The FCA’s regulatory objectives are:
- 1. Maintaining market confidence in the financial system
- 2. Public awareness and promoting public understanding of the financial system
- 3. The protection of consumers, and securing the appropriate degree of protection for consumers
- 4. The reduction of financial crime by reducing the extent to which it is possible for a regulated person/company to be used for a purpose connected with financial crime
To comply with the regulatory objectives FCA regulated companies are required to screen anyone in an Approved role and carrying out a controlled function
FCA Regulated companies must be satisfied that all employees in an Approved Function are Fit & proper to perform the controlled function applied for. The act does not describe the measures required to be taken into account when determining the Fitness & Propriety but the onus is on the company to demonstrate that the candidate is competent to carry out the controlled function.
MIFID Under Article 5(1)(d) of the MiFID Implementing Directive and Article 31 and 32 of MiFID, the requirement to employ personnel with the knowledge, skills and expertise necessary for the discharge of the responsibilities allocated to them is reserved to the firm's Home State. Therefore, in assessing the fitness and propriety of a person to perform a controlled function solely in relation to the MiFID business of an incoming EEA firm, the FCA will not have regard to that person's competence and capability.
Approved Persons
Once someone has been approved by the FCA they are allowed to perform a “controlled functions” on behalf of an authorised firm. In order to carry out a controlled function, the indevidual must have been approved by the FCA to that controlled function/s and must adhere to all the Principles and Code of Conduct.
FCA Regulated companies must be satisfied that all employees in an Approved Function are Fit & proper to perform the controlled function applied for. The act does not describe the measures required to be taken into account when determining the Fitness & Propriety but the onus is on the company to demonstrate that the candidate is competent to carry out the controlled function.
Prior Approval must be obtained before a person can perform any controlled function and approval cannot be applied for ahead of a company becoming Authorised
Controlled Functions
A controlled function relates to the carrying on of a regulated activity by a firm, which is specified, under section 59 of the Financial Services and Markets Act.
Controlled functions applicable for UK and overseas firms
- • CF1 Directors
- • CF2 Non-Executive Directors
- • CF3 Chief Executives
- • CF4 Partners
- • CF5 Directors of an unincorporated association
- • CF6 Small friendly society functions
Significant influence functions (all firms, covering the activities of directors and senior managers):
- • CF8 Apportionment and oversight (Non-MiFID business only)
- • CF10 Compliance oversight
- • CF11 Money laundering reporting
- • CF12 Actuarial function (in insurance cases)
- • CF12A With profits actuary function
- • CF12B Lloyds actuary
- • CF28 System and controls function
- • CF29 Significant management function
Customer functions:
Controlled function applicable for incoming EEA firms
Significant influence functions
- • CF9 EEA investment business oversight function (Non-MiFID business only)
- • CF10 Compliance oversight function (Non-MiFID business only)
- • CF11 Money laundering reporting function
- • CF12 Actuarial function
- • CF12A With profits actuary function
- • CF12B Lloyd’s Actuary function
- • CF29 Significant management function
Customer functions:
On 10 November 2007, the FCA converted the following controlled functions:
CF 13-15 has been merged to become CF 28 (Systems and Controls function).
CF 16-20 has been merged to become CF 29 (Significant Management function).
CF 21-27 has been merged to become CF30 (Customer function).
The Register has now been updated to reflect these changes. Previous controlled function(s) have been end-dated as at 31/10/2007, with the new function(s) beginning 1/11/2007.
Consequences of Approval
The “Statements of Principle” and “Code of Practice” specifies the behaviour and conduct that the employee is expected to comply with once in an Approved position. The “Code of Practice” also details behaviour that does not comply with the principles.
The “Statements of Principle” specifies 7 key principles of which 4 apply to all in approved functions and then 3 that apply to persons who are involved in roles that include functions of significant influence.
Withdrawal of Approval
The FCA may decide to withdraw approval if they decide that the approved person is no longer regarded as fit and proper. The factors considered are the same as those applied to the approval process.
The decision to revoke approval is based on whether the individual’s knowledge, skills and expertise that are necessary to the discharge their responsibilities are no longer regarded as fit and proper or has failed to comply with the Principles and Code of Practice.
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