Financial Services and Markets Act 2000, section 59

Approval for particular arrangements

Part V Performance of Regulated Activities

(1) An authorised person (“A”) must take reasonable care to ensure that no person performs a controlled function under an arrangement entered into by A in relation to the carrying on by A of a regulated activity, unless [F336 that person is acting in accordance with an approval given by the appropriate regulator under this section. F336]

(2) An authorised person (“A”) must take reasonable care to ensure that no person performs a controlled function under an arrangement entered into by a contractor of A in relation to the carrying on by A of a regulated activity, unless [F337 that person is acting in accordance with an approval given by the appropriate regulator under this section. F337]

[F338 (3) “Controlled function”—

(a)in relation to the carrying on of a regulated activity by a PRA-authorised person, means a function of a description specified in rules made by the FCA or the PRA, and

(b)in relation to the carrying on of a regulated activity by any other authorised person, means a function of a description specified in rules made by the FCA.

(4) “The appropriate regulator”—

(a)in relation to a controlled function which is of a description specified in rules made by the FCA, means the FCA, and

(b)in relation to a controlled function which is of a description specified in rules made by the PRA, means the PRA with the consent of the FCA.

F339 (5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F340 (6)The PRA may specify a description of function under subsection (3)(a) only if, in relation to the carrying on of a regulated activity by a PRA-authorised person, it is satisfied that the function is a senior management function as defined in section 59ZA.F340]

[F341 (6A)If the FCA is satisfied that a function of a description specified in rules made by the FCA under subsection (3)(a) or (b) is a senior management function as defined in section 59ZA, the FCA must designate the function in the rules as a senior management function.F341]

F342 (6B). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F342 (6C). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F343 (7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F343 (7A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F343 (7B). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F338]

[F344 (7C)A regulator may not exercise the power in subsection (3) so as to provide for a function to be a controlled function in relation to the carrying on of the regulated activity of managing an AIF by an AIFM which—

(a)is also an AIF;

(b)does not manage any AIF other than itself;

(c)is a body corporate; and

(d)is not a collective investment scheme.F344]

F345 (8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F346 (9). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10) “Arrangement”—

(a)means any kind of arrangement for the performance of a function of A which is entered into by A or any contractor of his with another person; and

(b)includes, in particular, that other person’s appointment to an office, his becoming a partner or his employment (whether under a contract of service or otherwise).

F347 (11). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Read section 59 in the full Act → Definitions (14) Cases (10)

Definitions used in section 59

authorised person

“authorised person” has the meaning given in section 31(2);

Defined in s.417(1) · see it in the full Act

(2) In this Act “authorised person” means a person who is authorised for the purposes of this Act.

Defined in s.31(2) · see it in the full Act
regulated activity

“regulated activity” has the meaning given in section 22;

Defined in s.417(1) · see it in the full Act
appropriate regulator

(11) The FCA is the “appropriate regulator” in the case of a contravention of any other requirement , other than a case falling within paragraph 26 of Schedule 17A .

Defined in s.380(11) · see it in the full Act
PRA-authorised person

(5) In this Act “PRA-authorised person” means an authorised person who has permission—

(a)given under Part 4A, or

(b)resulting from any other provision of this Act,

Defined in s.2B(5) · see it in the full Act

“PRA-authorised person” has the meaning given in section 2B(5);

Defined in s.417(1) · see it in the full Act
functions

(4) Neither section 2AB(3)(d) nor the definition of “functions” in paragraph 1 applies for the purposes of sub-paragraph (2).

Defined in Sch.1ZB para.31(4) · see it in the full Act

(2A) The functions referred to in sub-paragraph (1)(a) include functions of the FCA under the Competition Act 1998 or the Enterprise Act 2002 as a result of Part 16A of this Act ; but this sub-paragraph is not to be regarded as limiting the effect of the definition of “functions” in paragraph 1.

Defined in Sch.1ZA para.23(2A) · see it in the full Act

(4) Neither section 1A(6)(d) nor the definition of “functions” in paragraph 1 applies for the purposes of sub-paragraph (2).

Defined in Sch.1ZA para.23(4) · see it in the full Act
Specified

(5) “Specified” means specified in an order made by the Treasury.

Defined in s.22(5) · see it in the full Act
rule

“rule” means a rule made by the FCA or the PRA under this Act;

Defined in s.417(1) · see it in the full Act
the FCA

(2) The Financial Conduct Authority is in this Act referred to as “the FCA”.

Defined in s.1A(2) · see it in the full Act

“the FCA” means the Financial Conduct Authority;

Defined in s.417(1) · see it in the full Act
the PRA

“the PRA” means the Prudential Regulation Authority;

Defined in s.417(1) · see it in the full Act
senior management function

(2) A function is a “senior management function”, in relation to the carrying on of a regulated activity by an authorised person, if—

(a)the function will require the person performing it to be responsible for managing one or more aspects of the authorised person's affairs, so far as relating to the activity, and

(b)those aspects involve, or might involve, a risk of serious consequences—

(i)for the authorised person, or

(ii)for business or other interests in the United Kingdom.

Defined in s.59ZA(2) · see it in the full Act
regulator

“regulator” has the meaning given in section 3A(2);

Defined in s.417(1) · see it in the full Act
AIF

“AIF” has the meaning given in regulation 3 of the Alternative Investment Fund Managers Regulations 2013 ;

Defined in s.417(1) · see it in the full Act
body corporate

“body corporate” includes a body corporate constituted under the law of a country or territory outside the United Kingdom;

Defined in s.417(1) · see it in the full Act
collective investment scheme

“collective investment scheme” has the meaning given in section 235;

Defined in s.417(1) · see it in the full Act

Cases considering section 59 (10)

Markos Markou v The Financial Conduct Authority

[2023] UKUT 101 (TCC) · 28 April 2023

Confirms that approval to perform a function may be withdrawn where the Authority considers that the person is not fit and proper. The withdrawal decision was remitted because the factual basis for lack of integrity was not established (see paras [25]; [464]-[472]).

Goodall v Santander UK Plc & Anor

[2017] EWHC 3898 (Ch) · 31 July 2017

Confirms that the approved persons regime concerns employees, agents and representatives of an authorised person. Any breach would concern the authorised intermediary and would not make section 27 applicable against the Bank (see paras [63]-[69]).

Brazzill & Ors v Willoughby & Ors

[2009] EWHC 1633 (Ch) · 10 July 2009Limits

Treats the statutory definition of “customer” as part of the competing construction issue, but concludes that the Notice used “customers” in its ordinary and wider sense.

What each judgment says about section 59 is in the case-law panel in the full Act.

Explanatory note

138.This section requires authorised persons to take reasonable care not to allow persons, natural or corporate, to perform certain functions without the approval of the Authority.  Subsection (2) similarly requires an authorised person to take reasonable steps to ensure that any contractor does not allow a person to perform such functions without the approval of the Authority.  A person in respect of whom approval is given is an “approved person”.  The nature of the functions requiring approval will be specified by the Authority’s rules, within the limits set out in subsections (5) to (7) and subject to the normal consultation requirements under Part X.  The limits can be summarised:

  • The function may enable a person significantly to influence the conduct of the authorised person (for example a director). By virtue of subsection (9) account may be taken of influence which might result from a failure properly to carry out that function (for example a proprietary trader).

  • The function involves dealing with customers (for example a financial adviser) or dealing with their property (such as a stockbroker) in a way that is substantially connected with the carrying on of a regulated activity by the firm.

139.Subsection (8) limits the application of this section in the case of EEA or Treaty firms.  The Authority will only have powers to act in relation to functions over which it, rather than the home State regulator, has jurisdiction.

All the explanatory notes for the Act

Amendments and notes

18 notes from legislation.gov.uk

Amendments

  1. F336Words in s. 59(1) substituted (7.3.2016) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 3 para. 1(2); S.I. 2015/490, art. 2(1)(b) (with savings and transitional provisions in S.I. 2015/492 (as amended by S.I. 2015/1660)) this amendment is subject to savings and/or transitional provisions, see the commentary.
  2. F337Words in s. 59(2) substituted (7.3.2016) by Financial Services (Banking Reform) Act 2013 (c. 33), s. 148(5), Sch. 3 para. 1(3); S.I. 2015/490, art. 2(1)(b) (with savings and transitional provisions in S.I. 2015/492 (as amended by S.I. 2015/1660)) this amendment is subject to savings and/or transitional provisions, see the commentary.
  3. F338S. 59(3)-(7B) substituted for s. 59(3)-(7) (1.4.2013) by Financial Services Act 2012 (c. 21), ss. 14(1)(b), 122(3) (with Sch. 20); S.I. 2013/423, art. 3, Sch.
  4. F339S. 59(5) omitted (25.7.2014 for specified purposes, 7.3.2016 in so far as not already in force) by virtue of Financial Services (Banking Reform) Act 2013 (c. 33), ss. 18(2), 148(5); S.I. 2014/1819, art. 2(2)(a); S.I. 2015/490, art. 2(1)(b) (with savings and transitional provisions in S.I. 2015/492 (as amended by S.I. 2015/1660)) this amendment is subject to savings and/or transitional provisions, see the commentary.
  5. F340S. 59(6) substituted (25.7.2014 for specified purposes, 7.3.2016 in so far as not already in force) by Financial Services (Banking Reform) Act 2013 (c. 33), ss. 18(3), 148(5); S.I. 2014/1819, art. 2(2)(a); S.I. 2015/490, art. 2(1)(b) (with savings and transitional provisions in S.I. 2015/492 (as amended by S.I. 2015/1660)) this amendment is subject to savings and/or transitional provisions, see the commentary.
  6. F341S. 59(6A) substituted (13.9.2018 for specified purposes, 10.12.2018 for specified purposes, 18.7.2019 for specified purposes, 9.8.2019 for specified purposes, 9.12.2019 for specified purposes, 7.12.2020 in so far as not already in force) by Bank of England and Financial Services Act 2016 (c. 14), s. 41(3), Sch. 4 para. 2(2); S.I. 2018/990, reg. 2(1)(2)(3) (with regs. 3-6); S.I. 2019/1136, reg. 2(2)(3)(4)(5) (with regs. 3-5, 4, 5, 7)
  7. F342S. 59(6B)(6C) omitted (13.9.2018 for specified purposes, 10.12.2018 for specified purposes, 18.7.2019 for specified purposes, 9.8.2019 for specified purposes, 9.12.2019 for specified purposes, 7.12.2020 in so far as not already in force) by virtue of Bank of England and Financial Services Act 2016 (c. 14), s. 41(3), Sch. 4 para. 2(3); S.I. 2018/990, reg. 2(1)(2)(3) (with regs. 3-6); S.I. 2019/1136, reg. 2(2)(3)(4)(5) (with regs. 3-5, 4, 5, 7)
  8. F343S. 59(7)-(7B) omitted (25.7.2014 for specified purposes, 7.3.2016 in so far as not already in force) by virtue of Financial Services (Banking Reform) Act 2013 (c. 33), ss. 18(5), 148(5); S.I. 2014/1819, art. 2(2)(a); S.I. 2015/490, art. 2(1)(b) (with savings and transitional provisions in S.I. 2015/492 (as amended by S.I. 2015/1660)) this amendment is subject to savings and/or transitional provisions, see the commentary.
  9. F344S. 59(7C) inserted (22.7.2013) by The Alternative Investment Fund Managers Regulations 2013 (S.I. 2013/1773), reg. 1, Sch. 1 para. 7
  10. F345S. 59(8) omitted (31.12.2020) by virtue of The Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/632), regs. 1(3), 25; 2020 c. 1, Sch. 5 para. 1(1)
  11. F346S. 59(9) omitted (1.4.2013) by virtue of Financial Services Act 2012 (c. 21), s. 122(3), Sch. 5 para. 3 (with Sch. 20); S.I. 2013/423, art. 3, Sch.
  12. F347S. 59(11) omitted (25.7.2014 for specified purposes, 7.3.2016 in so far as not already in force) by virtue of Financial Services (Banking Reform) Act 2013 (c. 33), ss. 18(5), 148(5); S.I. 2014/1819, art. 2(2)(a); S.I. 2015/490, art. 2(1)(b) (with savings and transitional provisions in S.I. 2015/492 (as amended by S.I. 2015/1660)) this amendment is subject to savings and/or transitional provisions, see the commentary.

Modifications

  1. C229S. 59 extended (1.12.2001) by S.I. 2001/2636, arts. 1(2)(b), 74(2), 76(2); S.I. 2001/3538, art. 2(1)
  2. C230S. 59 modified (29.9.2008 at 8.00 a.m.) by The Bradford & Bingley plc Transfer of Securities and Property etc. Order 2008 (S.I. 2008/2546), art. 15(1)
  3. C231S. 59 modified (1.7.2009 for certain purposes, otherwise 30.6.2010) by The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2009 (S.I. 2009/1342), arts. 1(2), 34, {Sch. paras. 1, 3}
  4. C232S. 59 modified (1.1.2010) by The Northern Rock plc Transfer Order 2009 (S.I. 2009/3226), arts. 1(2)(b), 10
  5. C233S. 59(1) extended (1.12.2001) by S.I. 2001/2636, arts. 1(2)(b), 75(2); S.I. 2001/3538, art. 2(1)

Commencement

  1. I8S. 59 wholly in force at 1.12.2001; s. 59 not in force at Royal Assent see s. 431(2); s. 59 in force for specified purposes at 18.6.2001 by S.I. 2001/1820, art. 2, Sch.; s. 59 in force for specified purposes at 3.9.2001 by S.I. 2001/2632, art. 2(2), Sch. Pt. 2; s. 59 in force in so far as not already in force at 1.12.2001 by S.I. 2001/3538, art. 2(1)