APER Statements of Principle and Code of Practice for Approved Persons

Controlled functions:

What is an Approved Person?

An ‘Approved Person’ is an individual who the FCA approve to do one or more activities, known as ‘controlled functions’, for an authorised firm.

An Approved Person must:

• meet the requirements of the FCA’s ‘fit and proper’ test and follow its principles
• comply with the Statements of Principle and Code of Practice (these explain the behaviour the FCA expect of people they approve)
• report anything that could affect their ongoing suitability to the FCA and the authorised firm

Statements of principle

There are seven statements of principle that apply to Approved Persons. The first four apply to all Approved Persons whilst the last three apply to ‘Significant Influence Functions’ only, being controlled functions that are held by individuals fulfilling supervisory or managerial roles.
Applicable to all Approved Persons:

1. An Approved Person must act with integrity in carrying out his controlled function.
2. An Approved Person must act with due skill, care and diligence in carrying out his controlled function.
3. An Approved Person must observe proper standards of market conduct in carrying out his controlled function.
4. An Approved Person must deal with the FCA and with other regulators in an open and cooperative way and must disclose appropriately any information of which the FCA would reasonably expect notice.

Applicable to significant influence functions:

5. An Approved Person performing a Significant Influence Function must take reasonable steps to ensure that the business of the firm for which he is responsible in his controlled function is organised so that it can be controlled effectively. For example, they must put in place management information appropriate to monitor conduct and sustainability of the products being distributed.
6. An Approved Person performing a Significant Influence Function must exercise due skill, care and diligence in managing the business of the firm for which he is responsible in his controlled function. For example, they must ensure that where they delegate their responsibilities, they must monitor the persons to whom they have delegated to ensure such obligations are fulfilled.
7. An Approved Person performing a Significant Influence Function must take reasonable steps to ensure that the business of the firm for which he is responsible in his controlled function complies with the relevant requirements and standards of the regulatory system. For example, where an appointed representative interacts with a Lloyd’s managing agent, its approved person(s) must ensure it complies with the standard expected of it by that agent including Lloyd’s MS 11.

The code of practice for Approved Persons:

Code of practice (APER 3 & 4)

The FCA has set out a code of practice for Approved Persons, which details the types of acts and behaviour that would amount to breaches of these principles. The list is not exhaustive. All Approved Persons must read and understand the code prior to commencing work as a Significant Influence Function.

A copy of the code is available from the Compliance Team or can be found at https://www.handbook.fca.org.uk/.

Fitness and propriety (FIT)

The fitness and propriety rules apply to all Approved Persons, including both individuals and companies. They set out and describe the criteria that the FCA will consider when assessing the fitness and propriety of a person who is applying to perform a controlled function, but the criteria are also relevant in assessing the continuing fitness and propriety of Approved Persons.

The FCA will consider a number of factors when assessing fitness and propriety but the most important considerations will be the person’s:

• honesty, integrity and reputation (FIT 2.1);
• competence and capability (FIT 2.2);
• and financial soundness (FIT 2.3).

Controlled functions applicable to Paragon are described in more detail in section/app X. A full list of controlled functions is available on the FCA website.

The FCA requires that the Firm conducts its own assessment of whether each individual candidate is fit and proper to conduct a controlled function. In order to ensure that a candidate is suitable, the Managing Director conducts appropriate due diligence. The standard of due diligence is at the discretion of the Managing Director and is designed to satisfy the Managing Director that the tests of fitness listed above have been satisfied. The options include:

• a DBS check
• copy CV
• evidence of the qualifications obtained
• references
• credit check