SUP TP 7 1 Financial Services (Banking Reform) Act 2013: Approved persons in Solvency II firms

Purpose of SUP TP 7

7.1.1

G

SUP TP 7 has transitional and grandfathering provisions relating to the changes to the approved persons regime made by Part Four of the Financial Services (Banking Reform) Act 2013. The Financial Services (Banking Reform) Act 2013 Transitional and Savings Provisions Order 2015 (as amended)2:

(1)

requires all Solvency II firms before 8 February 2016 to give a notice to the appropriate regulator in respect of each person for whom that regulator has granted a pre-implementation approval in relation to the firm. The notice must specify the post-implementation functions that the person will perform on and after 7 March 2016, and each of these notified functions must be an equivalent function to a pre-implementation function which the person has approval to perform;

(2)

allows the FCA to specify classes of persons in respect of whom a notice is not required to be given to the FCA and in SUP TP 7.2.1R the FCA specifies that class of persons;

(3)

allows the FCA to make rules specifying the post-implementation controlled functions which are to be treated as equivalent to a pre-implementation controlled function for the purposes of that Order. In SUP TP 7.2.2R the FCA specifies the post-implementation FCA functions which are equivalent to PRA functions pre-implementation. The PRA has separately, in PRA Rulebook: Solvency II firms: Senior Insurance Managers Regime Transitional Provisions, rule 6, specified equivalent post-implementation PRA functions;2

(4)

provides that the pre-implementation approval has effect after 7 March 2016, without the need for re-application, if the notice in (1) is given before 7 March 2016 (whether or not that notice was given before 8 February 2016) and certain conditions in article 3 of the Order are met; and2

(5)

applies to large non-directive insurers. Large non-directive insurers are treated as, and included within the definition of, Solvency II firms by the FCA for SUP TP 7. Therefore large non-directive insurers must follow the requirements set out in SUP TP 7.2

(6)

applies to Swiss general insurers. Swiss general insurers are in the large non-directive insurers sector of the PRA Rulebook and the PRA applies to them, in relation to their controlled functions, provisions equivalent to those applying to third country branches in the Solvency II firms sector of the PRA Rulebook. The FCA includes them as third country undertakings of Solvency II firms and so they must follow the requirements for Solvency II firms set out in SUP TP 7.3

7.1.2

R

SUP TP 7 applies to:

(1)

Solvency II firms; and

(2)

approved persons of Solvency II firms.

7.1.3

G

There is a glossary of terms in SUP TP 7.6.1. Those terms are not defined in the Glossary.

Grandfathering of approved persons: requirement to give notice and equivalence of old and new functions

7.2.1

R

(1)

A Solvency II firm is not required to give notice to the FCA for the purposes of article 2(1) of the Financial Services (Banking Reform) Act 2013 Transitional and Savings Provisions Order 2015 in relation to any approved person for whom the FCA granted a pre-implementation approval in relation to that firm and whose role will not change post-implementation.2

(2)

The exception to (1) is approved persons:

(a)

for whom the FCA granted a pre-implementation approval to perform the significant management function (CF29); and

(b)

who are proposing to perform one of the PRA “senior insurance management functions” in column 2 of any of the rows relating to senior management functions (CF29) in the Table of Functions for Grandfathering in PRA Rulebook: Solvency II firms: Senior Insurance Managers Regime Transitional Provisions, rule 6,

in relation to whom a Solvency II firm is required to give notice to the FCA for the purposes of article 2(1).

[Note: See article 2(2) of the Financial Services (Banking Reform) Act 2013 Transitional and Savings Provisions Order 2015 (SI 2015/492)]

7.2.2

R

Each pre-implementation controlled function in the first column of the table in SUP TP 7.2.3R is specified as an equivalent function to the FCA controlled functions listed in column two of the same row of that table.2

[Note: See article 17(1)(a) of the Financial Services (Banking Reform) Act 2013 Transitional and Savings Provisions Order 2015 (SI 2015/492)]

7.2.3

R

Table: Old PRA controlled functions mapped onto new FCA ones

PRA Director function (CF1)

FCA Director function (CF1) (see Note 1)

PRA Director of unincorporated association (CF5)

FCA Director of unincorporated association (CF5) (see Note 1) (executive only)2

Chair of the nomination committee function (CF 2a) (see Note 2)

Chair of the with-profits committee function (CF 2b) (see Note 2)

2PRA Small friendly society function (CF6)

FCA Small friendly society function (CF6) (see Note 1) (executive only)

Chair of the nomination committee function (CF2a) (see Note 2)

Chair of the with-profits committee function (CF2b) (see Note 2)

PRA Non-Executive Director function (CF2)

Chair of the nomination committee function (CF 2a) (see Note 2)

PRA Non-Executive Director function (CF2)

Chair of the with-profits committee function (CF 2b) (see Note 2)

PRA Director function (CF1)

FCA Director function (CF1) (see Note 1)

PRA Non-Executive Director function (CF2)

Chair of the nomination committee function (CF 2a) (see Note 2)

PRA Non-Executive Director function (CF2)

Chair of the with-profits committee function (CF 2b) (see Note 2)

PRA Systems and Controls function (CF 28)

FCA systems and controls function (CF 28) (conduct perspective only) (see Note 32)

PRA Director function (CF1)

FCA Director function (CF1) (See Note 1)2

PRA Actuary function holder (CF 12)

Actuarial conduct function (third country) (CF 51) (conduct perspective only) (see Note 3)2

PRA Systems and Controls function (CF 28)

FCA systems and controls function (CF 28) (conduct perspective only) (see Note 3)2

7.2.4

G

In TP 7.2.3R, where a person is grandfathered to perform a post-implementation PRA controlled function, as set out in the Table of Equivalent Functions for Grandfathering in PRA Rulebook: Solvency II firms: Senior Insurance Managers Regime Transitional Provisions, rule 6, (or in relation to FCA functions CF2a or 2b, a PRA function equivalent to the pre-implementation PRA CF2 function) then, if they would also be performing an FCA function referred to in column 2 of the Table in TP 7.2.3R, the FCA function is disapplied and instead absorbed into that PRA function. This absorption happens by virtue of its inclusion in PRA Rulebook: Solvency II firms: Senior Insurance Managers Regime – Transitional Provisions 6, and the firm is required to identify the absorbed function on the person’s scope of responsibilities document described in SYSC 2.2.4R, when that record is produced. The exception to this is CF28 and CF51 FCA post-implementation functions which are not absorbed into PRA controlled functions.

27.2.5

R

Large non-directivefirms must read references to the ‘Solvency II Firms’ part of the PRA Rulebook as if they were references to the corresponding part of the PRA Rulebook applicable to large non-directive insurers.

7.2.5A3

R

Swiss general insurers must read references to the ‘Solvency II firms’ part of the PRA Rulebook as if they were references to the corresponding part of the PRA Rulebook applicable to large non-directive insurers.

Grandfathering of approved persons: forms

7.3.1

D

This section (SUP TP 7.3) applies to a notification by a firm2 under the articles of the Financial Services (Banking Reform) Act 2013 Transitional and Savings Provisions Order 2015 listed in the table in SUP TP 7.3.2D.

7.3.2

D

Table: Grandfathering notifications

(1) Notification of pre-implementation approval2

Article 2(1), article 52

(2) Amendments to grandfathering notification in (1)

Article 6

(3) Notification of applications for approval

Article 11

(4) Amendment to grandfathering notification in (1) to add a new candidate

Article 14

(5) Any other amendment to grandfathering notification in (1)

Article 14

7.3.3

D

(1)

A firm must make any notification in row (1) and (3) of the table in SUP TP 7.3.2D in accordance with SUP 10A.16 (How to apply for approval and give notifications) as applicable to insurers.

(2)

A firm must use the version of the grandfathering notification form made available online at fca.org.uk on the FCA and PRA’sONA electronic system (known as Connect) and which is based on the version found in SUP TP 7.7.1D.

(3)

If the online version is not yet available, a firm is not required to submit the notification form but, if it chooses to do so, it must use the version found in SUP TP 7.7.1D and submit it in accordance with SUP 15.7.4R to SUP 15.7.9G.

(4)

A firm must make any notification in rows (2), (4) and (5) by updating the notification form online at fca.org.uk on the FCA and PRA’sONA electronic system (known as Connect).

(5)

For2approved persons in firms which are carrying out PRA controlled function CF1 pre-implementation and who will continue to carry out FCA controlled function CF1 post-implementation (and no PRA controlled functions), and there are no other changes to the functions they carry out, notification and relevant information in relation to the FCA CF1 function is deemed to have been given to the FCA, unless the firm has submitted a Form C.

(6)

Large non-directive insurers must follow the directions for notification set out in instead of , as if applied to large non-directive insurers.2

(7)

Swiss general insurers must follow the directions for notification set out in SUP TP 8.3.3D instead of SUP 7.3.3D, as if SUP TP 8.3.3D applied to Swiss general insurers.3

7.3.4

G

If a firm notifies an application for approval and that application is refused before the commencement date, the firm should update the notification under row (5) of the table in SUP TP 7.3.2D.

7.3.5

G

If a firm gives a grandfathering notification for an approved person and that approved person leaves the firm or gives up performing some of their controlled functions, the firm should notify the appropriate regulator using Form C as well as under SUP TP 7.

Applications of approved persons to take effect from the 7 March 2016

7.4.1

D

(1)

A firm may apply for the FCA’s approval under section 59 of the Act (Approval for particular arrangements) for the performance of a controlled function which comes into force on 7 March 2016.

(2)

Any application must be made between the 1 January 2016 and the day before 7 March 2016.

(3)

Any such application is made on the basis that it is treated as being made on the 7 March 2016.

(4)

The application must be made using the version of Form A or Form E applicable from 7 March 2016 and in accordance with the other requirements to be in effect on that date.

7.4.2

G

The Financial Services (Banking Reform) Act 2013 Transitional and Savings Provisions Order 2015 will not apply to an application under SUP TP 7.4.1D.

7.4.3

G

A firm does not have to make an application under SUP TP 7.4.1D. It can make an application between the rule-making date and the 7 March 2016 under the rules and directions in force at the time of the application. The Financial Services (Banking Reform) Act 2013 Transitional and Savings Provisions Order 2015 will apply to such applications.

Application of ongoing requirements to documents submitted as part of grandfathering

7.5

R

(1)

The requirements of SUP 10A apply to approvals that are continued in force by the Financial Services (Banking Reform) Act 2013 Transitional and Savings Provisions Order 2015, as they do to applications made after the commencement date.

(2)

The requirements of SUP 10A apply to an application for approval that is grandfathered under the Financial Services (Banking Reform) Act 2013 Transitional and Savings Provisions Order 2015 and has not been finally determined before the 7 March 2016, as they do to applications made after the commencement date.

(3)

This paragraph is subject to the other provisions of SUP TP 7.

7.6.1

R2

Glossary of terms used in SUP TP 7

pre-implementation controlled functions

an FCA controlled function or a PRA controlled function in force immediately before the 7 March 2016

rule-making date

in accordance with The Financial Services (Banking Reform) Act 2013 Transitional and Savings Provisions Order 2015, the date both regulators make rules under article 17 of the Order or, if made on different days, the last day on which the rules are made. Under the Order the rule making date for large non-directive insurers is the same as that for small non-directive insurers.2

2Solvency II firm

a firm which is any of:

(a)

a “UK Solvency II firm” as described in chapter 2 of the PRA Rulebook: Solvency II Firms: Insurance General Application;

(b)

a third-country insurance or reinsurance undertaking, namely an undertaking that would require authorisation as an insurance or reinsurance undertaking under article 14 of the Solvency II Directive if its head office was situated in the EEA;

(c)

an undertaking authorised in accordance with a non-UKEEA State’s measures which implement article 14 of the Solvency II Directive;

(d)

the Society and, separately, a managing agent;

(e)

an insurance special purpose vehicle; and

(f)

a large non-directive insurer;

but excluding any firm to the extent that rule 2 of the PRA Rulebook: Solvency II Firms: Transitional Measures disapplies relevant rules implementing the Solvency II Directive.

[Note: References to rules in SYSC and SUP 10A are to those rules as they will be in force on the 7 March 2016.

7.7.1

D

Form K: Grandfathering notification

2

Solvency II firms (not including Swiss general insurers):

3Large non-directive insurers and Swiss general insurers:3Swiss general insurers must use the forms for large non-directive insurers not the form for Solvency II firms3