SUP 10C.5 1FCA governing functions: Executive
Executive director function (SMF3): General
- (1)
For a UK SMCR firm6, the executive director function6 is the function of acting in the capacity of a director (other than a non-executive director) of a the firm.2
3 - (2)
For an overseas SMCR firm, the executive director function6 is the function of acting in the capacity of a director (other than a non-executive director) in relation to its branch in the United Kingdom where the person performing that function has responsibility for managing one or more aspects of the firm’s affairs so far as relating to the activities of the branch.2
3 - (3)
Paragraph (2) includes a person who is a member (other than a non-executive3 member) of the branch’s governing body.2
- (4)
The executive director function does not apply to a UK SMCR firm that is:6
- (a)
a partnership; or6
- (b)
- (a)
[deleted] [Editor’s note: The text of this provision has been moved to SUP 10C.5A.3R]6
[deleted] [Editor’s note: The text of this provision has been moved to SUP 10C.5A.4G]6
4[deleted] [Editor’s note: The text of this provision has been moved to SUP 10C.5A.1G]6
Executive director function: Extension of definition for Lloyd’s
6In the case of the Society, the executive director function also includes the function of acting in the capacity of an executive member of a committee to which the Council of the Society directly delegates authority to carry out the Society’s regulatory functions.
Executive director function: Adjustment of definition for non-directive friendly societies
- (1)
6This rule applies to a non-directive friendly society.
- (2)
The executive director function is the function of directing the affairs of the firm, either alone or jointly with others. Each such person is referred to in this rule as a “director”.
- (3)
The executive director function includes the function of being or acting in the capacity of:7
- (a)
7a member of the firm’s governing body; or
- (b)
7(in the case of an FCA-authorised firm) the chief executive.
The term director also includes each such a person.
- (a)
- (4)
If the principal purpose of the firm is to carry on regulated activities, each director performs the FCA controlled function.
- (5)
If the principal purpose of the firm is other than to carry on regulated activities, a director performs the FCA controlled function only to the extent that they have responsibility for a regulated activity.
- (6)
Each person on the firm’s governing body will be taken to have responsibility for its regulated activities, unless the firm has apportioned this responsibility to one particular person to whom it is reasonable to give this responsibility.
- (7)
The “particular” person referred to in (6) need not be a member of the firm’s governing body.
- (8)
The executive director function does not include acting in the capacity of a non-executive director.
- (9)
This rule applies in place of SUP 10C.5.1R.
- (1)
6Typically a non-directive friendly society will appoint a “committee of management” to direct its affairs.
- (2)
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.
- (3)
The individual in (2) may, for example, have the title of chief executive or similar. The individual would (subject to SUP 10C.5.11G) have to be an FCA-approved person under SUP 10C.5.9R.7
- (1)
7In practice, the FCA expects that most non-directive friendly societies will be PRA-authorised persons.
- (2)
7Where that is the case, the executive director function will often not apply (see SUP 10C.4A.1G).
Executive director function: Addition for small non-directive insurers
- (1)
6This rule applies to a small non-directive insurer.
- (2)
The executive director function includes being a chief executive of the firm.
6SUP 10C.5.12R means:
- (1)
that being the chief executive of a small non-directive insurer is an FCA controlled function (subject to (4));
- (2)
but being chief executive is not an FCA controlled function in its own right but is rolled up into the executive director function;
- (3)
that being promoted from executive director to chief executive does not require a new approval from the FCA;
- (4)
that being the chief executive is not an FCA controlled function where SUP 10C.4A.1G applies; and
- (5)
SUP 10C.5.9R(4) to SUP 10C.5.9R(7) do not apply to the chief executive.
Partner function (SMF27): Partnerships and limited liability partnerships
- (1)
6This rule applies to a UK SMCR firm that is a partnership.
- (2)
The partner function is the function of being or occupying the position of a partner in that firm.
- (3)
The partner function also includes:
- (a)
the function of being or occupying the position of a partner in that firm (by whatever name called); and
- (b)
acting as a member of the firm’s governing body.
- (a)
- (1)
6The purpose of SUP 10C.5.14R(3) is to make sure that every partner and everyone else performing a function in SUP 10C.5.14R(3) is potentially included in the partner function even if the Glossary definition of partner is not wide enough to cover them all.
- (2)
Therefore, for example, the partner function applies to every partner in a firm unless SUP 10C.5.18G applies.
- (3)
In practice most functions in SUP 10C.5.14R(3) will also fall within SUP 10C.5.14R(2).
- (1)
6This rule applies to a UK SMCR firm that is a limited liability partnership.
- (2)
The partner function is the function of being or acting in the capacity of:
- (a)
a member in that firm or a person occupying the position of a member (by whatever name called);
- (b)
a person appointed to direct the firm’s affairs;
- (c)
a member of the firm’s governing body; or
- (d)
a person in accordance with whose directions or instructions (not being advice given in a professional capacity) the members or directors are accustomed to act.
- (a)
Partner function: Limited partnerships
6If a partnership is registered under the Limited Partnership Act 1907, the partner function does not extend to any function performed by a limited partner.
Partner function: Partners without influence
- (1)
6SUP 10C.5.14R to SUP 10C.5.17R (Partner function) are drafted to cover all partners and members.
- (2)
However, the partner function (as are all FCA-designated senior management functions) is subject to SUP 10C.3.10R (Definition of FCA-designated senior management function).
- (3)
The effect is that unless the function performed by the partner or member in question comes within the definition of a senior management function, the function does not come within the partner function. Therefore partners or members who play no part in the management of the firm are unlikely to be performing the partner function.
Partner function: When partners and members do not require approval
- (1)
7This rule applies to an SMCR firm that is an FCA-authorised person to which the partner function applies.
- (2)
If the principal purpose of the firm is to carry on one or more regulated activities, each person in SUP 10C.5.14R to SUP 10C.5.16R (a “partner”) performs the partner function.
- (3)
If the principal purpose of the firm is other than to carry on regulated activities:
- (a)
a partner performs the partner function to the extent only that they have responsibility for a regulated activity; and
- (b)
a partner in a firm will be taken to have responsibility for each regulated activity except where the firm has apportioned responsibility to another partner or group of partners.
- (a)
- (1)
7This paragraph SUP 10C.5.20G describes some of the combined effects of SUP 10C Annex 1 2.1R and SUP 10C.5.19R.
- (2)
A partner whose only regulated activities are incidental to their professional services, in a firm whose principal purpose is to carry on other than regulated activities, need not be an FCA-approved person.
- (3)
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.
- (4)
Any regulated activities which such a partner carries on are not within the description of the partner function.
Chief executive function (SMF1)
- (1)
7The chief executive function is the function of acting in the capacity of a chief executive of a firm.
- (2)
This function does not apply to a non-directive friendly society.
7This function is having the responsibility, alone or jointly with one or more others, under the immediate authority of the governing body for the conduct of the whole of the business (or relevant activities) of the firm.
- (1)
7A person performing the chief executive function may be a member of the governing body but need not be.
- (2)
If the chairman of the governing body is also the chief executive, they will be discharging this function.
- (3)
If the responsibility is divided between more than one person but not shared, there is no person exercising the chief executive function.
- (4)
But if that responsibility is discharged jointly by more than one person, each of those persons will be performing the chief executive function.
Head of third country branch function (SMF 19)
- (1)
7This rule applies to an overseas SMCR firm.
- (2)
The head of third country branch function is the function of having responsibility alone or jointly with others, for the conduct of all activities of the United Kingdom branch of the firm which are subject to the UK regulatory system.