129.This Part confers on the Authority a range of powers which will enable it to ensure that people who work for authorised persons for certain purposes are fit and proper to perform the functions for which they have been engaged.  While the focus of regulation is on authorised firms, the Part gives the regulator powers to prevent harm which might otherwise be caused by persons attached to firms.
130.Under the preceding regulatory framework, there is considerable variation between the arrangements applying to employees working in different sectors.  The SROs have introduced a contractual system which requires employees to sign up to regulatory and disciplinary arrangements.  Lloyd’s has applied similar regulation to employees of underwriting agents, using its byelaw making powers.  Banking and insurance legislation provides for pre-vetting of certain senior management positions, in some cases as part of the regime for the regulation of controllers of such firms. That legislation does not provide for the regulator to take disciplinary action against those managers, although senior managers, as officers of the firm, could commit a criminal offence where the firm itself had committed such an offence.  There is, in addition to the vetting arrangements, a power in section 59 of the FS Act 1986 for the Authority to prohibit a person’s employment in connection with investment business.  The above arrangements will be replaced by arrangements under this Part.
131.The Part seeks to harmonise these arrangements.  It provides a power for the Authority to ban unfit individuals from carrying out specified functions within the financial services sector.  It also provides for:
	the Authority to require its approval to be obtained before a person may perform specified functions;
	the Authority to issue statements of principle with which approved persons must comply, and codes of conduct elaborating on the statements; and
	a disciplinary regime for those who fail to comply with the statements of principle.
132.This Part provides for firms and individuals concerned to refer matters to the Tribunal if the Authority proposes to:
	issue a prohibition order;
	refuse an application to vary or revoke a prohibition order;
	refuse an application for approval;
	take disciplinary action; or
	withdraw approval.
133.The Part is primarily directed at the employees of authorised firms.  However, it extends beyond employees to include, for example, directors, representatives and contractors of an authorised person, and extends to bodies corporate where relevant.  If, for example, a life insurance company entered into a marketing agreement with a firm of estate agents to sell life insurance, the agency and relevant sales staff giving investment advice might need prior approval.  Part V would also cover “matrix managers” who carry out certain functions, often on a fairly informal basis, for a group of companies even though technically they are “employees” of a sister company rather than of the authorised person for whom they carry out relevant functions.  Such arrangements are increasingly common in multi-national groups.
Commentary on Sections Part V: Performance of Regulated Activities