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Changes to the Form A application forms for approved persons
What have we done?
As part of our Supervisory Enhancement Programme, we have been reviewing the scope and application of our approved persons regime for Significant Influence controlled functions (SIFs).
Why?
We have been addressing a number of key issues. Specifically in relation to the application stage, and in the light of events during the financial turbulence of the last year, we have assessed whether it is appropriate for us to tighten our processes for approving individuals to hold SIFs.
How has the form changed?
With this in mind we have amended form A, which will require all firms to provide supplementary information based on the competence and capability of the candidate. In particular, we will ask firms to provide information on:
- Why the candidate is competent and capable to perform the role applied for; why the appointment complements the firm’s business strategy, activity and the markets in which it operates; and
- how the appointment was agreed, including details of any discussions at governing body level where this is appropriate.
In addition, we are now asking both the candidate and the firm to confirm, via section 7 of the Application Form that the regulatory responsibilities of the proposed role, as set out in the Statement of Principles and Code of Practice for Approved Persons have been explained to and understood by the candidate.
What does this mean for firms?
Please ensure that you are using the most up to date form
The additional question is in section 6 under supplementary information.
We have made this change in combination with to the option to use a competency based interview to assess a candidate’s competence and capability for a given SIF role. We worked with a small number of firms to pilot a new approach to approvals of Chief Executive (CF3), non-executive Chairman (CF2), and Finance Director (CF1) candidates. The results of the pilot exercise indicated that interviewing candidates for the above roles would add significant value to our approval and supervisory processes This has led to candidates seeking to perform the above functions with a high impact firm being the subject of a competence based interview as a matter of routine (unless there is a good reason not too). Recently the role of Risk Director (CF1) with high impact firms has been treated in the same way.
In addition, FSA may exercise discretion to interview any candidate in respect of an application to perform a controlled function.
All firms are required to confirm the ‘due diligence’ carried out on candidates for SIF roles as part of the application process.
For more information regarding Significant Influence Function roles and applications, please see webpage.
Disapplication of CF9 & CF10 for incoming EEA Firms
In CP08/1 we consulted on a proposal to remove controlled function CF9 (EEA investment business oversight) and CF10 (Compliance oversight) for those individuals who have responsibility for non-MiFID business carried out by incoming EEA firms (including credit institutions).
As a consequence of MiFID, we are unable to apply controlled function CF9 (EEA investment business oversight) and CF10 (Compliance oversight) in relation to MiFID business carried out by incoming EEA firms. This is because these controlled functions relate to matters falling within MiFID which are the responsibility of the home state competent authority.
Having further reviewed the application of CF9 and CF10 to non-MiFID investment business for incoming EEA firms, we concluded post-consultation that the costs to firms and the FSA of continuing to apply CF9 and CF10 to the relatively small residual range of activities undertaken by these firms outweigh the benefits of the ongoing application of these functions. Such non-MiFID investment business could include, for example, some business in relation to life policies, certain commodity derivatives and pension transfers, in other words business for which a firm requires a passport under the Insurance Mediation directive or a top-up permission.
We concluded that we could continue to supervise these activities through the remaining controlled functions referred to in SUP 10.1.13R and SUP10.1.14R, including the Significant management function, where applicable (CF29) and the Customer function (CF30) and via the Statements of Principle and Code of Practice for Approved Persons (APER), where appropriate.
As we indicated in CP08/1, we will withdraw all such CF9s and CF10s from the FSA Register in the coming weeks. Due to the change in our rules, the waiver by consent disapplying CF9 and CF10 for incoming EEA firms is no longer required and has been withdrawn.
What can firms do to help the FSA improve the approval process?
Submitting the correct application form
- Firms are reminded that they should be using the current versions of the application Form A (1 October 2008) that are published on the FSA website. If we receive any older versions of the application forms these will be returned to firms for resubmission using the correct forms which will inevitably delay the application process.
- Firms will be aware that we now publish both Long and Short versions of the Approved Persons application form. Since we have published both versions of the form we have noticed an increase in the number of short application forms being incorrectly submitted, particularly when candidates are applying for a Significant influence function (CF1-29) for the first time. Firms are reminded that a short application form A should only be submitted if the following criteria is met:
- an approved person is applying to perform an additional controlled function under an arrangement with the same firm (within the same group of functions – e.g individual is approved as CF1 (Director) and wishes to apply for CF28 (Systems & controls function) for the same firm or another firm within the group; or
- the candidate has ceased to perform a controlled function under an arrangement with firm A and now requires approval to perform a controlled function under an arrangement with firm B. These can be two entirely different firms and not just two firms in the same group; or
- an approved person is applying to perform a controlled function and is already authorised for that group of functions (i.e. either CF1-12 or CF28, 29 or 30) for another firm. For example, if a CF2 non-executive director is applying to be approved as a CF2 for an additional firm.
However, a full Form A must be completed in full if:
- the candidate ceased to be an approved person more than six months ago;
- the candidate or approved person is seeking approval in respect of a Significant influence function for the first time, or has not been approved in a Significant influence function within the last 6 months; or
- there have been any changes to the answers provided in section 5 of the application form.
Providing complete information with an application form
- A number of application forms received appear to have missing information, whether it be employment information, missing signatures or supplementary information pertaining to the Fitness and Propriety questions etc. It would assist us to help you if you ensure that the application forms are checked thoroughly before they are submitted to the FSA. Full details of any "yes" response to any question in the Fitness and Propriety section should be provided in the supplementary information section with any supporting documentation securely attached to the application form.
- Firms submitting Significant influence function application forms for candidates who have not held a senior function previously, or within the last six months, should provide a copy of the candidate's up to date CV with the application form. Failure to provide the CV when the application form is submitted could cause delay to the processing of the application form.
Form E
Often firms submit a Form E inappropriately to apply for additional controlled functions or to withdraw existing controlled functions. We would therefore remind firms of the criteria for using the Form E which is referred to in SUP 10.13.3D :-
A firm should use this Form E when an approved person ceases to perform one or more controlled functions and the firm wishes to apply for approval for the individual in respect of other controlled functions. This Form E should not be used for a qualified withdrawal (see SUP 10.13.7R). Form E may also be used for transfers between firms that are part of the same group.
Form C must be used if the individual is ceasing to perform a controlled function and the firm is not seeking approval in respect of another controlled function.
Form A must be completed in full if the approved person is seeking approval in respect of a Significant influence function for the first time.
We would also remind firms that the Form E is an application to the FSA for approval for the transfer of the function and that approval should be obtained before the candidate undertakes any activities under the new function being applied for.
Appointed Representatives
- Firms are encouraged to submit the appropriate Approved Persons application forms at the same time as the relevant Add Appointed representative application form as the AR firm should not undertake regulated activities until the relevant individuals have been approved.
