AUTH 1.5 Understanding the requirements and standards of the regulatory system

The requirements and standards of the regulatory system, with which an authorised person must comply, vary depending on both the nature of the firm and the regulated activities it has permission to carry on. As part of preparing an application for Part IV permission, an applicant will need to familiarise itself with the rules, regulations and standards that would apply to the business it proposes to carry on. An applicant will then have to demonstrate how it proposes to comply, for example, with the high level systems and controls requirements in SYSC and, where relevant, the applicable rules in COB. EEA firms, Treaty firms or UCITS qualifiers which qualify for authorisation should also familiarise themselves with the relevant regulatory obligations before carrying on regulated activities in the United Kingdom.

1. (1)

   An EEA firm will be informed of any relevant regulatory obligations (known as applicable provisions) by the FSA or, in the case of an EEA firm which is an insurer, its Home State regulator, as part of the process of qualifying for authorisation.

2. (2)

   An applicant for Part IV permission should consult the notes to the application pack. They cross-refer to relevant parts of the Handbook, and this will help applicants to respond to certain questions.

As a general guide, all applicants for Part IV permission should be familiar with the threshold conditions (COND) and the Principles for Businesses (PRIN) in the High Level Standards part of the Handbook. To complete an application for Part IV permission, an applicant will also need to have regard to the following matters:

1. (1)

   Prudential requirements:

   1. (a)

      the high level requirement for adequate resources, which is applicable to all firms, described in COND; and

   2. (b)

      the detailed prudential requirements in the Interim Prudential Sourcebooks (collectively referred to as IPRU) and in the Integrated Prudential Sourcebook (PRU)5 in the Business Standards part of the Handbook. 5In addition to PRU There are five interim 5sourcebooks that apply, respectively, to banks (IPRU(BANK)), building societies (IPRU(BSOC)), friendly societies (IPRU(FSOC)), insurance companies (IPRU(INS)) and investment business firms (IPRU(INV)). Guidance is given to applicants in AUTH 3 Annex 2 on determining which prudential category, and which sourcebook of IPRU, or section of PRU5 will apply.

   An applicant will need to confirm that it will have adequate resources in place to meet the applicable requirements.

2. (2)

   Systems, controls and internal arrangements:

   1. (a)

      the high level requirement for all firms to maintain adequate resources (including systems and human resources) described in COND and the high level standards for all firms in Senior management arrangements, systems and controls (SYSC); and

   2. (b)

      the detailed requirements, many of which are regulated activity specific, in the sourcebooks in the Business Standards part of the Handbook; for example, in IPRU, PRU, 5the Training and Competence sourcebook (TC) and Conduct of Business sourcebook (COB); and the reporting requirements for firms in SUP 16 (Reporting requirements) and SUP 17 (Transaction reporting).

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   Before the FSA gives a Part IV permission, an applicant will need to confirm that it will have the necessary systems and controls in place.

3. (3)

   Approved persons:

   1. (a)

      the high level standards contained in the Fit and Proper test for approved persons (FIT) and the Statements of Principle and Code of Practice for Approved Persons (APER); and

   2. (b)

      the detailed rules about controlled functions and other matters in SUP 10 (Approved persons).

   An applicant will need to identify the persons that will require approval from the FSA in conjunction with its application for permission. This approval is required before a person may perform a controlled function.

4. (4)

   Other regulatory obligations:

   1. (a)

      the detailed regulatory obligations that apply to certain types of firm or regulated activity in COB, ICOB, 4MCOB, CASS, the Market Conduct sourcebook (MAR) and SUP;1

   2. (b)

      the obligations in Dispute resolution: Complaints (DISP) and Compensation (COMP); and

   3. (c)

      the specialist sourcebooks included in the Handbook such as, for example, those for collective investment schemes, exempt professional firms and the market at Lloyd's.32