Our approved persons and appointed representative network
ShareIn serves as a Principal firm with a network of Appointed Representatives and their associated FCA Approved Persons.
3.1. What are Approved Persons?
An 'approved person' is an individual approved by the FCA to do one or more activities - what are called 'controlled functions' - for an authorised firm. An Approved Person must know and meet the FCA's regulatory requirements, as well as understand how they are applied.
Approved Persons must:
- meet the requirements of the 'fit and proper' test and follow its principles
- comply with the Statements of Principle and Code of Practice explain behaviour the FCA expect of people we approve
- report anything that could affect their ongoing suitability to the FCA and the authorised firm, in this case ShareIn
ShareIn will verify the identity of and vet any individual seeking to become an Approved Person, whether that person is a ShareIn employee or is associated with one of our Appointed Representatives. The vetting process, which includes professional reference, credit and criminal background checks, is outlined in SPN 2018-03: Onboarding a new Appointed Representative client.
3.1.1. Statements of Principles for Approved Persons
The FCA requires that an approved person follows seven principles. An approved person must:
Act with integrity in carrying out his/her accountable functions.
Act with due skill, care and diligence in carrying out his/her accountable functions.
Observe proper standards of market conduct in carrying out his/her accountable functions.
Deal with the FCA, and with other regulators in an open and cooperative way and must disclose appropriately any information of which the FCA or the PRA would reasonably expect notice.
When performing an accountable significant influence function, take reasonable steps to ensure that the business of the firm for which he/she is responsible in his/her accountable function is organised so that it can be controlled effectively.
When performing an accountable significant influence function, exercise due skill, care and diligence in managing the business of the firm for which he/she is responsible in his/her accountable function.
When performing an accountable significant influence function, take reasonable steps to ensure that the business of the firm for which he/she is responsible in his/her accountable function complies with the relevant requirements and standards of the regulatory system.
3.1.2. Controlled Functions Regime
The FCA's approved persons regime is intended to ensure regulated firms have the right people in key positions to deliver effective corporate governance and risk management. Details of FCA expectations in these respects can be found in SYSC 1-21. Furthermore, the regime formalises the system of individual registration, making it a requirement that those officers and employees who perform certain key functions or controlled functions within the firm are registered. Where a business delegates any controlled functions to an outside party, the person performing them will also need to be registered as an approved person.
The objective is to allow regulation of the individual as well as the firm in its capacity as an authorised person. Controlled functions are categorised as follows:
Systems and controls function.
Significant management function.
The significant influence functions comprise the governing functions, the required functions, the systems and controls function and the significant management functions. Each significant influence function is one which is likely to result in the person responsible for its performance exercising a significant influence on the conduct of a firm's regulated activities.
If a firm appoints an individual to provide cover for an approved person whose absence is temporary or reasonably unforeseen, and such appointment would be for less than 12 weeks in a consecutive 12-month period, such an individual will not require to become an approved person.
If a firm is a body corporate (other than a limited liability partnership), the director function is the function of acting in the capacity of either a:
|Compliance oversight function||CF10||The compliance oversight function is the function of acting in the capacity of a director or senior manager who is allocated the function.|
|CASS oversight function||CF 10a||The function of overseeing the Firm’s arrangements for holding client money.|
|Money laundering reporting function||CF11||The money laundering reporting function is the function of acting in the capacity of the money laundering reporting officer of a firm.|
The customer function is the function of:
3.1.3. Controlled Functions and Us
As we are a relatively small organisation for FCA purposes, the function defined as 'significant management' does not apply to us. This is because those approved for the governing and required functions, in practice, exercise the significant management function at senior management level.
When an individual applies for a controlled function, we are required to provide supplementary information about the competence and capability of the candidate. ShareIn will undertake a number of steps to verify the identity of and vet anyone applying for Approved Person status, to be confident that individual is fit and proper, including a number of checks as described above.
AN INDIVIDUAL MUST NOT PERFORM A CONTROLLED FUNCTION UNLESS PRIOR APPROVAL HAS BEEN OBTAINED FROM THE FCA
3.1.4. Changes to Approved Persons' Details
If you are an approved person, it is imperative that you notify the compliance officer of any changes to your position, tasks, functional control or personal circumstances. For example, changes of NI number, title, name, address, etc. Such changes will be submitted to the FCA by the compliance officer using the FCA's 'CONNECT' system. You must wait until approval has been given by the FCA before you begin working on the new function(s). This information must be passed to the FCA within seven business days, so your co-operation is essential.
AN INDIVIDUAL MUST NOT BEGIN A NEW CONTROLLED FUNCTION(S) UNTIL APPROVAL HAS BEEN GIVEN BY THE FCA
3.1.5. Ceasing to Perform a Controlled Function
We are required to submit a notification within seven business days to the FCA, including a reason why you have ceased to perform the function. Normally this will not present difficulties. However, in cases where something has happened which calls into question fitness and propriety, the outcome may be different. Where the cessation is as a result of the latter, a qualified notification will be sent to the FCA, detailing the reason for cessation. In such cases we are required to notify the FCA within one business day of becoming aware of the relevant information.
3.1.6. Approved Persons Log
The Compliance Officer will ensure that details of all Approved Persons, their changes, status and training details are recorded and maintained.
3.2. What is an Appointed Representative?
An appointed representative (AR) is a firm or person who runs regulated activities and acts as an agent for a firm which is directly authorised by the FCA. This 'parent' is known as the principal firm. The ARmay only carry out activities it is permitted to carry out and for which the principal firm has been authorised.
The principal firm is responsible for the AR's acts and omissions. Our senior management are aware that the activities of our AR form an integral part of our business and as such require active management and oversight. Responsibility for appointing, controlling and monitoring all ARs lies with us as the principal firm and our senior management.
Because of this over-arching responsibility, we are required to establish and maintain effective systems and controls to demonstrate that our ARs comply at all times with the relevant regulatory requirements and standards. The FCA views ARs as part of our business and it considers any activities carried out by them or their approved persons as being carried out by us.
We therefore have in place robust and appropriate procedures, systems and controls for appointing ARs, conducting business and ending the relationship. These requirements are detailed within the FCA Handbook, under SUP 12.
3.2.1. Appointment of an Appointed Representative
Before we formally appoint an AR, the FCA expects us to undertake due diligence on the prospective AR firm. The requirements and expectations to be taken into account are noted in the FCA Handbook, and can be summarised as follows:
Suitability: Is the prospective firm suitable to act for us? As principal, we should consider whether the individuals who will become approved persons are fit and proper. We should also consider the fitness and propriety of all other senior managers, controllers, proprietors, etc., connected to the firm.
Systems and controls: Do we have adequate resources to monitor and enforce compliance with the relevant requirements of the prospective firm?
Solvency: Is the prospective firm solvent? As principal, we should take all necessary information into account. This includes statutory accounts, auditor reports, financial stability, debt, credit checks, forecasts, insurance, disciplinary history, and outstanding items with HMRC.
Close links: Does the prospective firm have any 'close links' (as defined by the FCA) that are likely to prejudice effective supervision?
Threshold conditions: Does the appointment impact on our current and continuing ability to satisfy the threshold conditions (COND)?
For all new Appointed Representative clients, ShareIn follows a detailed onboarding process and checklist, with multiple challenges and final sign off by the CF10/Head of Compliance before the completion of the FCA Application. The steps are described in detail in SPN 2018-03: Onboarding a new Appointed Representative client.
3.2.2. Ongoing Monitoring of an Appointed Representative
Once we have made the decision to take on a firm as an AR, and following confirmation of the registration of both firm and approved persons by the FCA, we then assume continuing obligations as a principal firm. The rules governing this are detailed within the FCA Handbook, under SUP 12.
As with the appointment, the requirements and expectations we must take into account during our relationship with the AR are detailed in the FCA Handbook, but can be summarised as follows:
Senior management responsibility: As we are the principal firm, we must take full responsibility for controlling and monitoring the activities of our AR. Our senior management should be familiar with all the activities undertaken by the AR and be aware that these form an integral part of our regulated activities. We are required to have in place effective systems and controls to demonstrate that the AR complies with its regulatory obligations. Our senior management are aware that they may, in their role as approved persons, be held personally accountable for the actions of our AR. We must have monitoring and oversight in place, and as per the requirements in SUP 12.6, as a minimum we must:
o Do desk checks, site visits and management meetings with the AR.
o Conduct ongoing compliance checks and refresh due diligence at least once a year.
o Regularly review all business activities undertaken by the AR.
Suitability: Following on from the initial suitability checks, we must monitor the ongoing suitability of the AR and, should we believe that the conditions for appointment are not being satisfied, take immediate steps to rectify the matter or terminate the AR contract.
Solvency: The FCA expects every principal to check the financial position of each AR at least once a year, and more often if necessary. Guidance is included in SUP 12.6.
Client money: We must ensure that any AR is not holding client money. This is checked by ShareIn in each quarter's ongoing compliance monitoring. ShareIn can hold client money in connection with arranging activities undertaken by ARs where the client agreement provides us with this authority.
Activities: We must take all reasonable steps to ensure that each ARis not conducting activities that are outwith our own permissions. ShareIn check on this as part of our monitoring of the AR's business activities.
Employees: We are responsible for approved persons and relevant employees of the AR fulfilling their obligations under the FCA's training and competence requirements. We must ensure that:
o We have satisfied the guidance under SYSC and TC in respect of all relevant staff within the AR. ShareIn has a policy on competence (SPN 2017-11 Measuring and Assuring Competence of Appointed Representatives, attached as an Appendix) that outlines specific elements each AR must master, along with how we measure and remediate each.
o That the AR has put in place adequate arrangements for training and competence and that appropriate training, such as AML, is given to all relevant staff. The competence policy is complemented by a suite of ShareIn Compliance training materials for AR staff.
Agreements: We must establish and maintain effective systems and controls to ensure that our AR complies with the terms of our contract.
ShareIn conduct both regularly scheduled formal monitoring as well as ad hoc monitoring. On a quarterly basis each Appointed Representative reports its activities via a standardised questionnaire. Compliance evaluate the responses and follow up to get further information or clarification where necessary. This process is described in SPN 2017-13: Quarterly Monitoring of Appointed Representatives.
ShareIn keep in regular touch with all clients, notably for any financial promotion review and approval, and this allows the Compliance team to quickly spot any areas that require further investigation on a more ad hoc basis. When there may be concerns about an AR's activities, or when an AR asks for additional training, Compliance address the issue and undertake remediation where necessary. The CF10 is directly involved in assessing these situations and determining a course of action.
3.2.3. Termination of an Appointed Representative
If we need to terminate our relationship with an AR, we would look to the FCA rules and guidance noted within the FCA Handbook under SUP 12.8
Whilst the FCA Handbook details the rules and expected course of action, the process can be summarised as follows:
Notification of termination or amendment of contract: If we or our AR wish to terminate the contract (or alter it so that it no longer meets the regulatory requirements) we must notify the FCA immediately.
Upon termination: All outstanding regulated activities and obligations to customers must be properly completed, either by ourselves or another of our AR firms.
Customer notification: All affected customers must be informed of any relevant changes.
Approved persons: We are responsible for notifying the FCA of any approved persons connected to us that are no longer performing a controlled function.
Notification of changes: If we have reasonable grounds to believe that an AR is likely to satisfy any of the conditions set out in SUP 12 then we must notify the FCA. The notification must cover either how we intend to rectify the matter or the date of termination of the contract with the AR.
Offboarding procedures and checklists will ensure that the offboarding is orderly and that investors receive full protection throughout the process.
3.2.4. Record-Keeping for Appointed Representatives
To demonstrate appropriate oversight of our AR, we are required to keep all records and documentation relating to the AR for at least three years following termination of its contract.
Under SUP 12.9, we must make and maintain the records including original contracts and amendments, dates and reasons for termination and whether the termination requires notification to the FCA. In addition, we are required to keep as much documentation as necessary to evidence initial and ongoing diligence, monitoring and oversight of the AR.