How Are FCA-Approved Persons Authorized?

The Financial Conduct Authority (FCA) is responsible for ensuring that individuals performing certain functions within regulated firms are fit to do so. These individuals, known as FCA-approved persons, must be authorized to conduct controlled functions, including key roles such as directors, compliance officers, and senior managers. The authorization process is rigorous and designed to maintain the integrity of the UK’s financial system. Below, we explore the detailed steps involved in obtaining FCA authorization for approved persons.

Table of Contents

1. Firm Submission of the Application

The first step in authorizing an FCA-approved person begins with the firm itself. The application must be submitted by the regulated firm employing the individual, not by the candidate. This ensures that the company takes responsibility for verifying that the individual meets the required standards. The firm uses Form A, the official application form, which includes essential information about the candidate such as:

Personal details.
Previous roles and relevant experience.
Proposed responsibilities within the firm.

Submitting Form A is a key part of demonstrating that the individual will perform controlled functions in line with the FCA’s expectations. The firm must also confirm that the candidate will uphold regulatory responsibilities within their proposed role.

2. Conducting Due Diligence

Before submitting the application, firms are required to carry out thorough due diligence on the candidate. This process ensures that the individual passes the FCA’s fit and proper test, which includes three main criteria:

Honesty, integrity, and reputation.
Competence and capability.
Financial soundness.

The firm needs to assess the candidate’s background to determine if they have the necessary qualifications, experience, and personal qualities to perform their duties. This assessment may involve reviewing past employment history, checking for any conflicts of interest, and verifying that the candidate has no criminal convictions or instances of regulatory breaches. The firm must document this process as it will form part of the formal application.

3. Submission of Supporting Documentation

The application is accompanied by a range of supporting documents to provide evidence of the candidate’s suitability for the role. These documents typically include:

Criminal records check: This ensures that the candidate has no disqualifying convictions.
Disclosure of previous regulatory issues: Any past FCA enforcement actions or disciplinary measures must be disclosed.
Educational and professional qualifications: Proof that the candidate has the appropriate skills and knowledge for the role.

The firm must ensure that the supporting documentation is complete, accurate, and up to date. Incomplete or inaccurate submissions can delay the approval process or lead to rejection.

4. Submission Through FCA’s Connect System

Applications are processed through the FCA’s Connect system, an online platform that streamlines the submission and review of applications. Firms must create an account on Connect, through which they can:

Submit Form A and the supporting documentation.
Track the status of the application.
Respond to any requests for additional information from the FCA.

Connect allows both the firm and the FCA to manage the entire process efficiently. This digital system enhances transparency, as the firm can see where the application is in the review process and make adjustments or provide further documentation if needed.

5. FCA Review and Processing Time

Once the application is submitted, the FCA begins its review process. The FCA typically aims to process applications within a standard timeframe of three months, provided that the application is fully completed and no further information is required. However, complex cases or those requiring further investigation may take longer.

During this stage, the FCA will:

Examine the candidate’s fitness and propriety.
Review the supporting documentation.
Potentially contact the firm for clarification or additional information.

If the FCA identifies issues or has concerns about the candidate, it may issue a warning notice. This notice indicates that the FCA is considering rejecting the application and provides the firm with an opportunity to respond before a final decision is made.

6. Approval Decision

Following the review, the FCA will make a decision. If the candidate passes the fit and proper test and meets all other regulatory requirements, the FCA will issue an approval notice. This notice confirms that the individual is authorized to perform controlled functions within the firm.

If the FCA decides not to approve the individual, it will issue a decision notice outlining the reasons for rejection. Firms have the right to challenge this decision through an appeals process, but it is critical that firms ensure candidates meet the requirements before submitting the application to avoid this outcome.

7. Ongoing Compliance Obligations

Authorization as an FCA-approved person is not a one-time event. Once approved, individuals must continue to meet the FCA’s standards throughout their tenure in the role. This requires:

Continuous adherence to the FCA’s Code of Conduct.
Ongoing training to remain updated on regulatory changes and best practices.
Ensuring integrity and transparency in all dealings, both within the firm and in relation to customers.

Firms are also responsible for regularly reviewing the performance of FCA-approved persons. This includes conducting periodic fitness and propriety assessments to ensure that the individual continues to meet the required standards. Any issues that arise, such as conflicts of interest or breaches of regulatory requirements, must be reported to the FCA immediately.

8. Senior Managers and Certification Regime (SM&CR)

It is also important to note that individuals in senior management positions are subject to the Senior Managers and Certification Regime (SM&CR). Under this regime, senior managers must be explicitly assigned responsibility for certain areas of the firm’s activities and are held accountable for failures in these areas. As part of SM&CR:

Senior managers must sign a statement of responsibilities, outlining their duties within the firm.
Firms must conduct annual reviews to ensure that senior managers continue to meet the regulatory standards.

The SM&CR aims to increase accountability and ensure that senior managers take ownership of their roles and their impact on the firm’s overall compliance.

Conclusion

The process for authorizing FCA-approved persons is structured to ensure that only individuals who are fit, proper, and capable of fulfilling their roles are allowed to perform controlled functions within financial services firms. By following the steps of submitting Form A, conducting thorough due diligence, and adhering to ongoing compliance obligations, firms can ensure that they meet the FCA’s stringent requirements for authorized individuals. This rigorous process is essential for maintaining the integrity and stability of the UK’s financial system.