Delay To Controlled Functions Changes

Regulatory Roundup 22 updated firms on proposed changes to the Approved Persons regime set out in PS10/15 (‘Effective corporate governance’).

Highlights included the removal of the CF28 (Systems and Controls) function to be replaced by the reintroduced CF13 (Finance); CF14 (Risk); and CF15 (Internal Audit) functions.

The biggest impact was the introduction of the CF00 (Parent entity significant influence) function. This would replace the current concept of the extended CF1/CF2and bring LLPs into such a regime for the first time.

Other functions introduced were: CF2a (Chairman); CF2b (Senior independent director); CF2c (Chairman of risk committee); CF2d (Chairman of audit committee); and CF2e (Chairman of remuneration committee.

Altogether the proposals would introduce nine new controlled functions to take effect, subject to certain transitional provisions, on 1 May 2011.

Annex 5 of PS10/15 contained a useful table of actions required by firms whether by way of notification to the FSA or via the FSA approval process. All such notifications and applications were to be submitted via ONA(the Online Notifications and Applications System). The FSA is undertaking a considerable programme of work on ONA, which means they have been unable to make the necessary changes to process the applications for these new functions.

The effect of this is to delay the introduction of these nine new functions and the deletion/amendment of existing controlled functions, although the other aspects of PS10/15 that are not system dependent will be implemented. There is no date set for when the new controlled functions will come into being, although the FSA has committed to giving at least two months’ notice of the new implementation date.

The FSA advise that the postponement should not be taken as a change of policy and assure firms that ‘any work they have already undertaken to identify and assign individuals to the new controlled functions has not been wasted’.