APER 4.7 Statement of Principle 7

The Statement of Principle 7 (see APER 2.1A.3R5) is in the following terms: "An approved person performing an accountable higher management function5 must take reasonable steps to ensure that the business of the firm for which they are5 responsible in their5 accountable function complies with the relevant requirements and standards of the regulatory system."5

6In the opinion of the FCA5, conduct of the type described in APER 4.7.3G, APER 4.7.4G, APER 4.7.5G, APER 4.7.7G, APER 4.7.9G, APER 4.7.10G or APER 4.7.11AG5 does not comply with Statement of Principle 7.

5Failing to take reasonable steps to implement (either personally or through a compliance department or other departments) adequate and appropriate systems of control to comply with the relevant requirements and standards of the regulatory system in respect of the regulated activities of the firm in question (as referred to in Statement of Principle 7) falls within APER 4.7.2G. In the case of an approved person who is responsible, under SYSC 2.1.3R(2) or SYSC 4.4.5R(2), with overseeing the firm's obligation under SYSC 3.1.1R or SYSC 4.1.1R, failing to take reasonable care to oversee the establishment and maintenance of appropriate systems and controls falls within APER 4.7.2G.

5Failing to take reasonable steps to monitor (either personally or through a compliance department or other departments) compliance with the relevant requirements7 and standards of the regulatory system in respect of the regulated activities of the firm in question (as referred to in Statement of Principle 7) falls within APER 4.7.2G.

5Failing to take reasonable steps adequately to inform themselves about the reason why significant breaches (whether suspected or actual) of the relevant requirements and standards of the regulatory system in respect of the regulated activities of the firm in question (as referred to in Statement of Principle 7) may have arisen (taking account of the systems and procedures in place) falls within APER 4.7.2G.

5Behaviour of the type referred to in APER 4.7.5G includes, but is not limited to, failing to investigate what systems or procedures may have failed including, where appropriate, failing to obtain expert opinion on the adequacy of the systems and procedures.

5Failing to take reasonable steps to ensure that procedures and systems of control are reviewed and, if appropriate, improved, following the identification of significant breaches (whether suspended or actual) of the relevant requirements and standards of the regulatory system relating to the regulated activities of the firm in question (as referred to in Statement of Principle 7) falls within APER 4.7.2G (see APER 4.7.13G and APER 4.7.14G).

5Behaviour of the type referred to in APER 4.7.7 G includes, but is not limited to:

1. (1)

   unreasonably failing to implement recommendations for improvements in systems and procedures;

2. (2)

   unreasonably failing to implement recommendations for improvements to systems and procedures in a timely manner.

5In the case of the money laundering reporting officer, failing to discharge the responsibilities imposed on them5 by the firm in accordance with SYSC 3.2.6IR or SYSC 6.3.9R falls within APER 4.7.2G.

5In the case of an approved person performing an accountable higher management function responsible for compliance under SYSC 3.2.8R, SYSC 6.1.4R or SYSC 6.1.4AR, failing to take reasonable steps to ensure that appropriate compliance systems and procedures are in place falls within APER 4.7.2G.

The FCA5 expects an approved person performing an accountable higher management function5 to take reasonable steps both to ensure their5 firm's compliance with the relevant requirements and standards of the regulatory system and to ensure that all staff are aware of the need for compliance.

5Where the approved person is a proprietary trader under SUP 10A.9.10R, failing to maintain and comply with appropriate systems and controls in relation to that activity falls within APER 4.7.2G.

An approved person performing an accountable higher management function5 need not themselves5 put in place the systems of control in their5 business (APER 4.7.4G5). Whether he does this depends on his role and responsibilities. He should, however, take reasonable steps to ensure that the business for which he is responsible has operating procedures and systems which include well-defined steps for complying with the detail of relevant requirements and standards of the regulatory system and for ensuring that the business is run prudently. The nature and extent of the systems of control that are required will depend upon the relevant requirements and standards of the regulatory system, and the nature, scale and complexity of the business.4

Where the approved person performing an accountable higher management function5 becomes aware of actual or suspected problems that involve possible breaches of relevant requirements and standards of the regulatory system falling within their5 area of responsibility, then they5 should take reasonable steps to ensure that they are dealt with in a timely and appropriate manner (APER 4.7.7G5). This may involve an adequate investigation to find out what systems or procedures may have failed and why. He may need to obtain expert opinion on the adequacy and efficacy of the systems and procedures.

Where independent reviews of systems and procedures have been undertaken and result in recommendations for improvement, the approved person performing an accountable higher management function5 should ensure that, unless there are good reasons not to, any reasonable recommendations are implemented in a timely manner (APER 4.7.10G5). What is reasonable will depend on the nature of the inadequacy and the cost of the improvement. It will be reasonable for the approved person performing an accountable higher management function5 to carry out a cost benefit analysis when assessing whether the recommendations are reasonable.