WHO WILL BE YOUR APPROVED PERSON?

After 1 April 2014, companies will be called forward for authorisation. You should now start the process thinking about who will be your Approved Person(s).
Being an approved person brings with it several important responsibilities. These include a duty to be aware of, and comply with, the FCA’s regulatory requirements and understand how they apply to each controlled function.
Specifically, approved persons must:
• Meet and comply on an ongoing basis with the FCA’s Fit and Proper Test for Approved Persons.
• Comply with the Statements of Principle and the Code of Practice for Approved Persons.
• Report to the firm and to the FCA any matter that may affect your firm’s ongoing fitness and propriety

The FCA’s handbook state that there are controlled functions which apply to consumer credit firms depending on their business and legal status. The number of roles staff will need to be approved for will depend on the type of credit activities you intend to carry out, the legal entity of your business and the permissions you require. Firms with limited permission will normally only require one approved person. Controlled functions which apply to lending businesses are:

• Governing functions (known as CF1 to CF6) (Applies to individuals performing these functions in all authorised firms except: firms with limited permissions; some authorised professional firms in respect of their non-mainstream regulated credit activity (this may include, for example, law firms that on an incidental basis recover consumer credit related debts on behalf of their clients); sole traders)
o CF 1 Director function
o CF 2 Non-executive director function
o CF 3 Chief executive function
o CF 4 Partner function
o CF 5 Directors of an unincorporated association
o CF 6 Small friendly society function
• Apportionment and oversight function (known as CF8) (Applies to individuals performing this function in the following firms: firms with limited permissions (except for not-for profit debt advice bodies); some authorised professional firms in respect of their non-mainstream regulated credit activity; It does not apply to sole traders unless they employ people who have to be approved persons.)
• Compliance oversight function (known as CF10) (Applies to individuals performing this function in the following authorised firms (including sole traders that employ staff involved in the carrying on of the regulated business activities): debt management businesses; credit repair businesses.
• Money laundering reporting function (known as CF11) (Applies to individuals performing this function in authorised firms (including sole traders that employ staff involved in the carrying on of the regulated business activities) that are covered by the Money Laundering Regulations. It does not apply to ‘limited permission lenders’.)
• Systems and controls function (known as CF28 (Applies to individuals performing these functions in all authorised firms except: firms with limited permissions; some authorised professional firms in respect of their non-mainstream reg credit activity
• Significant management function (known as CF29) (Applies to individuals performing these functions in all authorised firms except: firms with limited permissions; some authorised professional firms in respect of their non-mainstream regulated credit activity)
• CASS operational oversight function (known as CF10 A): (Applies to a director or senior manager in a large debt management firm (including a sole trader) and a large not-for-profit debt advice bodies. In each case ‘large’ means the firm holds a minimum of £1 million of client money at some point during the last calendar year or projects that it will hold during the current calendar year.)

You can appoint one employee/Director to be an approved person for more than one controlled function in your firm, provided you can demonstrate that they have the ability to manage multiple roles. The FCA will look at the size and complexity of your firm to decide whether more than one controlled functions for individuals is appropriate.
The employee/Director can be an approved person for more than one firm, trading name or brand, provided that each takes appropriate responsibility for ensuring they manage the risks involved.
Controlled functions need to be carried out by approved persons who are closely involved in the running of the firm.
The FCA thinks it is unlikely that you will be able to outsource these roles however, you can outsource resources for guidance and support of approved persons. Contact Jane Blowers our Compliance Lawyer for further information/assistance at jane@alphlegal.co.uk or tel 07913308773

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