An “Approved Person” is an individual who is directly approved by the FCA to perform one or more activities on behalf of an authorised firm.
The FCA refers to these activities as “Controlled Functions.” The FCA has defined 11 Controlled Functions which are relevant to consumer credit firms depending on their business and legal status. The 11 functions are:
CF 1 Director function
CF 2 Non-executive director function
CF 3 Chief Executive function
CF 4 Partner function
CF 5 Directors of an unincorporated association
CF 6 Small friendly society function
CF 8 Apportionment and oversight function (Non-MiFID business only)
CF 10 Compliance oversight function
CF 11 Money laundering reporting function
CF 28 Systems and controls function
CF 29 Significant management function
The number of roles for which staff will need to be approved by the FCA will depend on the type of credit activities a firm intends to carry out, the legal status of the firm and the type of authorisation (Full or Limited Permission) it requires from the FCA.
At least one individual in all consumer credit firms (except most not-for-profit debt advice bodies and some sole traders) must be approved by the FCA. Firms with a Limited Permission – for example, motor dealers who are not directly authorised for general insurance – will normally only require one Approved Person. A firm can appoint an individual to be an Approved Person for more than one Controlled Function in the firm, provided it can demonstrate that the individual has the ability and expertise to manage multiple roles. An individual can be an Approved Person for more than one firm, provided each firm takes responsibility for ensuring the individual manages any risks involved.
Controlled Functions need to be carried out by individuals who are closely involved in the running of the firm. It is unlikely that firms will be able to meet the standards required by outsourcing these roles - but the FCA will assess this on a case-by-case basis.
When considering a candidate for approval, the FCA will look at the individual's:
- Integrity and reputation
- Competence and capability
- Financial soundness
Approved Persons are required to comply with the Statements of Principle and Code of Practice for Approved Persons, which are set out in the APER (here) chapter of the FCA's Handbook. These set out the conduct required and expected of those who are approved to undertake Controlled Functions within authorised firms.