Functions of financial businesses regulated by Financial Conduct Authority (FCA)
The Financial Services and Markets Act 2000 provides that a significant influence function, in relation to the carrying on of a regulated activity by a firm, means a function that is likely to enable the person responsible for its performance to exercise a significant influence on the conduct of the firm’s affairs, so far as it relates to the regulated activity.
A person carrying out such a function in relation to an authorised firm must be an FCA-approved person.
The context of FCA’s significant influence function test is different from that of the significant influence rule in the Salaried Member legislation. However the following FCA functions are likely to result in the individual exercising them having significant influence for the purposes of Condition B: CF3 (chief executive function) and CF8 (apportionment and oversight function).
On the other hand, CF4 (partner function) merely means that the individual has to be FCA-approved by virtue of being a member of the LLP (and as a result of which the FCA presumes the individual to have influence). Whether this in practice results in the individual having significant influence over the affairs of the LLP as a whole is a question of fact. In cases where the firm’s activities consist wholly or almost wholly of regulated activities and the individual in question significantly contributes to the firm’s major decisions (management, strategic or investment-related), then it is likely that this constitutes significant influence for the purposes of Condition B
This example looks at whether someone who fulfils a function required by a regulatory body satisfies Condition B.
X is a member of XYZ LLP, a regulated asset manager. X is a key portfolio manager, but not on the managing committee of XYZ LLP.
X is authorised by the FCA and holds Controlled Function CF4 for FCA’s purposes, which is listed as a significant influence function. In addition, X makes significant investment decisions in relation to one of the funds under management.
X fails Condition B because of his significant influence over the LLP.