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Glossary

Fit and proper assessments for AR staff

The principal must be satisfied that each AR and the people who run it are fit and proper: honest, competent and financially sound. Some individuals in ARs also need FCA approval. SM&CR applies to the principal; within an AR, individuals fall under the approved persons regime in SUP 10A.

The principal's assessment

  • Suitability includes the fitness, propriety and financial standing of the AR's controllers, directors, partners, proprietors and managers, assessed against FIT and the Form A questions (SUP 12.4.4G, SUP 12 Annex 2).
  • Information must be verified, not just collected: accurate, detailed and up to date, with omissions and concerns discussed with the individual (SUP 12.4.4EG).
  • FIT looks at honesty, integrity and reputation; competence and capability; and financial soundness (FIT 1.3.1BG). It is reassessed in each annual review (SUP 12.6A.2R(2)).

Approved persons in ARs

  • The controlled functions for ARs are the governing functions (CF1 to CF5) and the CF30 customer function (SUP 10A.4.4R). The principal makes the application.
  • Where an AR's scope is only non-investment insurance distribution or credit-related activity and its main business is unregulated, such as a car dealer, only one governing function needs approval (SUP 10A.1.16R).
  • The customer function does not apply to general insurance business or credit-related regulated activity, and the regime does not apply to IARs.
  • AR approved persons are subject to APER. Certification can apply to AR staff, but often does not because they are not the principal's employees (SYSC 27.4.2G).

Common misconceptions

“SM&CR senior manager functions apply inside ARs.”
Generally they do not. ARs have their own controlled functions in SUP 10A.
“Every director of a credit-broking AR needs approval.”
Where SUP 10A.1.16R applies, only one governing function holder does.
“FCA approval means the principal's fit and proper work is done.”
The principal must be satisfied first and keep reassessing. The FCA has also criticised principals that rely on its gateway checks to spot risk.

In Merrin

Each individual completes their own declarations in the AR Portal, and the assessment, assessor and conclusion are recorded once a year.

Fit & Proper

Sources

Checked against these sources on . This is general information, not legal advice.

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