According to the Financial Conduct Authority (FCA), an Approved Person is an individual that is assessed and subsequently approved by the FCA to fulfil the functions included in their job role. The FCA is the regulatory body responsible for regulating the conduct of over 59,000 financial services firms in the UK, and therefore the FCA is committed to ensuring the employees within these firms can fulfil their duty. The FCA subject individuals to regulatory requirements which must be achieved to qualify for an Approved Person status. Therefore, knowledge of regulatory requirements and how to achieve them is essential for employees in financial services.
How do you become an FCA Approved Person?
The FCA has established regulatory requirements for employees to understand and meet to achieve an approved status from the FCA. To become approved by the FCA, you must:
- Complete a 'Fit and Proper' test. This test analyses how fit and proper you are to fulfil your duty and to handle your responsibilities at work.
- Comply with the Statements of Principle and Code of Practice. The Statement of Principle and the Code of Practice stipulates the behaviour and the conduct which the FCA expect from employees in financial services.
- Report any personal changes to the FCA. If a personal change occurs, which could affect the way that an individual can conduct their job and responsibilities, they must inform the FCA and their firm.
What is a 'Fit and Proper' Test?
The Fitness and Propriety test, also known as a 'Fit and Proper' test, is used by the FCA to assess whether an individual is fit and able to fulfil their duties, responsibilities and ultimately their job role.
The test is used as a benchmark to prove that an individual is suitable to perform their controlled functions. The test considers the following aspects of an individual's character:
- Financial Soundness
To assess an individual's character, the test is formed questions which require either a 'Yes' or 'No' answer. Therefore, it is important, to be honest and as clear as possible.
It is important to disclose all information which is required. Some of the information which will be required includes:
- Qualification Certificates
- Credit Checks
- Criminal Record Checks
- Regulatory References
- Directorship Checks
Who is this relevant to?
The Senior Managers & Certification Regime (SM&CR) is the FCA's initiative to increase the accountability and integrity of all FCA regulated firms in the UK. From 9 December 2019, the SM&CR applies to all solo-regulated and dual-regulated firms, which will account for the vast majority of financial firms in the UK. The SM&CR has effectively replaced the FCA's previous Approved Persons Regime.
The Approved Persons Regime only referred to the Directors of financial services firms. Therefore, the SM&CR broadens the scope and analyses all employees who deal with clients in a financial services firm and demands that they must be approved to work.
Employees who conduct controlled functions in a firm need to be approved. The FCA refers to the following as controlled functions in consumer credit firms:
- Director Function
- Non-Executive Director Function
- Chief Executive Function
- Partner Function
- Directors of an Unincorporated Association
- Small Friendly Society Function
- Apportionment and Oversight Function (Non-MiFID business only)
- Compliance Oversight Function
- Money Laundering Reporting Function
- Systems and Controls Function
- Significant Management Function
Therefore, it is important to understand what an FCA Approved Person is and how to conduct this process, to remain compliant with the FCA's requirements.