FSA extends approved person regime

27 July 2009

In its supervisory enhancement programme the FSA stated that it would place greater emphasis on the role of senior management, including non-executive directors.

Today’s policy statement extends the scope and application of director and non-executive director functions to include those persons employed by an unregulated parent undertaking or holding company, whose decisions or actions are regularly taken into account by the governing body of a regulated firm.

It also extends the definition of the significant management controlled function to include all proprietary traders who are not senior managers, but who are likely to exert significant influence on a firm.

The changes will come into effect on August 6, 2009 with a transitional period of six months.

The FSA says firms should now begin assessing which individuals require approval and submit applications to comply with the end of the transitional period.

The original proposals included clarifying the role of non-executive directors to make clear that the FSA will look at them more closely where it believes they should have intervened within a firm’s management.

The FSA says it wishes to consider the relevant recommendations of the Walker Review and the Financial Reporting Council’s review of the Combined Code before making a final decision on this issue.

The results of the consideration will be included in a further consultation paper on governance which the FSA says it expects to publish in Q4, 2009.

FSA director of permissions, decisions and reporting division Graeme Ashley-Fenn says: “It is important that directors and senior managers at firms understand their regulatory obligations and have the relevant competencies and experience to carry out their roles with integrity.

“Since October 2008, the FSA has carried out 115 interviews for significant influence posts at high impact firms. Nine applications have been withdrawn as a result. Once in post, where individuals fail to meet the required standards the FSA will consider enforcement action.”

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