The paper entitled ‘The approved persons regime – significant influence function review’, is aimed at clarifying what the FSA expects of individuals who currently perform a ‘significant influence’ function at a regulated firm.
Warren believes the consultation could have serious repercussions for many firms as it shows how the FSA is planning to increase the focus, competence levels and therefore the quality of management and controls on those persons owning, managing and/or controlling firms.
Bill Warren, Managing Director of Bill Warren Compliance LLP, commented: “The FSA has clearly been concerned by the number of individuals with ‘significant influence’ at firms who have, up until now, been able to avoid the FSA rules with regard to approved persons. This may be because they are not directly employed by the firm or, for example, are perhaps not located in the same country as the UK-based subsidiary.
“Consultation Paper 08/25 is the FSA’s solution in address this ‘gap’ by requiring individuals who have significant influence at the regulated firm to become approved persons. The upshot of this is that it makes these people personally accountable for their actions alongside the directors and managers running the firm on a day-to-day basis.”
Warren believes this will have implications for firms, particularly those who have senior managers who are not currently approved persons. The paper also outlines a new code of conduct for Non-Executive Directors outlining the minimum standards that are expected of such individuals.
Warren adds:
“Many firms appoint Non-Executive Directors to help them identify business risks, providing guidance and more control to the firm using their knowledge, experience and objectivity to deliver value. This is clearly a positive; however, the consultation paper makes it very clear that firms must carry out their own due diligence on these individuals. The days of appointing friends and former colleagues to management and Board positions, without showing clear evidence of their competence for the role, will perhaps disappear if these proposals become part of statutory regulation.
“While regulated advisory firms should continue to appoint Non-Executive Directors to help manage their growing risk, they must ensure the individuals in question have the right qualities and competencies to carry out this role. The FSA will be taking a keen interest in the qualities and abilities of all those with ‘significant influence’ therefore it will make sense to appoint those with the requisite experience and abilities. This paper should be the catalyst for a number of internal reviews at firms including their recruitment process, the appointment of Non-Execs, as well as other business fundamentals including risk management, T&C, and management and controls. If necessary, they should use the services of a compliance and regulatory expert to help them meet their growing responsibilities in these areas.”
Bill Warren Compliance LLP provides personal compliance advice to firms providing the full range of compliance services and providing recommendations to ensure compliance standards are met by applying a practical common sense approach.
Bill Warren Compliance LLP offers a range of compliance services all focused on the individual business model of the firm. Services range from reviews of management and controls, file checking, Treating Customers Fairly (TCF) requirements and Management Information, and FSA relationship to advise on the best approach to Principles-based regulation.
