The FSA has launched Consultation Paper (CP12/26) containing a number of proposals for the operation of the approved persons regime under the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). CP 12/26 proposes a number of changes to the existing regime that is currently set out in Chapter 10 of the Supervision Manual (SUP) of the FSA Handbook. Legal cutover is expected in April 2013, and at that time, the PRA and FCA will each assume responsibility for a number of controlled functions. Each regulator must establish the rules by which approval will be obtained for each of its controlled functions.
In CP12/26, the FSA outlines its proposals for how responsibility for the controlled functions will be split. In circumstances where one individual may be required to perform a combination of two controlled functions – one PRA function and one FCA function – that individual need only make one application to the PRA. There will be no need for a separate application to the FCA. However, the FCA will be involved in the assessment process and its consent must be obtained before the PRA can approve an application. On approval, this individual's PRA controlled function will also include the FCA role, but only the PRA controlled function will appear on the Register.
CP12/26 also discusses the creation of two new non-executive director controlled functions; one for the PRA and one for the FCA. The CF2 (PRA) function will cover those in the role of chairman, senior independent directors, non-executives in an unregulated parent undertaking or holding company and the chairmen of audit, risk and remuneration committees. The CF2 (FCA) function will cover all remaining aspects of the CF2 function. After legal cutover, a move from CF2 (PRA) to CF2 (FCA) will require a new application as it will be considered a new controlled function.
Significantly, CP12/26 also proposes an extension to the scope of the standards set out in the PRA and FCA versions of APER, so these standards will apply beyond the function for which the individual has been approved. The PRA's APER will apply to the performance of any activity which could be a significant influence function, insofar as it relates to the carrying on of a regulated activity by the firm which originally sought the approval. The FCA's APER will apply to the performance of any activity insofar as it relates to the carrying on of a regulated activity by the firm which originally sough the approval. This extension in scope illustrates the FSA's desire that individuals apply the same standards of behaviour to their wider roles, regardless of whether all those activities all fall within the "controlled function" definition.
Feedback on those proposals are welcome until 7 December 2012. The final rule instruments will not be published by the PRA and FCA until after legal cutover. Both of these regulators plan to carry out further work in relation to the approved persons regime once they have been formally established.