28 July 2009 News

 

FSA extends approved persons regime to include prop traders

The Financial Services Authority confirmed an extension of the approved persons regime for those that perform a ‘significant influence' function at firms. In its supervisory enhancement programme the FSA stated that it would place greater emphasis on the role of senior management, including non-executive directors.

In particular, the FSA has extended the scope and application of CF1 director function and CF2 non-executive director to include those persons employed by an unregulated parent undertaking or holding company, whose decisions or actions are regularly taken into account by the governing body of a regulated firm. They have also extended the definition of the significant management controlled function CF29 to include all proprietary traders who are not senior managers but who are likely to exert significant influence on a firm. Lastly amendments have been made to the application of the approved persons' regime to UK branches of overseas firms based outside the EEA.

The original proposals included clarifying the role of NEDs to make clear that the FSA will look at NEDs more closely where it believes they should have intervened more actively within a firm's management. Before making a final decision on this issue, the FSA wishes to consider the relevant recommendations of the Walker Review and the financial reporting council's review of the combined code. The results of this consideration will be included in a further consultation paper on governance which the FSA expects to publish in Q4 2009.

These changes will come into effect on 6 August 2009 with a transitional period of six months. Firms should now begin assessing which individuals require approval and submit timely applications to comply with the end of the transitional period.