On 27 July 2009, the Financial Services Authority (the FSA) issued PS09/14: “The approved persons regime – significant influence function review” (the Policy Statement) confirming that it will extend the approved persons regime for those that perform a ‘significant influence’ function at firms. The changes are aimed at better reflecting the corporate governance structures that exist within firms. As part of its supervisory enhancement programme, the FSA stated that it would place greater emphasis on the role of senior management, including non-executive directors. The Policy Statement sets out changes to the approved persons regime which ensure that those likely to exert a significant influence on a firm fall within its scope. In particular, the amendments will:
- extend 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;
- extend 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; and
- extend the limited application of the approved persons regime to UK branches of overseas firms based outside the EEA to apply all controlled functions.
The changes will come into force on 6 August 2009. Firms are required to identify any relevant individuals to whom the extended rules apply and submit applications for approval within a transitional six month period.
The FSA is postponing its proposal to clarify the role of non-executive directors until it knows the outcome of the Walker Review and the Financial Reporting Council’s review of the impact of the Combined Code on Corporate Governance, as both reviews will consider the role of non-executive directors.