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SUP 12.6A Assessment of compliance

Purpose

SUP 12.6A.1G
  1. (1)

    1SUP 12.4.2R imposes continuing obligations on a firm that has appointed an appointed representative. This includes to ensure on reasonable grounds that the person is suitable to act in the capacity of an appointed representative and that the firm has adequate controls and resources to oversee the person’s activities. SUP 12.4.6R imposes similar obligations in relation to introducer appointed representatives.

  2. (2)

    SUP 12.6.1R requires a firm to act where it has reasonable grounds to believe that the conditions referred to in (1) are not, or are not likely to be, satisfied in relation to any appointed representative.

  3. (3)

    Without prejudice to these continuing requirements, the rules in this section require:

    1. (a)

      a firm to undertake a specific review (referred to in this section as the ‘annual review’) of certain aspects of its arrangements with appointed representatives (other than introducer appointed representatives) on at least an annual basis; and

    2. (b)

      the governing body of a firm to:

      1. (i)

        review and approve at least once every 12 months a written record of the firm’s assessment of how it is meeting the requirements in this chapter (referred to in this section as the ‘self-assessment document’); and

      2. (ii)

        agree the firm’s response to any material issues identified.

  4. (4)

    The assessment in (3)(b) applies in relation to introducer appointed representatives to the extent that the rules in this chapter apply to arrangements with introducer appointed representatives.

Annual review

SUP 12.6A.2R

1At least once every 12 months, a firm must specifically review in respect of each of the firm’s appointed representatives (other than its introducer appointed representatives):

  1. (1)

    whether the appointed representative is solvent and otherwise suitable for the purposes of SUP 12.4.2R(2)(a) and SUP 12.4.2R(2)(b);

  2. (2)

    the fitness and propriety of the controllers, directors, partners, proprietors and managers of the appointed representative and, in particular, their ability to carry out the regulated activities for which the firm has accepted responsibility; and

  3. (3)

    the adequacy of the firm’s controls over, and resources for monitoring and enforcing compliance of, the appointed representative for the purposes of SUP 12.4.2R(3)(a) and SUP 12.4.2R(3)(b).

SUP 12.6A.3R

1In addition to the annual review required by SUP 12.6A.2R, a firm must carry out a review of the matters in SUP 12.6A.2R in relation to an appointed representative where:

  1. (1)

    the appointed representative changes its business model (including its target market);

  2. (2)

    the scope of the appointed representative’s appointment is expanded to include one or more additional regulated activities;

  3. (3)

    the appointed representative changes any of its senior management in a particular role with responsibility for, or being involved with, the activities being carried on within the scope of its appointment more than once in a 12-month period;

  4. (4)

    the appointed representative is appointed by an additional principal; or

  5. (5)

    the firm identifies a significant increase in the number of complaints it receives about the appointed representative.

SUP 12.6A.4R
  1. (1)

    1A firm must maintain a written record of each review undertaken for the purposes of SUP 12.6A.2R or SUP 12.6A.3R.

  2. (2)

    The written record required by (1) must be retained for at least 6 years.

SUP 12.6A.5G
  1. (1)

    1In carrying out, and documenting, each review required by SUP 12.6A.2R or SUP 12.6A.3R, a firm:

    1. (a)

      should have regard to the guidance on assessing the matters covered by the review in SUP 12.4;

    2. (b)

      may focus on any changes from the previous such review undertaken in relation to the relevant appointed representative and cross-refer, where appropriate, to previous reviews.

  2. (2)

    A firm may determine the most appropriate way in which to undertake and document each review required by SUP 12.6A.2R or SUP 12.6A.3R. Each review should be undertaken by one or more individuals at the firm with an appropriate level of knowledge and experience.

  3. (3)

    A firm should ensure that any significant issues which arise as a result of a review undertaken for the purposes of SUP 12.6A.2R or SUP 12.6A.3R are escalated for consideration by its governing body, where appropriate, in particular in so far as those issues give rise to risks of harm to consumers or market integrity (see also SUP 12.6A.7G(1)(c)).

Self-assessment

SUP 12.6A.6R
  1. (1)

    1At least once every 12 months, the governing body of a firm must:

    1. (a)

      review and approve a written record (its ‘self-assessment document’):

      1. (i)

        of the way in which the firm complies with the requirements in this chapter (SUP 12); and

      2. (ii)

        that identifies any material deficiencies in, or concerns in relation to, such compliance; and

    2. (b)

      agree the steps to be taken to address the matters in (1)(a)(ii).

  2. (2)

    The self-assessment document must include any concerns arising from the most recent reviews undertaken in relation to each of the firm’s appointed representatives for the purposes of SUP 12.6A.2R or SUP 12.6A.3R.

SUP 12.6A.7G
  1. (1)

    1The self-assessment document should include, as appropriate, the firm’s current assessment of:

    1. (a)

      the effectiveness of the firm’s arrangements for overseeing its appointed representatives;

    2. (b)

      the adequacy of the firm’s controls and resources for the purposes of SUP 12.4.2R(3);

    3. (c)

      the firm’s assessment of the risk of harm to consumers or market integrity arising from its appointed representatives’ activities or business (SUP 12.4.2R(5));

    4. (d)

      the outcome of any re-assessment of the continuing adequacy of the firm’s controls and resources for the purposes of SUP 12.4.4FG; and

    5. (e)

      the methodologies used to assess and verify the firm’s compliance with the requirements.

  2. (2)

    In respect of any introducer appointed representatives, the self-assessment document should include, as appropriate, those matters in (1) which are relevant to introducer appointed representatives (including those matters specified in SUP 12.6A.7G(1)(a), SUP 12.6A.7G(1)(c) and SUP 12.6A.7G(1)(d)).

SUP 12.6A.8R

1A firm must retain a copy of each self-assessment document approved by the governing body of the firm for at least 6 years from the date of approval.

SUP 12.6A.9G
  1. (1)

    1While the self-assessment document must be approved by the governing body each year (SUP 12.6A.6R), it is not expected that the firm creates a new document each year.

  2. (2)

    A firm that has appointed more than one appointed representative need only maintain a single self-assessment document covering all of its appointed representative relationships.

SUP 12.6A.10G

1While the self-assessment document need only be approved by the governing body once a year, firms are reminded that the senior management of a firm is responsible for the control and monitoring of the firm’s appointed representatives (SUP 12.6.7G). Notwithstanding the requirements of this section, a firm should ensure that any issues relating to its appointed representatives are escalated for consideration by its governing body where appropriate, in addition to the annual approval of the self-assessment document, in particular in so far as those issues give rise to risks of harm to consumers or market integrity.