FCA expectations – temporary long term absence

Following consultation in CP20/23, which was published in December 2020, the FCA has made changes to the Handbook.

 

 

The affected sections are:

  • SYSC 25.4
  • FIT 1.3
  • SUP 10A.14, 10C.9, 10C.10, 10C.11, 10C.14, 10C Annex
  • 2G and 10C Annex 6R Form D

In summary, the changes to the Handbook are intended to reflect the FCA’s expectations for firms to notify it when an Approved Person at an Appointed Representative firm (AR) or a Senior Manager takes temporary leave for longer than 12 weeks (long-term leave).

The changes include adding an additional field to Form D (Changes to personal information/application details and conduct breaches/disciplinary action related to conduct) to enable firms to notify the FCA that the relevant individual is taking leave or returning from that leave.

These changes come into force on 2 June 2021.

The 12-week rule

Information and guidance on the 12-week rule can be found in SUP 10C. Firms are required to notify the FCA when a relevant individual has been absent for more than 12 weeks. The notification can be made before the end of the 12-week period where the firm is aware that the individual’s absence will be longer than 12 weeks. Firms should apply for approval for interim appointments as soon as it becomes apparent that the individual will be performing a FCA designated SMF for more than 12 weeks.

Clarifications

Where an individual who performs a controlled function at an AR or a Senior Management Function (SMF) takes temporary, long-term leave, and the firm intends to keep the role open for that individual to return to, there is no requirement to notify the FCA that the individual is no longer performing the role by submitting a Form C. Firms are also not required to seek re-approval for the individual once they have returned to their role.

However, firms should still ensure that, where the individual taking long-term leave is carrying out an FCA (or PRA) required function, another individual is appointed to perform that required function during the interim period.

Where the individual, who is performing a controlled function at an AR or a SMF, is temporarily absent from their role, the firm must notify the FCA of the individual being on long-term leave via Form D. As stated above, Form D has been amended to include an additional field for firms to use to notify that the relevant individual is taking leave or returning from that leave.

This does not affect cases where a firm is aware, or becomes aware, that the individual will NOT be returning to their role. In these cases, firms must still notify the FCA and, where applicable, the PRA, that the individual’s approval should be removed using Form C (Notice of ceasing to perform controlled functions including senior management functions) or Form E (Internal transfer of an approved person) as appropriate.

Statement of Responsibilities

Firms must continue to provide the FCA and, where applicable, the PRA, with a revised Statement of Responsibilities where there has been any significant change in the responsibilities of a Senior Manager. Where the individual on long term leave had been allocated prescribed responsibilities (PRs), firms are expected to follow the existing process for removing PRs from that individual and allocating the PRs to another individual performing a SMF in that firm. This is via Form J (Notification of Significant Changes in Responsibilities of a Person Performing a Senior Management Function).

Responsibilities Maps

Responsibilities Maps set out the firm’s management and governance arrangements. Firms must maintain a comprehensive and up-to-date document that describes its management and governance arrangements. This means that maps should continue to be revised to reflect any relevant appointments and changes in responsibilities.

Ongoing fit and proper assessments

The rules recognise that, in certain circumstances, an individual may not be practically able to participate in a fitness and propriety assessment while on long-term leave. SUP 10C now contains guidance that it may not always be appropriate or necessary for an individual to participate in such an assessment while they are on long-term leave in order to comply with the relevant requirement.

However, firms remain responsible for assessing the continuing fitness and propriety of staff and consider whether it may be necessary to refresh any aspects of the assessment upon the individual’s return to work.

Certified staff

Where a member of Certified staff no longer holds a relevant role, as with any individual meeting the definition of Directory person, namely an individual who is:

  • an appointed representative Directory person;
  • a certification employee;
  • a non-SMF director Directory person; or
  • a sole trader Directory person.

… firms need to notify the FCA when the role ended in accordance with the reporting requirements on Directory persons in SUP 16.26.

If the firm is keeping the same role open for a Directory person while the individual is on long-term leave, there is no need to notify as the individual will continue to appear as active on the Financial Services Register.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

ATEB Compliance offers compliance and regulatory advice.

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About the Author

Richard is a Chartered Financial Planner and a Fellow. He has a long track record of implementing compliance regimes for firms large and small. His expertise and qualifications are broad, including pensions, investments, home finance, consumer credit and general insurance.

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