Approved persons carry out certain activities on a firm’s behalf and must be regulated by us. Learn about our requirements, conduct rules and ‘fit and proper’ test.
An ‘approved person’ is someone who we approve to do one or more activities for an authorised firm. We call these activities ‘controlled functions’. A subset of controlled functions are ‘senior management functions’ (SMFs).
Whether you’re the firm applying or the person or firm that’s the candidate to be an approved person, you should read this page and any other relevant pages in this section about:
- How to apply to approve an individual or firm
- How we process approved persons applications
- Senior management functions
- Heads of compliance and money laundering reporting officers (MLROs)
- Changing or cancelling an approval for a controlled function
Requirements of approved persons
At all times, approved persons must:
- Meet the requirements of our ‘fit and proper’ test and follow its principles
- Comply with our conduct rules
- Report anything that could affect their ongoing fitness and propriety, using Form D
Approved persons have a responsibility to be aware of – and comply with – our regulatory requirements and understand how they apply to carrying out each controlled function.
Our ‘fit and proper’ test
We use this as a benchmark to assess whether a candidate is suitable to perform a controlled function or SMF – it’s not an exam they have to pass.
Before submitting your application, your firm must be confident that the candidate is fit and proper to perform the role. If we’re not satisfied, we won’t approve them (this applies when we’re reassessing approved persons too).
We look for the candidate’s:
- Honesty (including being open about disclosing information)
- Integrity and reputation
- Competence and capability
- Financial soundness
We expand on this below. There’s more detail in our Handbook.
The individual your firm is applying for must understand the importance of being honest with us from the start.
Your application must provide information on everything we ask for. If in doubt, let us know as much as possible, even if it may not seem relevant. And where you think that something you’re disclosing about the individual shouldn’t affect their fitness or propriety, explain why.
Giving us false or misleading information may be a criminal offence.
If you’re not sure about disclosing convictions, you should seek legal advice.
Before applying, you must establish your own criteria of due diligence.
To help, here are some of the things we look for when assessing the candidate’s fitness and propriety:
- Regulatory references
- Qualification certificates
- Credit checks
- Criminal records checks
- Directorship checks
Make sure that your firm and the candidate complete the relevant parts of your application, and that it’s accurate and discloses all information. You should both then sign 2 copies, retaining one and sending us the other.
You’ll need references from the candidate’s previous employer(s) – unless you’re a sole trader, in which case you don’t need to seek regulatory references for yourself.
‘Regulatory references’ (references from other authorised firms) are particularly important. If you’re applying for SMF candidates or Non-Executive Directors (NEDs) who aren’t Senior Managers, your firm must:
- Get references from all previous employers (regulatory and non-regulatory) in the past 6 years, in line with SYSC 22.7 in our Handbook
- Share information between firms in a standard template
- Disclose certain information going back 6 years, including details of any disciplinary action taken due to breaches of our conduct rules and any findings that the person was not fit and proper
- Tell us anything else which helps us assess whether the candidate is fit and proper (eg the number of upheld complaints)
- Keep records of disciplinary and fit and proper findings
- Not enter into arrangements that conflict with your disclosure obligations (eg non-disclosure agreements)
And at any time, not just in the past 6 years, you must tell us if the candidate was involved in a case of serious misconduct.
Your firm will also need to update regulatory references where new, significant information comes to light.
Our conduct rules
Our conduct rules apply to all employees within a firm, not just approved persons.
They:
- Set basic standards of good personal conduct, against which we can hold people to account
- Help shape a firm’s culture, standards and policies
- Promote positive behaviours
- Improve individual accountability and awareness of conduct issues
- Apply to any of a firm’s financial services activities, whether regulated or unregulated
There are 2 tiers of conduct rules which apply to all firms.
The first is a set of general rules that apply to most employees and directors in a firm. The second set of rules only applies to Senior Managers, and in one case also to NEDs.
You must:
- Act with integrity
- Act with due care, skill and diligence
- Consider the interests of customers and treat them fairly
- Observe proper standards of market conduct
You must:
- Take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively (SC1)
- Take reasonable steps to ensure that the business of the firm for which you are responsible complies with the relevant requirements and standards of the regulatory system (SC2)
- take reasonable steps to ensure that any delegation of your responsibilities is to an appropriate person and that you oversee the discharge of the delegated responsibility effectively (SC3)
- disclose any information to us which we would reasonably expect to know about (SC4) – this also applies to NEDs who are not Senior Managers
If an approved person doesn’t comply with our rules
We will take disciplinary action, which could include fines, suspensions of approval, imposing restrictions and issuing a public statement about the misconduct.
Examples of approved persons not complying include if they act in a way that’s inconsistent with the rules for SMFs, or if they knowingly work together to breach their firm’s rules.