Disciplinary action by the FCA

Once a person has become an Approved Person, he/she is individually regulated by the FCA and is therefore personally accountable to it. This has implications for the standards of conduct – Statements of Principle and Code of Practice for Approved Persons (APER) and fit and proper test – the person is expected to maintain and the disciplinary action that the FCA can take against him/her for failure to maintain standards.

If the FCA considers at any time that an Approved Person is no longer fit and proper to perform their controlled functions, it can make an order prohibiting that individual from performing one or more of those functions. This is known as a prohibition order. This is likely to prevent the individual from working in the financial services sector again.

The FCA can take action against an Approved Person if:

  • It appears to it that the person is guilty of misconduct;
  • It is satisfied that it is appropriate in all the circumstances to take action against the person.

An Approved Person is guilty of misconduct if he/she:

  • Has failed to comply with the Statements of Principle and Code of Practice for Approved Persons (APER);
  • Has been knowingly concerned in a contravention by the authorised firm of a statutory requirement under FSMA or an FCA Handbook provision.

The FCA can take action against individuals relating to historic matters and therefore against those who ceased to be Approved Persons a long time ago. It does not matter if that individual has changed jobs or retired.

The FCA has the power to impose a financial penalty on the Approved Person or issue a public statement of their misconduct. The FCA may also suspend its approval of the performance of a specific controlled function by the Approved Person or impose such limitations or restrictions on the performance of a controlled function as it deems appropriate. However, any such suspension or restrictions (currently) must not exceed two years. Disciplinary action may even result in withdrawal of authorisation.

The FCA expects senior management to take responsibility for ensuring firms identify risks, develop appropriate systems and controls to manage those risks and ensure systems and controls are effective in practice. Personal culpability of an Approved Person arises where, in the exercise of an approved function, behaviour was deliberate or where the Approved Person’s standard of behaviour was below what would be reasonable in all the circumstances. The FCA’s expectation of individuals’ responsibilities under the various controlled functions differs.

The FCA may take disciplinary action against individuals within senior management who fail to ensure that their firm complies with requirements, such as having adequate systems of control or an appropriate training and competence programme.