SUP 10A.9 applies only to a firm which:
under SYSC 4.1.1 R, apportions a significant responsibility, within the description of the significant management function, to a senior manager of a significant business unit; or
undertakes proprietary trading.
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The FCA anticipates that there will be only a few firms needing to seek approval for an individual to perform the significant management function set out in SUP 10A.9.1R (1). In most firms, those approved for the FCA governing functions, FCA required functions and, where appropriate, the systems and controls function, are likely to exercise all the significant influence at senior management level.
A proprietary trader undertakes activities with the firm's money and has the ability to commit the firm. By virtue of this role, all proprietary traders have potential to be able to exercise significant influence on the firm for the purposes of the definition of significant-influence function. Therefore, it is the FCA's expectation that all firms will assess all their proprietary traders to ascertain the ones for whom approval is required.
The scale, nature and complexity of the firm's business may be such that a firm apportions, under SUP 10A.9.1R (1), a significant responsibility to an individual who is not approved to perform the FCA governing functions, FCA required functions or, where appropriate, the systems and controls function. If so, the firm should consider whether the functions of that individual fall within the significant management function. For the purposes of the description of the significant management functions, the following additional factors about the firm should be considered:
the size and significance of the firm's business in the United Kingdom; for example, a firm carrying on designated investment business may have a large number of approved persons (for example, in excess of 100 individuals);
the number of regulated activities carried on, or proposed to be carried on, by the firm and (if relevant) other members of the group;
its management structure (for example, matrix management); and
the size and significance of its international operations, if any.
When considering whether a business unit is significant, the firm should take into account all relevant factors in the light of the firm's current circumstances and its plans for the future, including:
the risk profile of the unit; or
its use or commitment of a firm's capital; or
its contribution to the profit and loss account; or
the number of employees or approved persons in the unit; or
the number of customers of the unit; or
any other factor which makes the unit significant to the conduct of the firm's affairs so far as relating to the regulated activity.
The question may arise whether a manager who is based overseas will be performing the significant management function under SUP 10A.9.9 R and should, therefore, be an FCA-approved person. This is especially true where the firm operates matrix management. The fact there is a person performing the apportionment and oversight function, and who has responsibility for activities subject to regulation by the FCA, may have a bearing on this. It is a factor to take into account when assessing the likely influence of the overseas manager.
Generally, in relation to a branch of a firm, or a firm which is part of an overseas group, where an overseas manager is responsible for strategy, he will not need to be approved for the significant management function. However, where he is responsible for implementing that strategy in the United Kingdom, and has not delegated that responsibility to a senior manager in the United Kingdom, he is likely to be performing that FCA controlled function.
See also SUP 10A.7.3 G to SUP 10A.7.6 G in relation to matrix management.
The significant management function is the function of acting as a senior manager with significant responsibility for a significant business unit that:
carries on designated investment business or other activities not falling within (2) to (4);
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carries on credit-related regulated activity;
makes material decisions on the commitment of a firm's financial resources, its financial commitments, its assets acquisitions, its liability management and its overall cash and capital planning;
processes confirmations, payments, settlements, insurance claims, client money and similar matters.
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The significant management function also includes the function of acting as a proprietary trader.
The significant management function does not include any of the activities described in any other FCA controlled function if that other controlled function applies to the firm.
A senior manager carrying on the significant management function under SUP 10A.9.9 R with significant responsibility for a significant business unit that carries on activities other than designated investment business for the purposes of SUP 10A.9.9R (1) could, for example, be the head of a unit carrying on the activities of: personal lending, corporate lending, salvage or loan recovery, or proprietary trading, or a member of a committee (that is, a person who, together with others, has authority to commit the firm) making decisions in these functions.
A proprietary trader also undertakes activities which may have a significant influence on the firm. Such activities may require approval for CF29 under SUP 10A.9.10 R.
A firm carrying on insurance distribution activity, other than a sole trader, must allocate to a director or senior manager the responsibility for the firm's insurance distribution activity (MIPRU 2.2.1 R). The firm may allocate this responsibility to the person performing the significant management function.
Where the person performing the significant management function is also responsible for the firm's insurance distribution activity, the words “(insurance distribution)” will be inserted after this FCA controlled function (see MIPRU 2.2.5 G).
