Twelve-week Rule. In June 2020, the FCA issued a statement detailing their expectations regarding the Approved Persons Regime-coronavirus and introduced a Modification by Consent to the 12-week rule to support firms with Appointed Representatives (ARs) apply the Approved Persons Regime during the coronavirus crisis. This modification by consent extended the period in which an individual could cover for an Approved Person without being approved from a maximum of 12 weeks in a 12-month consecutive period to a maximum of 36 weeks in a consecutive 12-month period.
Firms could use this modification if they thought they may need to make or extend temporary arrangements to cover absence as a result of the coronavirus.
The FCA’s December 2020 update explains that the FCA now considers that firms have adapted to the impact of the pandemic over the past few months and that the relevant modification of consent will end after 30 April 2021. This will mean that a firm cannot consent to the modification after 30 April 2021 and all modifications consented to before then will come to an end on that date, therefore, a modification will not assist with a temporary appointment that begins after 5 February 2021 (12 weeks before 30 April 2021).
In June 2020 the FCA said that there may be cases where ARs decide to furlough Approved Persons if they are unable to fulfil their responsibilities, for example, due to illness, caring responsibilities or if they have no current practical responsibilities. Unless an individual is permanently leaving their post, they can retain their approval during their absence and will not need to be re-approved by the FCA when they return. The Principal firm is still responsible for ensuring the Approved Person in the AR is fit and proper.
This remains unchanged from the FCA’s June 2020 statement.
Notification and documentation
The FCA’s previous statement regarding notifications about temporary arrangements said that they did not expect firms to notify the FCA under Form D of the temporary arrangements. It was made clear that the FCA expected these arrangements to be clearly documented internally, evidencing that everyone understands who is responsible for what and that this documentation should be available to the FCA if requested, now or in the future.
This provision will end on 7 January 2021 and the normal rules will apply from then. Any changes made on or after 7 January 2021 will need to be notified to the FCA by submitting a Form D.
Responsibilities of the Principal firm
The FCA’s recent update also reminds Regulated firms with ARs appointed to carry on regulated activity that they remain responsible for their ARs and meeting the FCA rules. Principals should continue to ensure that:
- the controllers, directors, partners, proprietors and managers of an AR are fit and proper;
- the AR is solvent and suitable to act for the firm;
- the Principal has adequate controls over the AR’s activities;
- the appointment does not prevent the firm from satisfying and continuing to satisfy the threshold conditions;
- the Principal is able to monitor and enforce compliance with relevant requirements.