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SYSC 10.2 Chinese walls

Application

SYSC 10.2.1RRP

This section applies to a common platform firm.

Control of information

SYSC 10.2.2RRP
  1. (1)

    When a common platform firm establishes and maintains a Chinese wall (that is, an arrangement that requires information held by a person in the course of carrying on one part of the business to be withheld from, or not to be used for, persons with or for whom it acts in the course of carrying on another part of its business) it may:

    1. (a)

      withhold or not use the information held; and

    2. (b)

      for that purpose, permit persons employed in the first part of its business to withhold the information held from those employed in that other part of the business;

    but only to the extent that the business of one of those parts involves the carrying on of regulated activities,2 ancillary activities or, in the case of MiFID business, the provision of ancillary services.2

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  2. (2)

    Information may also be withheld or not used by a common platform firm when this is required by an established arrangement maintained between different parts of the business (of any kind) in the same group. This provision does not affect any requirement to transmit or use information that may arise apart from the rules in COBS.

    1
  3. (3)

    For the purpose of this rule, "maintains" includes taking reasonable steps to ensure that the arrangements remain effective and are adequately monitored, and must be interpreted accordingly.

  4. (4)

    For the purposes of section 118A(5)(a) of the Act, behaviour conforming with paragraph (1) does not amount to market abuse.

Effect of rules

SYSC 10.2.3GRP

SYSC 10.2.2 R is made under section 147 of the Act (Control of information rules). It has the following effect:

  1. (1)

    acting in conformity with SYSC 10.2.2 R (1) provides a defence against proceedings brought under section 397(2) or (3) of the Act (Misleading statements and practices) - see sections 397(4) and (5)(c);

  2. (2)

    behaviour in conformity with SYSC 10.2.2 R (1) does not amount to market abuse (see SYSC 10.2.2 R (4)); and

  3. (3)

    acting in conformity with SYSC 10.2.2 R (1) provides a defence for a firm against FSA enforcement action, or an action for damages under section 150 of the Act, based on a breach of a relevant requirement to disclose or use this information.

Attribution of knowledge

SYSC 10.2.4RRP

When any of the rules of COBS or CASS apply to a common platform firm that acts with knowledge, the firm will not be taken to act with knowledge for the purposes of that rule if none of the relevant individuals involved on behalf of the firm acts with that knowledge as a result of arrangements established under SYSC 10.2.2 R.

1
SYSC 10.2.5GRP

When a common platform firm manages a conflict of interest using the arrangements in SYSC 10.2.2 R which take the form of a Chinese wall, individuals on the other side of the wall will not be regarded as being in possession of knowledge denied to them as a result of the Chinese wall.