compliance Terence Clark RWA COMPLIANCE SERVICES
Whatshall wedowith Mum&Dad?
One of the biggest headaches for the family-run business in the small to medium independent broking sector has been the burden piled on by the regulator when it comes to “approved persons”
U
p to the time when statutory regulation arrived, it was usual for directors or partners to be on the scene who performed no active role whatsoever in the day-to-day running of the firm. Mums and dads, aunts and uncles held directorships for no other reasons than holding a significant shareholding, or simply for historical or sentimental reasons.
But then the regulator comes along. The FSA find themselves in a tricky situation. Unofficially they can no doubt recognise the reasons behind the situation that they find - but how on earth can they possibly regulate the potential time bomb of unregulated individuals, of unproven skills, who may - or may not - be in control of the very firms they are expected to regulate on behalf of the consumer? The bad news is, of course, that they can’t. The FSA view all directors or partners within a firm as having equal regulatory responsibility and would expect
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each person to be aware of what is happening in their firm. It’s no longer the case that a person in such a position can plead ignorance to a non compliant act by another person. Everyone is expected to know what’s going on.
So everyone becomes swept up under the Controlled Function heading, and so must be approved by the FSA. And go through the application process, and be entered onto the FSA register.
Directors or partners who perform no active role whatsoever in the day-to-day running of the firm, but hold the position for historical, sentimental, or family reasons must go through the process of being an approved person.
The application process is as follows:-
1. The completion of a “Form A” (available from the FSA website) by the individual concerned and submission to
the FSA. (There is a “long” form for new Approved Persons and a “short” version for those who are approved for another function, or who have ceased to hold a function within the last six months)
2. The individual applicant may be called to Canary Wharf for an interview as part of the process (although unlikely for a general insurance firm which is regarded as low risk)
3. If all goes well and the FSA are satisfied, then the firm will receive a letter formally approving the application, and then the individual can start to perform the role
The last point is very
important; an individual cannot under any circumstance perform the role before approval is granted by the FSA. However, let us take a step back. Before submitting an application to the FSA, a firm must
be confident that the application will proceed, and that there are no nasty surprises. What this effectively means is that a firm must have information to demonstrate that they have performed due diligence on the applicant.
This can include:-
● Previous employers references (going back at least 5 years, preferably ten)
● Professional references ● Evidence of qualifications ● Evidence of previous CPD ● Criminal Records Check ● Credit referencing ● Evidence of Technical ability
The FSA may want to look at the due diligence undertaken, the recruitment, interview and appointment process and details
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