Approved Persons

Consumer Credit firms new to regulation are facing the dilemma, how do the approved persons meet the code of practice requirements and the statements of principle.

Over 50,000 firms new to regulation will need to consider whether they need to implement new procedures to ensure that senior management who need to seek approval as approved persons meet the criteria in the FIT rulebook.

Under the Financial Services and Markets Act 2000, the FCA may approve an individual only where it is satisfied that a candidate is fit and proper to perform the controlled function(s) applied for. The FCA main criteria for assessing are:

– honesty, integrity and reputation;
– competence and capability;
– financial soundness.
Before a firm submits an approved persons application to the FCA they should have already undertaken sufficient checks to satisfy the criteria remembering that it is the firm who completes the candidates application and the firm who must sign the application declaration.

In making this application the firm believes on the basis of due and diligent enquiry that the candidate is a fit and proper person to perform the controlled function(s) listed in section 3. The firm also believes, on the basis of due and diligent enquiry, that the candidate is competent to fulfil the duties required in the performance of such function(s).

Being an approved person brings with it a number of important responsibilities, including a duty to be aware of and comply with FCA regulatory requirements and expectations and, understand how they apply to the day to day exercise of controlled functions. Approved Persons must:

Meet and comply on an ongoing basis with the FCA’s Fit and Proper test for Approved Persons;
Comply with the Statements of Principle and the Code of Practice for Approved Persons set out in the APER rulebook. The Statements of Principle describe the conduct that the FCA requires and expects of the individuals it approves;
Internal reporting within your own business and notification to the FCA any matter that may impact on their ongoing fitness and propriety.
Statements of principle

Principle 1
An approved person must act with integrity in carrying out his accountable functions.

Principle 2
An approved person must act with due skill, care and diligence in carrying out his accountable functions.

Principle 3
An approved person must observe proper standards of market conduct in carrying out his accountable functions

Principle 4
An approved person must deal with the FCA, the PRA and other regulators in an open and cooperative way and must disclose appropriately any information of which the FCA or the PRA would reasonably expect notice.

Principle 5
An approved person performing an accountable significant-influence function must take reasonable steps to ensure that the business of the firm for which he is responsible in his accountable function is organised so that it can be controlled effectively.

Principle 6
An approved person performing an accountable significant-influence function must exercise due skill, care and diligence in managing the business of the firm for which he is responsible in his accountable function.

Principle 7
An approved person performing an accountable significant-influence function must take reasonable steps to ensure that the business of the firm for which he is responsible in his accountable function complies with the relevant requirements and standards of the regulatory system.

If you are affected by the approved persons regime ask yourself the following key questions:

Question1. Have your approved persons been trained on the requirements and responsibilities under the approved persons regime?

Question 2. Have you undertaken sufficient checks on your senior management to know that they meet the main assessment criteria in FIT?

Question 3. Have you implemented processes for reporting changes to approved persons personal circumstances and are reporting processes in place to notify the regulator?

Question 4. Are approved persons responsibilities clearly defined in job descriptions?

Question 5. Do approved persons know which control function they have been apportioned?

Question 6. Are records of apportionment maintained in line with Systems and controls requirements.

Remember, approval must be obtained before a person can perform a controlled function and if a proposed candidate does not gain approval they will not be able to continue with the role. See slide for further details Approved Person