SUP 10

Approved
persons

SUP 10.1

Application

General

SUP 10.1.1

See Notes

handbook-rule
This chapter applies to every firm.

SUP 10.1.2

See Notes

handbook-guidance
This chapter is also relevant to every approved person.

SUP 10.1.3

See Notes

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

SUP 10.1.4

See Notes

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

Overseas firms: UK services

SUP 10.1.6

See Notes

handbook-rule
This chapter does not apply to an overseas firm in relation to regulated activities which are carried on in the United Kingdom other than from an establishment maintained by it or its appointed representative in the United Kingdom.

Overseas firms: UK establishments

SUP 10.1.7

See Notes

handbook-rule
Only the following controlled functions apply to an overseas firm which maintains an establishment in the United Kingdom from which regulated activities are carried on:
(3) the significant management function in so far as the function relates to:
(b) processing confirmations, payments, settlements, insurance claims, client money and similar matters in so far as this relates to designated investment business; and
(4) [deleted]

Incoming EEA firms, incoming Treaty firms and UCITS qualifiers

SUP 10.1.9

See Notes

handbook-rule
This chapter does not apply to:if and in so far as the question of whether a person is fit and proper to perform a particular function in relation to that firm is reserved, under any of the Single Market Directives, the Treaty or the UCITS Directive to an authority in a country or territory outside the United Kingdom.

SUP 10.1.10

See Notes

handbook-guidance
SUP 10.1.9 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 FSA under the Act.

SUP 10.1.11

See Notes

handbook-guidance
But an incoming EEA firm, or 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 firm will 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.

SUP 10.1.12

See Notes

handbook-guidance
An incoming EEA firm will have to consider, for example, the position of a branch manager 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 a controlled function, the firm will need to seek approval for that person to perform that controlled function.

Incoming EEA firms: passported activities from a branch

SUP 10.1.13

See Notes

handbook-rule
Only the following controlled functions apply to an incoming EEA firm with respect to its passported activities carried on from a branch in the United Kingdom:
(4) the significant management function in so far as the function relates to:
(b) processing confirmations, payments, settlements, insurance claims, client money and similar matters in so far as this relates to designated investment business; and
(5) [deleted]
(6) the customer function other than where this relates to the function in SUP 10.10.7A R (4).

SUP 10.1.13A

See Notes

handbook-rule
If the only regulated activities carried on by an incoming EEA firm in the United Kingdom are MiFID business, only SUP 10.1.13 R (3), (4) and (6) apply to that firm.

SUP 10.1.13B

See Notes

handbook-guidance

SUP 10.1.13C

See Notes

handbook-guidance
If an incoming EEA firm carries on designated investment business which consists of both MiFID business and other regulated activities, the EEA investment business oversight function and the compliance oversight function (SUP 10.1.13 R (1) and SUP 10.1.13 R (2)) will apply to that firm, but only in relation to that part of the business which is not MiFID business.

Incoming EEA firms etc with top-up permission activities from a UK branch

SUP 10.1.14

See Notes

handbook-rule
In relation to the activities of a firm for which it has a top-up permission, only the following controlled functions apply:
(2) the significant management function in so far as it relates to:
(b) processing confirmations, payments, settlements, insurance claims, client money and similar matters in so far as this relates to designated investment business; and
(3) [deleted]

Appointed representatives

SUP 10.1.16

See Notes

handbook-rule
The descriptions of the following controlled functions apply to an appointed representative of a firm, except an introducer appointed representative, as they apply to a firm:
(1) the governing functions, subject to SUP 10.1.16A R and except for a tied agent of an EEA MiFID investment firm; and
(2) the customer function other than in relation to acting in the capacity of an investment manager (see SUP 10.10.7A R (6)).

SUP 10.1.16A

See Notes

handbook-rule
(1) SUP 10.1.16 R is modified in relation to an appointed representative meeting the conditions in (2) so that only one of the following governing functions:
applies, as appropriate, to an individual within that appointed representative who will be required to be an approved person.
(2) The conditions are that:
(a) the scope of appointment of the appointed representative includes insurance mediation activity in relation to non-investment insurance contracts but no other regulated activity, and
(b) the principal purpose of the appointed representative is to carry on activities other than regulated activities.

Members of a profession

SUP 10.1.18

See Notes

handbook-rule
This chapter, except in respect of the required functions, does not apply to an authorised professional firm in respect of its non-mainstream regulated activities.

Oil market participants, service companies, energy market participants, subsidiaries of local authorities or registered social landlords and insurance intermediaries.

SUP 10.1.21

See Notes

handbook-rule
The descriptions of significant influence functions, other than the required functions, and if the firm is a MiFID investment firm, the governing functions, do not extend to activities carried on by a firm whose principal purpose is to carry on activities other than regulated activities and which is:
(2) a service company; or
(4) a wholly owned subsidiary of:
(a) a local authority; or
(b) a registered social landlord; or

SUP 10.1.22

See Notes

handbook-guidance
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 10.1.21 R, it should be in a position to demonstrate that its principal purpose is to carry on activities other than regulated activities.

Committees of the Society of Lloyd's

SUP 10.1.23

See Notes

handbook-rule
(1) For the purpose of SUP 10.6.4 R (the director function), "director" includes an executive member of a committee to which the Council of the Society of Lloyd's directly delegates authority to carry out the Society's regulatory functions.
(2) For the purpose of SUP 10.6.8 R (the non-executive director function), "non-executive director" includes a non-executive member of a committee to which the Council of the Society of Lloyd's directly delegates authority to carry out the Society's regulatory functions.

Insolvency practitioners

SUP 10.1.26

See Notes

handbook-rule
This chapter does not apply to a function performed by:
(1) a person acting as an insolvency practitioner within the meaning of section 388 of the Insolvency Act 1986; or
(2) a person acting as a nominee in relation to a voluntary arrangement under Parts I (Company Voluntary Arrangements) and VIII (Individual Voluntary Arrangements) of the Insolvency Act 1986; or
(3) a person acting as an insolvency practitioner within the meaning of Article 3 of the Insolvency (Northern Ireland) Order 1989; or
(4) a person acting as a nominee in relation to a voluntary arrangement under Parts II (Company Voluntary Arrangements) and VIII (Individual Voluntary Arrangements) of the Insolvency (Northern Ireland) Order 1989.

SUP 10.2

Purpose

SUP 10.2.1

See Notes

handbook-guidance
The immediate purpose of SUP 10.3 to SUP 10.10 is to specify, under section 59 of the Act, descriptions of the 16 controlled functions which are listed in SUP 10.4.5 R. The underlying purpose is to establish, and mark the boundaries of, the "approved persons regime".

SUP 10.3

Provisions related to the act

Arrangements and regulated activities

SUP 10.3.1

See Notes

handbook-rule
A function is a controlled function only to the extent that it is performed under an arrangement entered into by:
(1) a firm; or
(2) a contractor of the firm;
in relation to the carrying on by the firm of a regulated activity.

SUP 10.3.2

See Notes

handbook-guidance
Sections 59(1) and (2) of the Act provide that approval is necessary in respect of a 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.

SUP 10.3.3

See Notes

handbook-guidance
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 10.12.3 G and SUP 10.12.4 G.

SUP 10.3.4

See Notes

handbook-guidance
If, however, a firm is a member of a group, and the arrangements for the performance of a controlled function of the firm are made by, say, 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.

SUP 10.3.5

See Notes

handbook-guidance
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.

SUP 10.4

Specification of functions

SUP 10.4.1

See Notes

handbook-rule
Each of the functions described in SUP 10.4.5 R (the table of controlled functions) is a controlled function.

SUP 10.4.3

See Notes

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

SUP 10.5

Significant influence functions

What are the significant influence functions?

SUP 10.5.1

See Notes

handbook-guidance

The first condition

SUP 10.5.2

See Notes

handbook-rule
Each significant influence function is one which is likely to result in the person responsible for its performance exercising a significant influence on the conduct of a firm's affairs, so far as relating to a regulated activity of the firm.

SUP 10.5.3

See Notes

handbook-guidance
SUP 10.5.2 R gives effect to section 59(5) of the Act (where this provision is referred to as the first condition).

SUP 10.5.4

See Notes

handbook-guidance
Whether a 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 FSA has identified the significant influence functions as satisfying this condition.

Periods of less than 12 weeks

SUP 10.5.5

See Notes

handbook-rule
If:
(1) a firm appoints an individual to perform a function which, but for this rule, would be a significant influence function;
(2) the appointment is to provide cover for an approved person whose absence is:
(a) temporary; or
(b) reasonably unforeseen; and
(3) the appointment is for less than 12 weeks in a consecutive 12 month period;
the description of the relevant significant influence function does not relate to those activities of that individual.

SUP 10.5.6

See Notes

handbook-guidance
SUP 10.5.5 R enables cover to be given for, say, 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 a controlled function for more than 12 weeks, the firm should apply for approval.

SUP 10.6

Governing functions

Introduction

SUP 10.6.1

See Notes

handbook-guidance
Every firm will have one or more persons responsible for directing its affairs. These persons will be performing the governing functions and will be required to be approved persons unless the application provisions in SUP 10.1, or the particular description of a controlled function, provide otherwise. For example, each director of a company incorporated under the Companies Acts will perform the governing function in relation to that company.

SUP 10.6.1A

See Notes

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

What the governing functions include

SUP 10.6.2

See Notes

handbook-rule
Each of the governing functions (other than the non-executive director function) includes where apportioned under SYSC 2.1.1 R:

SUP 10.6.3

See Notes

handbook-guidance
The effect of SUP 10.6.2 R is that a person who is approved to perform a governing function (other than the non-executive function) will not have to be specifically approved to perform the systems and controls function or the significant management function. A person who is approved to perform a governing function will have to be additionally approved before he can perform any of the required functions or the customer function.

SUP 10.6.3A

See Notes

handbook-guidance
A firm carrying on insurance mediation activity, other than a sole trader, must allocate to a director or senior manager the responsibility for the firm'sinsurance mediation activity (MIPRU 2.2.1 R). MIPRU 2.2.2 R (1) provides that the firm may allocate this responsibility to one or more of the persons performing a governing function (other than the non-executive director function).

SUP 10.6.3B

See Notes

handbook-guidance
Where a person performing a governing function is also responsible for the firm's insurance mediation activity, the words "(insurance mediation)" will be inserted after the relevant controlled function (see MIPRU 2.2.5 G ).

Director function (CF1)

SUP 10.6.4

See Notes

handbook-rule
If a firm is a body corporate (other than a limited liability partnership), the director function is the function of acting in the capacity of a director (other than non-executive director) of that firm.

SUP 10.6.7

See Notes

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

Non-executive director function (CF2)

SUP 10.6.8

See Notes

handbook-rule
(1) If a firm is a body corporate, the non-executive director function is the function of acting in the capacity of a non-executive director of that firm.
(2) If a firm is a long-term insurer, the non-executive director function is also the function of acting in the capacity of an individual (other than an individual performing the director function or the non-executive director function under (1)) who, as a member of a committee having the purpose of a with-profits committee, has responsibility in relation to governance arrangements for with-profits business under COBS 20.3 (Principles and Practices of Financial Management).

SUP 10.6.9

See Notes

handbook-guidance
[Deleted]
(1) [Deleted]
(2) [Deleted]
(3) [Deleted]

Chief executive function (CF3)

SUP 10.6.11

See Notes

handbook-rule
The chief executive function is the function of acting in the capacity of a chief executive of a firm.

SUP 10.6.13

See Notes

handbook-guidance
This 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); or, in the case of a branch in the United Kingdom of an overseas firm, for all of the activities subject to the UK regulatory system.

SUP 10.6.14

See Notes

handbook-guidance
For a branch in the United Kingdom of an overseas firm, the FSA would not normally expect the overseas chief executive of the firm as a whole to be 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 10.7.4 G).

SUP 10.6.15

See Notes

handbook-guidance
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.

SUP 10.6.16

See Notes

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

Partner function (CF4)

SUP 10.6.17

See Notes

handbook-rule
(1) If a firm is a partnership, the partner function is the function of acting in the capacity of a partner in that firm.
(2) If the principal purpose of the firm is to carry on one or more regulated activities, each 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 he has 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 partnership has apportioned responsibility to another partner or group of partners.

SUP 10.6.19

See Notes

handbook-guidance
Any apportionment referred to in SUP 10.6.17 R (3)(b) will have taken place under SYSC 2.1.1 R. The FSA may ask to see details of the apportionment but will not require, as a matter of course, a copy of the material which records this (see SYSC 2.2).

SUP 10.6.20

See Notes

handbook-guidance
The effect of SUP 10.1.18 R is that regulated activity in SUP 10.6.17 R (and elsewhere) is to be taken as not including an activity that is a non-mainstream exempt 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 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.

SUP 10.6.21

See Notes

handbook-rule
If a firm is a limited liability partnership, the partner function extends to the firm as if the firm were a partnership and a member of the firm were a partner.

SUP 10.6.23

See Notes

handbook-rule
If a partnership is registered under the Limited Partnership Act 1907, the partnerfunction does not extend to any function performed by a limited partner.

Director of unincorporated association function (CF5)

SUP 10.6.24

See Notes

handbook-rule
If a firm is an unincorporated association, the director of unincorporated association function is the function of acting in the capacity of a director of the unincorporated association.

Small friendly society function (CF6)

SUP 10.6.26

See Notes

handbook-rule
(1) If a firm is a non-directive friendly society, the small friendly society function is the function of directing its affairs, either alone or jointly with others.
(2) If the principal purpose of the firm is to carry on regulated activities, each person with responsibility for directing its affairs performs the controlled function.
(3) If the principal purpose of the firm is other than to carry on regulated activities, a person performs the small friendly society function only to the extent that he has responsibility for a regulated activity.

SUP 10.6.28

See Notes

handbook-rule
(1) Each person on the non-directive friendly society's governing body will be taken to have responsibility for its regulated activities, unless the firm has apportioned this responsibility to one particular individual to whom it is reasonable to give this responsibility.
(2) The individual need not be a member of the governing body.

SUP 10.6.29

See Notes

handbook-guidance
(1) 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 FSA 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 approved person under SUP 10.6.26 R.
(2) Any apportionment of responsibilities will have taken place under SYSC 2.1.1 R. The FSA may ask to see details of the apportionment but will not require, as a matter of course, a copy of the material which records this (seeSYSC 2.2).

SUP 10.6.30

See Notes

handbook-rule
(1) [deleted]
(2) [deleted]

SUP 10.7

Required functions

Apportionment and oversight function (CF8)

SUP 10.7.1

See Notes

handbook-rule
The apportionment and oversight function is the function of acting in the capacity of a director or senior manager responsible for either or both of the apportionment function and the oversight function set out in SYSC 2.1.3 R.

SUP 10.7.2A

See Notes

handbook-guidance
In requiring someone to apportion responsibility, a common platform firm should not apply for that person or persons to be approved to perform the apportionment and oversight function (see SUP 10.7.1 R, SYSC 2.1.3 R and SYSC 1.1.3 R (5)).

SUP 10.7.3

See Notes

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

SUP 10.7.4

See Notes

handbook-guidance
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, he will not need to be an approved person. However, where, in accordance with SYSC 3 or SYSC 4 to SYSC 10, 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 a controlled function, such as, for example, the chief executive function. This is subject to SUP 10.1.13A R, which applies where the firm is a MiFID investment firm and the only regulated activities carried out by it in the United Kingdom are MiFID business.

SUP 10.7.4A

See Notes

handbook-guidance
A firm carrying on insurance mediation activity, other than a sole trader, must allocate to a director or senior manager the responsibility for the firm's insurance mediation activity (MIPRU 2.2.1 R). MIPRU 2.2.2 R (2) provides that the firm may allocate this responsibility to the person performing the apportionment and oversight function.

SUP 10.7.4B

See Notes

handbook-guidance
Where the person performing the apportionment and oversight function is also responsible for the firm's insurance mediation activity, the words "(insurance mediation)" will be inserted after this controlled function (see MIPRU 2.2.5 G ).

EEA investment business oversight function (CF9)

SUP 10.7.6

See Notes

handbook-rule
The EEA investment business oversight function is the function of acting in the capacity of an individual who is responsible, in accordance withSYSC 2.1.3 R (2), for overseeing the establishment and maintenance of systems and controls in relation to designated investment business carried on from a branch in the United Kingdom of an incoming EEA firm.

SUP 10.7.7

See Notes

handbook-guidance
Where an overseas individual has not delegated this function to a senior manager in the United Kingdom, he is likely to be performing this controlled function. However, the FSA anticipates that any individual carrying out this function will normally be located in the United Kingdom. He may be the local chief executive or one or more of the individuals approved to perform the significant management (designated investment business) function. If the local chief executive (or other individual) is approved for this function, this does not mean that all his responsibilities are the concern of the FSA. SUP 10.1.9 R preserves the principle of Home State prudential regulation whenever it applies and in respect of each controlled function.

Compliance oversight function (CF10)

SUP 10.7.8

See Notes

handbook-rule
The compliance oversight function is the function of acting in the capacity of a director or senior manager who is allocated the function set out in SYSC 3.2.8 R or SYSC 6.1.4 R (2).

Money laundering reporting function (CF11)

SUP 10.7.13

See Notes

handbook-rule
The money laundering reporting function is the function of acting in the capacity of the money laundering reporting officer of a firm.

SUP 10.7.13A

See Notes

handbook-guidance
A firm's obligations in respect of its money laundering reporting officer are set out elsewhere in the Handbook (see SYSC 3.2.6I R and SYSC 6.3.9 R and for their scope, see the application provisions in SYSC 1.1 and SYSC 1.3).

SUP 10.7.13B

See Notes

handbook-guidance
A firm's obligations in respect of its money laundering reporting officer are set out in SYSC 3.2.6I R and SYSC 6.

Actuarial function (CF12) and with-profits actuary function (CF12A)

SUP 10.7.17

See Notes

handbook-rule
The actuarial function is the function of acting in the capacity of an actuary appointed by a firm under SUP 4.3.1 R to perform the duties set out in SUP 4.3.13 R.

SUP 10.7.17A

See Notes

handbook-rule
The with-profits actuary function is the function of acting in capacity of an actuary appointed by a firm under SUP 4.3.1 R to perform the duties set out in SUP 4.3.16A R.

Lloyd's actuary function (CF12B)

SUP 10.7.22

See Notes

handbook-rule
The Lloyd's actuary function is the function of acting in the capacity of the actuary appointed under SUP 4.6.1 R to perform the duties set out in SUP 4.6.7 R.

SUP 10.8

Systems and control functions

Systems and controls function (CF28)

SUP 10.8.1

See Notes

handbook-rule
The systems and controls function is the function of acting in the capacity of an employee of the firm with responsibility for reporting to the governing body of a firm, or the audit committee (or its equivalent) in relation to:
(1) its financial affairs;
(2) setting and controlling its risk exposure (see SYSC 3.2.10 G and SYSC 7.1.6 R);
(3) adherence to internal systems and controls, procedures and policies (see SYSC 3.2.16 G and SYSC 6.2).

SUP 10.8.2A

See Notes

handbook-guidance
Where an employee performs the systems and controls function the FSA 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.

SUP 10.9

Significant management functions

Application

SUP 10.9.1

See Notes

handbook-rule
SUP 10.9 applies only to a firm which, under SYSC 2.1.1 R, apportions a significant responsibility, within the description of athe significant management function, to a senior manager of a significant business unit.

SUP 10.9.2

See Notes

handbook-guidance
The FSA anticipates that there will be only a few firms needing to seek approval for an individual to perform the significant management function . In most firms, those approved for the governing functions, required functions and, where appropriate, the systems and controls function, are likely to exercise all the significant influence at senior management level.

SUP 10.9.3

See Notes

handbook-guidance
However, the scale, nature and complexity of the firm's business may be such that a firm apportions under SYSC 2.1.1 R a significant responsibility to an individual who is not approved to perform the governing functions, required functions or, where appropriate, the systems and controls function. If so,v 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) 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); or a firm carrying on general insurance business may have gross written premiums in excess of £100mn;
(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) its group structure (if it is a member of a group);
(4) its management structure (for example matrix management); and
(5) the size and significance of its international operations, if any.

SUP 10.9.4

See Notes

handbook-guidance
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) the risk profile of the unit; or
(2) its use or commitment of a firm's capital; or
(3) its contribution to the profit and loss account; or
(4) the number of employees or approved persons in the unit; or
(5) the number of customers of the unit; or
(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.

SUP 10.9.5

See Notes

handbook-guidance
The question may arise whether a manager who is based overseas will be performing the significant management function and should therefore be an 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 FSA, may have a bearing on this. It is a factor to take into account when assessing the likely influence of the overseas manager.

SUP 10.9.6

See Notes

handbook-guidance
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 an approved person. 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 a controlled function.

SUP 10.9.7

See Notes

handbook-guidance
See also SUP 10.7.3 G to SUP 10.7.4B G in relation to matrix management.

Significant management function (CF29)

SUP 10.9.10

See Notes

handbook-rule
(1) The significant management function is the function of acting as a senior manager with significant responsibility for a significant business unit that:
(a) carries on designated investment business or other activities not falling within (b) to (d);
(c) makes material decisions on the commitment of a firm's financial resources, its financial commitments, its assets acquisitions, its liability management and its overall cash and capital planning;
(d) processes confirmations, payments, settlements, insurance claims, client money and similar matters.
(2) This controlled function does not include any of the activities described in any other controlled function.

SUP 10.9.10A

See Notes

handbook-guidance
A senior managerwith significant responsibility for a significant business unit that carries on activities other than designated investment business for the purposes of SUP 10.9.10 R (1)(a) could, for example, be the head of a unit carrying on the activities of: retail banking, personal 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. The senior manager could also be a proprietary trader whose trading limits are such that he may put, or potentially put, his firm at significant risk. This function would not extend to every proprietary trader.

SUP 10.9.13A

See Notes

handbook-guidance
A firm carrying on insurance mediation activity, other than a sole trader, must allocate to a director or senior manager the responsibility for the firm's insurance mediation activity (MIPRU 2.2.1 R). MIPRU 2.2.2 R (3)) provides that the firm may allocate this responsibility to the person performing the significant management function.

SUP 10.9.13B

See Notes

handbook-guidance
Where the person performing the significant management function is also responsible for the firm's insurance mediation activity, the words "(insurance mediation)" will be inserted after this controlled function (see MIPRU 2.2.5 G ).

SUP 10.10

Customer functions

SUP 10.10.1

See Notes

handbook-rule
SUP 10.10 ( Customer function) applies with respect to activities carried on from an establishment maintained by the firm (or by its appointed representative) in the United Kingdom.

SUP 10.10.2

See Notes

handbook-guidance
Without SUP 10.10.1 R the description of the customer function would extend to this function wherever it was performed. The effect of SUP 10.10.1 R is that the description islimited, in relation to regulated activities with an overseas element, in a manner which is broadly consistent with the scope of conduct of business regulation.

SUP 10.10.3

See Notes

handbook-guidance
The customer functions 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.

The customer conditions (the second and third conditions)

SUP 10.10.4

See Notes

handbook-rule
The customer function is one which will involve the person performing it in dealing with clients , or dealing with property of clients , of a firm in a manner substantially connected with the carrying on of a regulated activity of the firm.

SUP 10.10.5

See Notes

handbook-guidance
SUP 10.10.4 R gives effect to sub-sections (6) and (7) of section 59 of the Act (referred to in that section as the second and third conditions).

SUP 10.10.6

See Notes

handbook-guidance
The FSA interprets the phrase "dealing with" as including having contact with customers 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.

Customer function (CF 30)

SUP 10.10.7A

See Notes

handbook-rule
The customer function is the function of:
(1) advising on investments other than a non-investment insurance contract (but not where this is advising on investments in the course of carrying on the activity of giving basic advice on a stakeholder product) and performing other functions related to this such as dealing and arranging;
(2) giving advice to clients solely in connection with corporate finance business and performing other functions related to this;
(3) giving advice or performing related activities in connection with pension transfers or opt-outs for retail clients;
(4) giving advice to a person to become, or continue or cease to be, a member of a particular Lloyd's syndicate;
(5) dealing, as principal or as agent, and arranging (bringing about) deals in investments other than a non-investment insurance contract with or for, or in connection with customers where the dealing or arranging deals is governed by COBS 11 (Dealing and managing);
(6) acting in the capacity of an investment manager and carrying on functions connected to this.

SUP 10.10.7B

See Notes

handbook-rule
The customer function does not extend to an individual who is performing the functions in SUP 10.10.7A R (1) to (2) or SUP 10.10.7A R (5) to (6) and who is based overseas and who, in a 12 month period, spends no more than 30 days in the United Kingdom to the extent that he is appropriately supervised by a person approved for this function.

SUP 10.10.7C

See Notes

handbook-guidance
The FSA 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' 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 packaged products or is a broker fund adviser). The effect of this is that such individuals need not pass the relevant regulatory module of an appropriate examination (see TC 2.1.9 R (2)).

SUP 10.10.7D

See Notes

handbook-guidance
The customer function in SUP 10.10.7A R (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.

SUP 10.10.7E

See Notes

handbook-guidance
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 shall record when that person subsequently becomes competent.

SUP 10.11

Procedures relating to approved persons

Forms

SUP 10.11.1

See Notes

handbook-guidance
The forms listed in SUP 10.11.2 G are referred to in SUP 10.11 (Procedures relating to approved persons) to SUP 10.14 (Further questions).

SUP 10.11.2

See Notes

handbook-guidance

Approved persons forms

SUP 10.11.3

See Notes

handbook-guidance
A summary of the forms and their purposes is in SUP 10 Annex 2 G. A summary of FSA procedures is in SUP 10 Annex 3. For the method of notification to the FSA, see SUP 15.7 (Form and method of notification).

SUP 10.11.4

See Notes

handbook-guidance
Unless the context otherwise requires, in SUP 10.11 (Procedures relating to approved persons) to SUP 10.14 (Further questions) where reference is made to a firm, this also includes an applicant for Part IV permission, and other persons seeking to carry on regulated activities as an authorised person.

SUP 10.11.5

See Notes

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

SUP 10.11.6

See Notes

handbook-guidance
Copies of Forms A, B, C, D and E may be obtained from the FSA website or from the Individuals, Mutuals and Policy Department. To contact the Individuals, Mutuals and Policy Department for general enquiries:
(1) telephone 020 7066 0019; or
(2) fax 020 7066 0017; or
(3) write to:
Individuals, Mutuals and Policy Department
The Financial Services Authority
25 The North Colonnade
Canary Wharf
LONDON E14 5HS; or
(4) e-mail iva@fsa.gov.uk

SUP 10.12

Application for approval and withdrawing an application for approval

When to apply for approval

SUP 10.12.1

See Notes

handbook-guidance
In accordance with section 59 of the Act (Approval for particular arrangements), where a candidate will be performing one or more 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 FSA.

How to apply for approval

SUP 10.12.2

See Notes

handbook-directions
An application by a firm for the FSA's approval under section 59 of the Act (Approval for particular arrangements) must be made by completing the Form A which relates to the particular type of firm, that is, a UK firm, overseas firm or incoming EEA firm.

Who should make the application?

SUP 10.12.3

See Notes

handbook-guidance
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 the candidate. Usually this will be the firm that is employing the candidate to perform the controlled function. Where a firm has outsourced the performance of a controlled function, the details of the outsourcing determine where responsibility lies and whom the FSA anticipates will submit approved persons forms. SUP 10.12.4 G describes some common situations. The firm which is outsourcing is referred to as "A" and the person to whom the performance of the function has been outsourced, or which makes the arrangement for the 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 a 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 FSA. See also SYSC 3.2.4 G and SYSC 8.1.1 R, and for insurers SYSC 13.9 .

SUP 10.12.4

See Notes

handbook-guidance

Outsourcing arrangements

SUP 10.12.4A

See Notes

handbook-guidance
Where the notification of an appointed representative (SUP 12.7.1 R) is linked to an application for approval (SUP 10.12 (Applications for approval and withdrawing an application for approval)), any delay in receiving the notification under SUP 12.7.1 R may delay the FSA's approval of the individuals employed by that appointed representative who will be performing controlled functions for the firm.

Processing an application

SUP 10.12.5

See Notes

handbook-guidance
The Act allows the FSA three months from the time it receives a properly completed application to consider it and come to a decision. The FSA must either grant the application or, if it proposes not to grant an application, issue a warning notice (see DEPP 2 ). The FSA 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 FSA 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.

SUP 10.12.6

See Notes

handbook-guidance
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 delayed and, in some cases, possibly rejected.A person who provides information to the FSA that is false or misleading may commit a criminal offence.

SUP 10.12.7

See Notes

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

SUP 10.12.8

See Notes

handbook-guidance
Before making a decision to grant the application or give a warning notice, the FSA may ask the firm for more information about the candidate. If it does this, the three month period in which the FSA must determine a completed application:
(1) will stop on the day the FSA requests the information; and
(2) will start running again on the day on which the FSA finally receives all the requested information.

SUP 10.12.9

See Notes

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

SUP 10.12.10

See Notes

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

Decisions on applications

SUP 10.12.11

See Notes

handbook-guidance
Whenever it grants an application, the FSA will confirm this in writing to all interested parties.

SUP 10.12.12

See Notes

handbook-guidance
If the FSA proposes to refuse an application in relation to one or more 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.

Withdrawing an application for approval

SUP 10.12.13

See Notes

handbook-rule
A firm applying to withdraw an application must notify the FSA, using Form B.

SUP 10.12.14

See Notes

handbook-guidance
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.

SUP 10.13

Changes to an approved person's details

Moving within a firm

SUP 10.13.1

See Notes

handbook-guidance
An 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's regulated activities. Where the changes will involve the person performing one or more different controlled functions from those for which approval has already been granted, then an application must be made to the FSA for approval for the person to perform those controlled functions. The firm must take reasonable care to ensure that an individual does not begin performing a controlled function until the FSA has granted approved person status to that individual in respect of that controlled function. This applies to individuals seeking approval in respect of a controlled function within the firm for which they already perform controlled functions. If the approved person is ceasing to perform controlled functions, as well as applying for approval in respect of additional controlled functions, then refer to SUP 10.13.3 D.

SUP 10.13.2

See Notes

handbook-guidance
The relevant Form A must be used to apply for an individual to perform further controlled functions for a firm for which he already performs a controlled function as an approved person (see SUP 10.12.2 D). It is not mandatory to complete all parts of the form. See the notes relevantto eachform for full details.

SUP 10.13.3

See Notes

handbook-directions
A firm must use Form E where an approved person is both ceasing to perform one or more controlled functions and needs to be approved in relation to one or more new controlled functions within the same firm or group.

Moving between firms

SUP 10.13.4

See Notes

handbook-guidance
If it is proposed that an approved person will no longer be performing a controlled function under an arrangement entered into by one firm or one of its contractors, but will be performing the same or a different 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 controlled function by that person.

SUP 10.13.5

See Notes

handbook-guidance
In certain circumstances, when the FSA already has the information it would usually require, a shortened version of the relevant Form A may be completed. See the notes relevant to each form for full details.

Ceasing to perform a controlled function

SUP 10.13.6

See Notes

handbook-rule
A firm must submit to the FSA a completed Form C no later than seven business days after an approved person ceases to perform a controlled function.

SUP 10.13.7

See Notes

handbook-rule
(1) A firm must notify the FSA as soon as practicable after it becomes aware, or has information which reasonably suggests, that it will submit a qualified Form C in respect of an approved person.
(2) Form C is qualified if the information it contains:
(a) relates to the fact that the firm has dismissed, or suspended, the approved person from its employment; or
(b) relates to the resignation by the approved person while under investigation by the firm, the FSA or any other regulatory body; or
(c) otherwise reasonably suggests that it may affect the FSA's assessment of the approved person's fitness and propriety.

SUP 10.13.8

See Notes

handbook-guidance
Notification under SUP 10.13.7 R may be made by telephone, fax or email 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 FSA in due course of the reason. This could be done using Form D, if appropriate.

SUP 10.13.9

See Notes

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

SUP 10.13.10

See Notes

handbook-guidance
A firm can submit Form C or Form E to the FSA in advance of the cessation date. When a person ceases the arrangement under which he performs a controlled function, he will automatically cease to be an approved person in relation to that controlled function. A person can only be an approved person in relation to a specific controlled function. Therefore, a person is not an approved person during any period between ceasing to perform one controlled function (when he is performing no other controlled function) and being approved in respect of another controlled function.

SUP 10.13.11

See Notes

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

SUP 10.13.12

See Notes

handbook-rule
(1) If a firm (A):
(a) is considering appointing a person to perform any of the customer functions ;
(b) requests another firm (B), as a former employer of that person, for a reference or other information in connection with that appointment; and
(c) indicates to B the purpose of the request;
B must, as soon as reasonably practicable, give to A all relevant information of which it is aware.
(2) When giving the information to A under (1), B must have regard to the purpose of the request and in particular to:
(a) any outstanding liabilities of that person from commission payments;
(b) any relevant outstanding or upheld complaint from an eligible complainant against that person;
(c) section 5 of the relevant Form A in SUP 10 Annex 4 (Application to perform controlled functions under approved persons regime);
(d) FIT 2 (Main assessment criteria); and
(e) if SUP 16.8.1 G (1) (Persistency reports from insurers) applies to B, the persistency of any life policies sold by that person.

SUP 10.13.13

See Notes

handbook-guidance
A firm supplying a reference in accordance with SUP 10.13.12 R owes a duty to its former employee and the recipient firm to exercise due skill and care in the preparation of the reference. The reference should be accurate and based on documented fact. The firm may give frank and honest views, but only after taking reasonable care both as to factual content, and as to the opinions expressed, and verifying the information upon which they are based.

Changes to an approved person's personal details

SUP 10.13.14

See Notes

handbook-rule
If an approved person's title, name or national insurance number changes, the firm for which the person performs a controlled function must notify the FSA on Form D of that change within seven business days of the firm becoming aware of the matter.

SUP 10.13.15

See Notes

handbook-guidance
The duty to notify in SUP 10.13.14 R does not apply to changes to an approved person's private address.

SUP 10.13.16

See Notes

handbook-rule
If a firm becomes aware of information which would reasonably be material to the assessment of an approved person's, or a candidate's, fitness and propriety (see FIT), it must inform the FSA on Form D as soon as practicable.

SUP 10.13.17

See Notes

handbook-guidance
The duty to notify in SUP 10.13.16 R extends to any circumstances that would normally be declared when giving the information required for section 5 of Form A or matters considered in FIT 2.

SUP 10.13.18

See Notes

handbook-rule
(1) If, in relation to a firm which has completed the relevant Form A (SUP 10 Annex 4), any of the details in section 3.01 (Arrangementsand controlled functions) are to change, the firm must notify the FSA on Form D .
(2) The notification must be made as soon as reasonably practicable after the firm becomes aware of the proposed change.
(3) Paragraphs (1) and (2) also apply to a firm in respect of an approved person, to whom the grandfathering arrangements applied as if the firm had completed the relevant Form A for that person.

SUP 10.13.19

See Notes

handbook-guidance
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 investment adviser function for the firm. The firm should notify the FSA by completing Section 1.07 of Form D.

SUP 10.13.20

See Notes

handbook-guidance
The grandfathering arrangements applying to an approved person referred to in SUP 10.13.18 R are contained in Part VI (Approved persons) of the Financial Services and Markets Act (Transitional Provisions) (Authorised Persons etc.) Order 2001 (SI 2001/2636). Article 72 of that Order provides, in general terms, that, where a person was performing a function at the beginning of 1 December 2001 which became a controlled function under the Act, the continued performance of that function by that person was taken to be approved by the FSA. That person therefore became an approved person without the need for a Form A.

SUP 10.14

Further questions

SUP 10.14.1

See Notes

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

SUP 10.14.2

See Notes

handbook-guidance
If the firm or its advisers have further questions, they should contact the FSA'sIndividuals, Mutuals and PolicyDepartment(see SUP 10.11.6 G).

SUP 10 Annex 1

Frequently asked questions

See Notes

handbook-guidance
How does the customer function relate to the training and competence requirements?

SUP 10 Annex 2

Approved person regime: summary of forms and their use

Approved person regime: summary of forms and their use

See Notes

handbook-guidance

SUP 10 Annex 4

Form A: Application to perform controlled functions under the approved person regime

See Notes

handbook-directions
This annex consists only of one or more forms. Forms are to be found through the following address:

Supervision forms - Notes from direction in SUP 10.12

SUP 10 Annex 5

Form B: Notice to withdraw an application to perform controlled functions under the approved persons regime

See Notes

handbook-rule
This annex consists only of one or more forms. Forms are to be found through the following address:

Supervision forms - SUP 10 Annex 5

SUP 10 Annex 6

Form C: Notice of ceasing to perform controlled functions

See Notes

handbook-rule
This annex consists only of one or more forms. Forms are to be found through the following address:

Supervision forms - SUP 10 Annex 6

SUP 10 Annex 7

Form D: Notification of changes in personal information or application details

See Notes

handbook-rule
This annex consists only of one or more forms. Forms are to be found through the following address:

Supervision forms - SUP 10 Annex 7

SUP 10 Annex 8

Form E: Internal transfer of an approved person

See Notes

handbook-guidance
This annex consists only of one or more forms. Forms are to be found through the following address:

Supervision forms - SUP 10 Annex 8