition.

SUP 10A.5.6 R enables cover to be given for, as an example, holidays and emergencies and avoids the need for the precautionary approval of, for example, a deputy. However, as soon as it becomes apparent that a person will be performing an FCA controlled function for more than 12 weeks, the firm should apply for approval.

1. (1)

   Every firm will have one or more persons responsible for directing its affairs. These persons will be performing the FCA governing functions and will be required to be FCA-approved persons unless the application provisions in SUP 10A.1, or the particular description of an FCA controlled function, provide otherwise. For example, each director of a company incorporated under the Companies Acts will perform an FCA governing function.5

   32
2. (2)

   [deleted]5

   332
3. (3)

   [deleted]5

   332

A sole trader does not fall within the description of the governing functions.

1. (1)

   The effect of SUP 10A.6.3 R is that a person who is approved to perform an FCA governing function will not have to be specifically FCA-approved to perform the systems and controls function or the significant management function or the part of the customer function specified in SUP 10A.10.7R (7). However, a person who is approved to perform an FCA governing function will have to be additionally FCA-approved before he can perform any of the FCA required functions or the customer function (except the part specified in SUP 10A.10.7R (7)).

2. (2)

   SUP 10A.6.3 R does not apply to the non-executive director function. It does not apply to the director function if the only part of that function that the FCA-approved person is performing is the function described in SUP 10A.6.8 R.

See MIPRU 2.2 for how the FCA's approved persons regime is adjusted for a firm carrying on insurance distribution activity4.2

Examples of where SUP 10A.6.8 R might apply include (but are not limited to):

1. (1)

   a chairman of an audit committee of a parent undertaking or holding company of a UK firm where that audit committee is working for that UK firm (that is, functioning as the audit committee for the group); or

2. (2)

   a director (other than a non-executive director) of a parent undertaking or holding company of a UK firm exercising significant influence by way of his involvement in taking decisions for that UK firm; or

3. (3)

   an individual (such as a senior manager) of a parent undertaking or holding company of a UK firm who is responsible for and/or has significant influence in setting the objectives for and the remuneration of executive directors of that UK firm; or

4. (4)

   an individual who is a director (other than a non-executive director) or a senior manager of a parent undertaking or holding company of a UK firm who is accustomed to influencing the operations of that UK firm, and acts in a manner in which it can reasonably be expected that an executive director or senior manager of that UK firm would act; or

5. (5)

   an individual of an overseas firm which maintains an establishment in the United Kingdom from which regulated activities are carried on, where that individual has responsibilities for those regulated activities which are likely to enable him to exercise significant influence over the UKbranch.

A director can be a body corporate and may accordingly require approval as an FCA-approved person in the same way as a natural person may require approval.

Examples of where SUP 10A.6.13 R might apply include (but are not limited to):

1. (1)

   an individual who is a non-executive director of a parent undertaking or holding company who takes an active role in the running of the business of a UK firm, for example, as a member of a board or committee (on audit or remuneration) of that firm; or

2. (2)

   an individual who is a non-executive director of a parent undertaking or holding company having significant influence in setting and monitoring the business strategy of the UK firm; or

3. (3)

   an individual who is a non-executive director of a parent undertaking or holding company of a UK firm involved in carrying out responsibilities such as scrutinising the approach of executive management, performance, or standards of conduct of the UK firm; or

4. (4)

   an individual who is a non-executive director of a parent undertaking or holding company of a UK firm who is accustomed to influence the operations of the UK firm, and acts in a way in which it can reasonably be expected that a non-executive director of the UK firm would act; or

5. (5)

   an individual who is a non-executive director of an overseas firm which maintains a branch in the United Kingdom from which regulated activities are carried on where that individual has responsibilities for those regulated activities which are likely to enable him to exercise significant influence over the UKbranch.

1. (1)

   This paragraph explains the basis on which the director function and the non-executive director function are applied to persons who have a position with the firm'sparent undertaking or holding company under SUP 10A.6.8 R or SUP 10A.6.13 R.

2. (2)

   The basic position is set out in SUP 10A.3.4 G. As is the case with all controlled functions, SUP 10A.6.8 R and SUP 10A.6.13 R are subject to the overriding provisions in SUP 10A.3.1 R, which sets out the requirements of section 59(1) and (2) of the Act. This means that unless the firm has an arrangement permitting the performance of these roles by the persons concerned, these persons will not be performing these controlled functions. Therefore, the FCA accepts that there will be cases in which a person performing these roles will not require approval. However where there is such an arrangement the function may apply.

This function is having the responsibility, alone or jointly with one or more others, under the immediate authority of the governing body:

1. (1)

   for the conduct of the whole of the business (or relevant activities); or

2. (2)

   in the case of a branch in the United Kingdom of an overseas firm, for the conduct of all of the activities subject to the UKregulatory system.

For a branch in the United Kingdom of an overseas firm, the FCA would not normally expect the overseas chief executive of the firm as a whole to be FCA-approved for this function where there is a senior manager under him with specific responsibility for those activities of the branch which are subject to the UKregulatory system. In some circumstances, the person within the firm responsible for UK operations may, if the function is likely to enable him to exercise significant influence over the branch, also perform the chief executive function (see SUP 10A.7.4 G).

A person performing the chief executive function may be a member of the governing body but need not be. If the chairman of the governing body is also the chief executive, he will be discharging this function. If the responsibility is divided between more than one person but not shared, there is no person exercising the chief executive function. But if that responsibility is discharged jointly by more than one person, each of those persons will be performing the chief executive function.

Note that a body corporate may be a chief executive. If so, it will need to be approved 5to perform the chief executive function.

Any apportionment referred to in SUP 10A.6.23R (3)(b) will have taken place under 5SYSC 4.3.1 R and SYSC 4.4.3 R. The FCA may ask to see details of the apportionment but will not require, as a matter of course, a copy of the material which records this5.

The effect of SUP 10A.1.17 R is that regulated activity in SUP 10A.6.23 R (and elsewhere) is to be taken as not including an activity that is a non-mainstream regulated activity. Therefore, a partner whose only regulated activities are incidental to his professional services, in a partnership whose principal purpose is to carry on other than regulated activities, need not be an FCA-approved person. What amounts to the principal purpose of the firm is a matter of fact in each case having regard to all the circumstances, including the activities of the firm as a whole. Any regulated activities which such a partner carries on are not within the description of the partner function.

Typically a non-directive friendly Society will appoint a “committee of management” to direct its affairs. However, the governing arrangements may be informal and flexible. If this is the case, the FCA would expect the society to resolve to give responsibility for the carrying on of regulated activities to one individual who is appropriate in all the circumstances. That individual may, for example, have the title of chief executive or similar. The individual would have to be an FCA-approved person under SUP 10A.6.31 R.

In practice, the FCA expects that most non-directive friendly societies will be PRA-authorised persons. Where that is the case, this chapter does not apply and so5 the small friendly society function will not apply5.

In requiring someone to apportion responsibility, a common platform firm should 4not9 apply for that person or persons to be FCA-approved to perform the apportionment and oversight function (see SUP 10A.7.1 R9 and SYSC 1 Annex 1).

The fact that there is a person performing the apportionment and oversight function, and who has responsibility for activities subject to regulation by the FCA, may have a bearing on whether a manager who is based overseas will be performing an FCA controlled function. It is a factor to take into account when assessing the likely influence of the overseas manager.

Generally, in relation to a UK establishment of an overseas firm or a firm which is part of an overseas group, where an overseas manager’s responsibilities in relation to the United Kingdom are strategic only, they9 will not need to be an FCA-approved person. However, where, in accordance with 9SYSC 4 to SYSC 10, they are9 responsible for implementing that strategy in the United Kingdom, and have9 not delegated that responsibility to a senior manager in the United Kingdom, they are9 likely to be performing an FCA controlled function for example, the chief executive function9.

A firm carrying on insurance distribution activity7, other than a sole trader, must allocate to a director or senior manager the responsibility for the firm'sinsurance distribution activity7 (MIPRU 2.2.1 R). The9firm may allocate this responsibility to the person performing the apportionment and oversight function.

Where the person performing the apportionment and oversight function is also responsible for the firm'sinsurance distribution activity7, the words “(insurance distribution7)” will be inserted after this FCA controlled function (see MIPRU 2.2.5 G).

A firm's obligations in respect of its money laundering reporting officer are set out elsewhere in the FCA Handbook9 (see 9SYSC 6.3.9 R and for its9 scope, see the application provisions in SYSC 1 Annex 1).

Where an employee performs the systems and controls function the FCA would expect the firm to ensure that the employee had sufficient expertise and authority to perform that function effectively. A director or senior manager would meet this expectation.

1For a full-scope UK AIFM, the requirement to have an employee responsible for reporting to the governing body of the firm or the audit committee for matters in SUP 10A.8.1R (2) and SUP 10A.8.1R (3) is derived from the AIFMD level 2 regulation, which imposes obligations on such firms to have a permanent risk management function and, where appropriate and proportionate for their business, an internal audit function.

The FCA anticipates that there will be only a few firms needing to seek approval for an individual to perform the significant management function set out in SUP 10A.9.1R (1). In most firms, those approved for the FCA governing functions, FCA required functions and, where appropriate, the systems and controls function7, are likely to exercise all the significant influence at senior management level.

A proprietary trader undertakes activities with the firm'smoney 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 the definition of significant-influence function. Therefore, it is the FCA's expectation that all firms will assess all their proprietary traders to ascertain the ones for whom approval is required.

The scale, nature and complexity of the firm's business may be such that a firm apportions, under SUP 10A.9.1R (1), a significant responsibility to an individual who is not approved to perform the FCA governing functions, FCA required functions or, where appropriate, the systems and controls function7. If so, the firm should consider whether the functions of that individual fall within the significant 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); 7

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 function under SUP 10A.9.9 R and should, therefore, be an FCA-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 FCA, 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 approved for the significant management function. 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 FCA controlled function.

See also SUP 10A.7.3 G to SUP 10A.7.6 G in relation to matrix management.

5A senior manager carrying on the significant management function under SUP 10A.9.9 R with significant responsibility for a significant business unit that carries on activities other than designated investment business for the purposes of SUP 10A.9.9R (1) could, for example, be the head of a unit carrying on the activities of: 4personal 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.

A proprietary trader also undertakes activities which may have a significant influence on the firm. Such activities may require approval for CF29 under SUP 10A.9.10 R.

A firm carrying on insurance distribution activity6, other than a sole trader, must allocate to a director or senior manager the responsibility for the firm'sinsurance distribution activity6 (MIPRU 2.2.1 R). The7firm may allocate this responsibility to the person performing the significant management function.

Where the person performing the significant management function is also responsible for the firm'sinsurance distribution activity6, the words “(insurance distribution6)” will be inserted after this FCA controlled function (see MIPRU 2.2.5 G).

Without SUP 10A.10.1 R, the description of the customer function would extend to this function wherever it was performed. The effect of SUP 10A.10.1 R is that the description is limited, in relation to regulated activities with an overseas element, in a manner which is broadly consistent with the scope of conduct of business regulation.

The customer function has to do with giving advice on, dealing and arranging deals in and managing investments; it has no application to banking business such as deposit taking and lending, nor to general insurance business or credit-related regulated activity1.

The FCA interprets the phrase “dealing with” as including having contact with customers5 and extending beyond “dealing” as used in the phrase “dealing in investments”. “Dealing in” is used in Schedule 2 to the Act to describe in general terms the regulated activities which are specified in Part II of the Regulated Activities Order.

The FCA would expect an individual from overseas to be accompanied on a visit to a customer. TC 2.1.9 R (2) provides that the firm will have to be satisfied that the individual has at least three years of up-to-date, relevant experience obtained outside the United Kingdom. However, the remaining provisions of TC 2.1.9 R (2) are disapplied in these circumstances (except for an individual who gives advice to retail clients on retail investment products, gives advice on P2P agreements to retail clients4 or is a broker fund adviser). The effect of this is that such individuals need not attain the relevant regulatory module of an appropriate qualification (see TC 2.1.9 R (2)).

The customer function in SUP 10A.10.7R (5) does not extend to the individual who, on the instructions of the customer, simply inputs the customer's instructions into an automatic execution system where no discretion is or may be exercised by the individual performing the activity. Nor does it extend to merely introducing a customer to a firm or distributing advertisements.

An individual may advise on investments prior to being assessed as competent in accordance with the rules in the Senior Management Arrangements, Systems and Controls sourcebook (SYSC) and, where relevant, the Training and Competence sourcebook (TC). The firm should record when that person subsequently becomes competent.

The forms listed in SUP 10A.12.2 G are referred to in SUP 10A.12 (Procedures relating to FCA-approved persons) to SUP 10A.17 (Further questions).

A summary of the forms and their purposes is in SUP 10A Annex 2.

Unless the context otherwise requires, in SUP 10A.12 (Procedures relating to FCA-approved persons) to SUP 10A.17 (Further questions) where reference is made to a firm, this also includes an applicant for Part 4A permission, and other persons seeking to carry on regulated activities as an authorised person.

Forms B, C, D and E can only be submitted in respect of an FCA-approved person by the firm that submitted an FCA-approved person's original application (the relevant Form A).

Copies of Forms A, B, C, D and E may be obtained from the FCA website. Credit unions can obtain copies from the FCA's Contact Centre. To contact the FCA's2 Contact Centre for approved persons enquiries:

1. (1)

   telephone 0300 500 0597;2or

   2
2. (2)

   e-mail firm.queries@fca.org.uk; or

3. (3)

   fax 020 7066 0017; or

4. (4)

   write to:

   Customer Contact Centre

   The Financial Conduct Authority

   12 Endeavour Square4

   London4

   E20 1JN.4

In accordance with section 59 of the Act (Approval for particular arrangements), where a candidate will be performing one or more FCA controlled functions, a firm must take reasonable care to ensure that the candidate does not perform these functions unless he has prior approval from the FCA.

If a person performs an FCA controlled function without approval it is not only the firm that is accountable. Under section 63A of the Act (Power to impose penalties), if the FCA is satisfied that:

1. (1)

   a person (“P”) has at any time performed an FCA controlled function without approval; and

2. (2)

   at that time P knew, or could reasonably be expected to have known, that P was performing an FCA controlled function without approval;

it may impose a penalty on P of such amount as it considers appropriate.

SUP 10A.16.1 D explains how applications should be submitted.

2When a MiFID investment firm (except a credit institution) notifies the FCA of a change using Form A or Form E, they must also submit the MiFID Article 4 APER Information Form. The details can be found in SUP 10A.14.4BD.

1. (1)

   In accordance with section 60 of the Act (Applications for approval), applications must be submitted by, or on behalf of, the firm itself, not by:

   1. (a)

      the FCAcandidate; or

   2. (b)

      (where the FCAcandidate works for the firm'sparent undertaking or holding company) by the firm'sparent undertaking or holding company.

2. (2)

   Usually this will be the firm that is employing the FCAcandidate to perform the FCA controlled function. Where a firm has outsourced the performance of an FCA controlled function, the details of the outsourcing determine where responsibility lies and whom the FCA anticipates will submit FCA-approved persons application forms. SUP 10A.13.6 G describes some common situations. The firm which is outsourcing is referred to as "A" and the person to whom the performance of the FCA controlled function has been outsourced, or which makes the arrangement for the FCA controlled function to be performed, is referred to as "B". In each situation, A must take reasonable care to ensure that, in accordance with section 59(2) of the Act, no person performs an FCA controlled function under an arrangement entered into by its contractor in relation to the carrying on by A of a regulated activity, without approval from the FCA. See also SYSC 8.1.1 R3.

Where the notification of an appointed representative (SUP 12.7.1 R) is linked to an application for approval (SUP 10A.13 (Applications for approval and withdrawing an application for approval)), any delay in receiving the notification under SUP 12.7.1 R may delay the FCA's approval of the individuals employed by that appointed representative who will be performing FCA controlled functions for the firm.

The Act sets out the time that the FCA has to consider an application and come to a decision.

In any case where the application for approval is made by a person applying for permission under Part 4A of the Act, the FCA has until the end of whichever of the following periods ends last:

1. (1)

   the period within which an application for that permission must be determined; and

2. (2)

   the period of three months from the time it receives a properly completed application.

In any other case it is the period of three months from the time it receives a properly completed application.

The FCA must either grant the application or, if it proposes not to grant an application, issue a warning notice (see DEPP 2). The FCA will deal with cases more quickly than this whenever circumstances allow and will try to meet the standard response times published on the website and in its Annual Report. However, if an application is incomplete when received, or the FCA has knowledge that, or reason to believe that, the information is incomplete, then the processing time will be longer than the published standard response times.

Application forms must always be completed fully and honestly. Further notes on how to complete the form are contained in each form. If forms are not completed fully and honestly, applications will be subject to investigation and the FCAcandidate's suitability to be approved to undertake an FCA controlled function will be called into question. A person who provides information to the FCA that is false or misleading may commit a criminal offence, and could face prosecution under section 398 of the Act regardless of the status of their application.

If there is a delay in processing the application within the standard response time, the FCA will tell the firm making the application as soon as this becomes apparent.

Before making a decision to grant the application or give a warning notice, the FCA may ask the firm for more information about the FCA candidate. If it does this, the three-month period in which the FCA must determine a completed application:

1. (1)

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

2. (2)

   will start running again on the day on which the FCA finally receives all the requested information.

The FCA may grant an application only if it is satisfied that the FCA candidate is a fit and proper person to perform the FCA controlled function stated in the application form. Responsibility lies with the firm making the application to satisfy the FCA that the FCA candidate is fit and proper to perform the FCA controlled function applied for.

For further guidance on criteria for assessing whether a FCA candidate is fit and proper, see FIT.

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

If the FCA proposes to refuse an application in relation to one or more FCA controlled functions, it must follow the procedures for issuing warning and decision notices to all interested parties. The requirements relating to warning and decision notices are in DEPP 2.

Under section 61(5) of the Act (Determination of applications), the firm may withdraw an application only if it also has the consent of the candidate and the person by whom the candidate is or would have been employed, if this is not the firm making the application.

An FCA-approved person's job may change from time to time as a result, for instance, of a change in personal job responsibilities or a firm'sregulated activities. Where the changes will involve the person performing one or more FCA controlled functions different from those for which approval has already been granted, then an application must be made to the FCA for approval for the person to perform those FCA controlled functions. The firm must take reasonable care to ensure that an individual does not begin performing an FCA controlled function until the FCA has granted FCA-approved person status to that individual in respect of that FCA controlled function. 5

If an FCA-approved person or a PRA-approved person is ceasing to perform FCA controlled functions or a5PRA controlled function, as well as applying for approval in respect of FCA controlled functions within the same firm or group, the firm should5 generally use Form E5. Further details can be found in SUP 10A.14.4D5.

If a person is to perform an FCA controlled function for a firm for which they5 already perform an5FCA controlled function as an approved person but they are5 not at the same time ceasing to perform an FCA controlled function or PRA controlled function for the firm or a firm in the same group5, a firm should use Form A. See SUP 10A.13.3D and SUP 10A.13.3AD for further5 details.

1. (1)

   4The MiFID authorisation and management body change notification ITS5 requires that MiFID investment firms (except credit institutions) submit the Annex III information on the ESMA template available at https://www.fca.org.uk/publication/forms/mifid-changes-management-body-form.docx (‘Annex III template’) where there is a change to a member of the management body or a person who effectively directs the business.

2. (2)

   MiFID investment firms (except credit institutions) need to submit this Annex III template within ten business days of the change in the online notification and application system (also known as Connect).

3. (3)

   SUP 10A.14.4BD explains how this requirement fits in with the requirement5 to submit a Form A or Form E.5

1. (4)

   [deleted]5

1. (1)

   5The MiFID authorisation and management body change notification ITS requires that a person applying to be a MiFID investment firm (except a credit institution) notify the appropriate regulator of information about members of its management body by filling in the template set out in Annex II of the MiFID authorisation and management body change notification ITS.

2. (2)

   This applies whether:

   1. (a)

      the person is applying for authorisation; or

   2. (b)

      the person is a firm applying for a variation of its permission that would turn it into a MiFID investment firm.

3. (3)

   The requirement in SUP 10A.14.4BD to fill in the MiFID Article 4 SMR Information Form along with a Form A or Form E does not apply.

4Where:5

1. (1)

   there is a change to a member of the management body or person who directs the business5 of a MiFID investment firm (except a credit institution) that the firm must notify to the appropriate regulator under Annex III of the MiFID authorisation and management body change notification ITS; and5

2. (2)

   that change also requires the firm to apply for approval for that member or person to perform an FCA controlled function;5

the firm must submit to the FCA the completed form found in SUP 10A Annex 10D (MiFID Article 4 APER Information Form) at the same time as submitting the Form A or Form E about a the candidate.5

5

4 5 MiFID investment firms (except credit institutions) who submit:

1. (1)

   Form A and/or E; and5

2. (2)

   the MiFID Article 4 APER Information Form5

about a candidate may complete the Annex III template outlined in SUP 10A.14.4AG(1)5 by cross-referring to any5 information required by the template that has been included5 in the relevant Form A or Form E . The template should5 be annexed to the relevant Form A or5 Form E.

SUP 10A.16.1 D explains how applications should be submitted.

If it is proposed that an FCA-approved person will no longer be performing an FCA controlled function under an arrangement entered into by one firm or one of its contractors, but will be performing the same or a different FCA controlled function under an arrangement entered into by a new firm or one of its contractors (whether or not the new firm is in the same group as the old firm), the new firm will be required to make a fresh application for the performance of the FCA controlled function by that person.

SUP 10A.16.2 R explains how notifications should be submitted.

1. (1)

   5The MiFID authorisation and management body change notification ITS requires that a MiFID investment firm (except a credit institution) submit the information in Annex III of the MiFID authorisation and management body change notification ITS on the ESMA template where there is a change to a member of the management body or a person who effectively directs the business.

2. (2)

   This means that a MiFID investment firm required to notify the FCA under (1) may also need to submit the Annex III information along with the Form C or Form E.

3. (3)

   See SUP 10A.14.4AG to SUP 10A.14.4CG for more about these notification requirements in a case in which the firm is applying for approval under section 59 of the Act (Approval for particular arrangements).

Notification under SUP 10A.14.10 R may be made by telephone, email or fax and should be made, where possible, within one business day of the firm becoming aware of the information. If the firm does not submit Form C, it should inform the FCA in due course of the reason. This could be done using Form D, if appropriate.

A firm is responsible for notifying the FCA if any FCA-approved person has ceased to perform an FCA controlled function under an arrangement entered into by its appointed representative or former appointed representative.

A firm can submit Form C or Form E and the MiFID Article 4 APER Information Form4 to the FCA in advance of the cessation date. When a person ceases the arrangement under which they perform4 an FCA controlled function, they4 will automatically cease to be an FCA-approved person in relation to that FCA controlled function. A person can only be an FCA-approved person in relation to a specific FCA controlled function. Therefore, a person is not an FCA-approved person during any period between ceasing to perform one FCA controlled function (when they are4 performing no other FCA controlled function) and being approved in respect of another FCA controlled function.

Sending forms promptly will help to ensure that any fresh application can be processed within the standard response times.

The duty to notify in SUP 10A.14.15 R does not apply to changes to an FCA-approved person's private address.

SUP 10A.16.2 R applies to the submission of Form D.

Failing to disclose relevant information to the FCA may be a criminal offence under section 398 of the Act.

1. (1)

   If, in relation to a firm which has completed the relevant Form A (SUP 10A Annex 4D), any of the details relating to arrangements and FCA controlled functions are to change, the firm must notify the FCA on Form D (SUP 10C Annex 6R5).

2. (2)

   The notification under (1) must be made as soon as reasonably practicable after the firm becomes aware of the proposed change.

3. (3)

   This also applies in relation to an FCA controlled function for which an application was made using Form E.

4. (4)

   This rule also applies to a firm in respect of an approved person, to whom the grandfathering arrangements relating to the coming into force of the Act applied as if the firm had completed the relevant Form A for that person.

SUP 10A.16.2 R also applies to the submission of Form D under SUP 10A.14.21 G.

An example of where a firm should use Form D is when an individual who is appointed by one appointed representative becomes employed by another appointed representative but continues to perform the customer function for the firm. The firm should notify the FCA by completing Section 1.07 of Form D.

1. (1)

   1SYSC 22 (Regulatory references) says that if1 a firm (A):

   1. (a)

      is considering appointing a person (P)1 to perform any1controlled function or certain other functions1;

   2. (b)

      requests1 a reference from a firm (B) that is P’s1 current or former employer1; and

   3. (c)

      indicates to B the purpose of the request;

   B should1, as soon as reasonably practicable, give a reference to A1.

2. (2)

   This applies even if A is a firm to which SUP 10C (FCA senior managers3 regime for approved persons in SMCR firms3) applies rather than this chapter. 1

3. (3)

   [deleted]3

   1

The obligations to supply information to1 the FCA under either SUP 10A.14.8R or SUP 10A.14.10R1

apply notwithstanding any agreement (for example a 'COT 3' Agreement settled by the Advisory, Conciliation and Arbitration Service (ACAS)) or any other arrangements entered into by a firm and an employee upon termination of the employee's employment. A firm should not enter into any such arrangements or agreements that could conflict with its obligations under this section.

Failing to disclose relevant information to the FCA may be a criminal offence under section 398 of the Act.

If the information technology systems used by the FCA fail and online submission is unavailable for 24 hours or more, the FCA and PRA will endeavour to publish a notice on their websites confirming that online submission is unavailable and that the alternative methods of submission set out in SUP 10A.16.1D (4) and SUP 15.7.4 R to SUP 15.7.9 G (Form and method of notification) should be used.

Where SUP 10A.16.1D (4) or the equivalent situation under SUP 10A.16.2 R applies to a firm, GEN 1.3.2 R (Emergency) does not apply.

A list of frequently asked questions and answers is at SUP 10A Annex 1.

If the firm or its advisers have further questions, they should contact the FCA's Contact Centre (see SUP 10A.12.6 G).