SIFA 3.1 The parts of the Handbook that apply to IFAs

This is an Overview for IFAs to highlight which parts of the Handbook will be of most immediate practical significance to them. There will be some variation, as not all IFAs undertake identical business or hold the same permission.

A list of abbreviations commonly used to refer to parts of the Handbook and other publications is set out below:

Although many of the PIA rules with which firms were familiar have been carried forward with little or no change into the FSA Handbook, all firms must now understand and follow our rules as currently drafted. If transitional provisions have expired, compliance with the former SRO rules is no longer a defence to a breach of FSA rules. Firms should review their existing procedures to ensure that they have been fully revised to comply with the FSA Handbook.

Section 2.1.3(2) of this Overview explains how to access the Tables of Derivations and Destinations so you can check whether previous rules have been carried across to the FSA.

The Handbook is divided into Blocks that contain sourcebooks and manuals. Sourcebooks provide the source of the FSA's rules and guidance. Manuals contain processes to be followed by firms and by the FSA.

Block 1 deals with the high-level requirements for all firms and so is very relevant to you.

Block 2 sets out most of the detailed requirements that will affect firms day-to-day.

COB will be of immediate practical relevance to you. It will also be familiar in many cases because it carries forward many of the requirements of the former regulators. COB has wide and varied application and so it is particularly important for you to read the application provisions at the beginning of each chapter.

The rest of Block 2 contains:

1. (1)

   IPRU: Chapters 1 and 13 of IPRU (INV) largely carry forward prudential requirements of the previous regulator, and are likely to be relevant to IFAs previously regulated by PIA. The other interim Prudential sourcebooks will not be immediately relevant in most cases. The Prudential sourcebooks explain the financial resources requirements for firms. The existing rules are interim rules that will be replaced in 2007.

2. (2)

   Money Laundering (ML) has immediate relevance to IFAs, and builds on existing money laundering requirements.

3. (3)

   Training & Competence (TC) has immediate relevance to IFAs.

4. (4)

   Market Conduct (MAR) is unlikely to be relevant but MAR 1: The Code of Market Conduct provides guidance to all persons as to whether or not behaviour amounts to market abuse.

Block 3 sets out our regulatory processes and procedures and contains the Authorisation (AUTH), Supervision (SUP), Enforcement (ENF), and Decision making (DEC) manuals. Most of this may be of interest but will not be of immediate importance unless you are applying to vary your permission, or facing enforcement action.

Parts of SUP do have more immediate relevance to IFAs. These are Chapters 8 - 10, 11 (if the IFA firm is incorporated), 12, 15, parts of 16, and 20. They cover topics such as individual guidance, approved persons, notifications, financial reporting, and fee rules.

Block 4 contains the Dispute resolution (DISP), Compensation (COMP) and Complaints against the FSA (COAF) sourcebooks. Chapter 1 of DISP sets out requirements for a firm's complaints procedures.

Block 5 contains specialist sourcebooks, which show how the Handbook applies to certain sectors, such as collective investment schemes and credit unions. These are unlikely to be relevant to most IFAs, but the sourcebook for Professional firms (PROF) may be of interest.

Block 6 contains special guides. Special guides contain guidance aimed at helping a class or type of firm to meet their regulatory responsibilities.

Various parts of SUP, DISP and COMP will be relevant to the fees payable by IFAs. However, you will receive the necessary information about this with your invoices. Chapter 18 of this Overview includes more information on fees.

Every provision in the Handbook must be interpreted with its purpose in mind (GEN 2.2). The purpose of any provision in the Handbook is to be gathered first and foremost from the text of the provision in question and its context amongst other relevant provisions.

We have prepared a Reader's Guide to help firms navigate the Handbook and it can be accessed via the CD-ROM (by clicking on 'Handbook') and on our website (by clicking on 'FSA Handbook' and scrolling down the page).

As explained more fully in the Reader's Guide the provisions in the Handbook do not all have the same status. The difference between Rules and Guidance is important. The Rules in the Handbook (marked with an 'R') create binding obligations on firms. If a firm breaches such a rule, it may be subject to enforcement action and in some circumstances to an action for damages.

Guidance in the Handbook (marked with a 'G') is general Guidance given to more than one firm or individual. Guidance is not binding on a firm. So long as a firm follows Guidance that indicates possible means of compliance with a rule or recommends a course of action or arrangement, we intend to proceed on the basis that the firm has complied with the relevant Handbook rule. A small firm may find that Guidance is a helpful indication of how compliance with a Rule may be achieved without devising its own approach to that Rule.

There are also Evidential Provisions. These are rules but they are not binding in their own right - they are marked with a status letter 'E' in the margin or header. You can find a more detailed explanation in the Reader's Guide.