As part of this, it seeks feedback by 31 October 2016 on the FCA’s proposed approach to changes MiFID II makes to the authorisation process, particularly changes to its “approved persons” application form known as Form A.
From early 2017, the new Form A would be used by:
- Firms applying for a new authorisation to undertake MiFID activities (e.g. those operating an organised trading facility or data reporting service providers);
- Existing non-MiFID firms with permissions applying for a variation of permissions (VOP) that will bring them into scope of MiFID – for new individuals. For existing individuals, firms can decide to submit a new Form A or refer to the existing Form A and submit the additional information required by the Authorisations RTS or the ITS annexes (as defined below); and
- Prospective Article 3 firms applying for authorisation.
Existing MiFID firms will only be required to use the new Form A once MiFID II comes into force on 3 January 2018.
Firms applying for a new authorisation will only need to provide the full information (including that listed below) required by the new Form A for members of the management body or those who effectively direct the business. However, the FCA recognises that firms may prefer to use one single Form A for all relevant approved persons applied for, even where not members of the management body, and so it seeks views on whether it has approached the balance between complexity and information requirements correctly (see Chapter 16 and Qs.61 and 62 on p120).
The proposed amendments to Long Form A
Section 59 of the Financial Services and Markets Act 2000 requires regulated firms to take reasonable care to ensure that no one performs “controlled functions” for the firm without previous approval by the FCA. Currently, to seek approval for individuals to perform such controlled functions (including any relevant senior management functions) firms must submit “Long Form A” (see SUP 10A Annex 4D or SUP 10C Annex 2D as appropriate). The firm may be allowed to use “Short Form A” on occasion. These changes relate to the Long Form A found at SUP 10A Annex 4D.
The MiFID II framework requires firms to provide mandatory information as part of the authorisations process. It is welcome that the FCA appears to be seeking to modify its existing approach, rather than introduce a new, separate or additional process. However, firms will need to provide some supplementary information including:
- the relevant individual’s:
- contact telephone number;
- employment history for 10 years (rather than the current five);
- an official certificate of conviction (where available), if candidates have disclosed a criminal offence;
- answers to whether the individual or the firm is aware of any financial or non-financial interests of the candidate or close relatives to the management body and key function holders of the firm, its parent, subsidiaries or shareholders that may cause a conflict with the performance of the controlled functions for which the approval is now sought (see Q.505.1 on page 18 of the amended form);
- the minimum time that will be devoted to the performance of the function within the firm;
- human and financial resources devoted to the induction and training of the candidate;
- the candidate’s experience and reputation, with references (including contact details and letters of recommendation and other relevant documentary evidence);
- whether an assessment on the candidate has already been conducted (including the date of and the identity of the assessor, and evidence of the outcome of the assessment); and
- where the candidate is subject to an ongoing criminal investigation, a “declaration of honour” – to be satisfied by signing the declaration at the end of Form A.
The FCA has shortened the consultation period as it wishes to open the authorisations gateway in early 2017 so that firms may apply to vary or add permissions and investment types in advance of the 3 January 2018 MiFID II implementation date. This proposal is covered in Chapter 16 of CP 16/29 (see pp117 onwards). Further details will also be provided in the MiFID II Application and Notifications guide that the FCA plans to publish later in 2016.
There is a separate version of Form A for relevant authorised persons subject to the UK’s Senior Managers’ regime (SUP 10C Annex 2D- the RAP Form A). The FCA is not currently planning changes to the RAP Form A. However, this is under review. Also note that the FCA is proposing that existing MiFID firms continue to use the current Form A (or Form C, if relevant) until 3 January 2018.
MiFID II Directive (2014/65/EU) – Articles 5, 6, 7, and 9 – plus any exemptions in Articles 2 and 3
Regulatory Technical Standards (RTS) under Art7(4) of MiFID II on information and requirements for the authorisation of investment firms (the Authorisations RTS) – Article 4
Implementing Technical Standards (ITS) under Art7(5) of MiFID II on notifications by and to applicant and authorised investment firms (the Authorisations ITS) – Annex I, II, and III