Yudu - Journey to the FCA

PROTECTING THE PERIMETER

• We will look closely at the proposed business model and the viability of the firm over a medium-term horizon.

• Our processes will be structured to support our operational objectives.

• We will refuse applications at an earlier stage if we do not think the proposed offering of products or services is in the interests of consumers or, more broadly, if it poses a significant risk to our objectives.

• We will share any risks and underlying themes that we identify with our supervision colleagues, so they can monitor and assess them on an ongoing basis once a firm or individual is authorised.

…it is vital for firms to have balanced and effective boards, with a competent senior executive team.

Business Model Threshold Condition

A new Business Model Threshold Condition will demonstrate the importance that we place on a firm’s ability to put forward an appropriate, viable and sustainable business model, given the nature and scale of business that they intend to carry out.

We will expect firms to demonstrate adequate contingency planning in their business model. They will need to make clear how their business model meets the needs of clients and customers, not placing them at undue risk, or placing at risk the integrity of the wider financial services system, for example, from financial crime. We expect firms to provide clear information, with evidence of how they will meet this threshold condition. We will recommend refusal at an early stage where we are not satisfied that a firm meets, or will continue to meet, this minimum expected standard.

We will consult on how we will apply this Business Model Threshold Condition in a separate consultation paper due to be published in November 2012.

Approved persons

An ‘approved person’ is an individual who has been approved by the FCA or PRA to perform one or more ‘controlled functions’ on behalf of an authorised firm. These include significant influence functions (SIFs), such as a director or chief executive.

To ensure firms are effectively governed and able to deal with their customers fairly, only individuals with the appropriate skills, capabilities and behaviour should be appointed to these positions.

We think it is vital for firms to have balanced and effective boards, with a competent senior executive team. We will therefore consider the appropriateness of an individual’s appointment to a board within the context of the board’s overall composition.

We will continue to take a risk-based approach to approving individuals who perform controlled functions. For SIFs in higher-impact firms, we will continue to use SIF interviews where appropriate. When we assess an approved person application, we will look at the individual’s personal integrity, financial soundness, honesty and record of treating customers fairly. We are prepared to accept individuals into controlled functions who have non-financial convictions that are spent. It is up to the firms that make the application to demonstrate to us that the individual is appropriate for the role.

The PRA will receive and consider applications relating to the most senior functions – such as chief executive or senior directors – for dual-regulated firms. We will either give or refuse our consent to those applications. We will ensure that conduct-related skills and experience are taken into account when assessing senior function applications.

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Foreword by

John Griffith-Jones Introduction by

Martin Wheatley: Our vision for the Financial Conduct Authority

Chapter 1:

The creation of the FCA: Spotlight on some of our new powers

Chapter 2: Protecting

the perimeter

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Chapter 3:

Ensuring firms continue to meet our standards

Chapter 4:

Taking action against firms that do not meet our standards

Chapter 5: Building our

understanding of the markets

Chapter 6:

Maintaining effective relationships

Chapter 7:

Accountability, transparency and measuring our success

Annex A:

Specific questions for consultation

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