Following the FSA’s recent review of the Handbook they propose correcting a technical error in SUP 10.9.1R that sets out the types of firm where the significant management function (CF29) applies.
Generally CF29 is used for larger firms where an individual is not a member of the governing body, such as a Director, but does however exercise significant influence in the firm’s affairs, such as being a head of a business unit.
SYSC 2.1.1R (which requires firms to have clear and appropriate apportionment of responsibilities) was used as a cross reference in the rules setting out the application of CF29. SYSC 2 ceased applying to MiFID or CRD firms following those respective Directives’ implementation.
These firms were subject to the new provisions of SYSC under what is known as the common platform approach as set out in SYSC 4-10. This common platform approach was extended to most other firms, for which SYSC 2 also ceased to apply. Currently and from a technical standpoint therefore, according to the FSA, the application of CF29 has been carved out for the majority of firms subject to the common platform so that it currently applies to those generally smaller firms covered by SYSC 4.4.
The carve out has not been deliberate and the FSA state that even the CP06/15, (‘Reforming the Approved Persons regime’) which introduced CF29, clearly states that it will apply to both MiFID and non-MiFID firms in the future. Consequently the FSA believe that most firms will be unaware of the issue and will have been operating in line with stated policy intention.
The FSA have proposed to insert a reference to SYSC 4.1.1R into SUP 10.9.1R to bring the Handbook in line with stated policy intention, correcting this technical error.
In keeping with the odd construction of this paper the amendments to SUP for the CF29 technical correction are found in Appendix 10 (which is supposed to concern amendments to FSA015) and not in Appendix 12 (‘proposed changes to the approved persons regime in the Supervision manual’ – which actually contains details of changes to FSA003).