SYSC 10A.1 Application

1Subject to the exemptions in SYSC 10A.1.4R, this chapter applies to a firm:

1. (1)

   that is a:

   1. (a)

      UK MiFID investment firm; or

   2. (b)

      full-scope UK AIFM; or

   3. (c)

      small authorised UK AIFM or residual CIS operator; or

   4. (d)

      incoming EEA AIFM; or

   5. (e)

      UCITS management company; or

   6. (f)

      MiFID optional exemption firm, performing activities covered by the exemption; or

   7. (g)

      EEA MiFID investment firm; or

   8. (h)

      third country investment firm; or

   9. (i)

      that carries on activities referred to in the general application rule related to:

      1. (i)

         commodity futures; or

      2. (ii)

         commodity options; or

      3. (iii)

         contracts for differences related to an underlying commodity; or

      4. (iv)

         other futures or contracts for differences which are not related to commodities, financial instruments or cash,

      which are not MiFID or equivalent third country business and energy market activity or oil market activity, but excluding the following firms:

      1. (v)

         a depositary when acting as such; and

      2. (vi)

         an authorised professional firm with respect to its non-mainstream regulated activities; or

   10. (j)

       that carries on energy market activity or oil market activity; or2

   11. (k)

       is an OPS firm; and2

2. (2)

   that carries out any of the following activities, in investments that are financial instruments:

   1. (a)

      arranging (bringing about) deals in investments;

   2. (b)

      dealing in investments as agent;

   3. (c)

      dealing in investments as principal;

   4. (d)

      managing investments;

   5. (e)

      managing a UCITS to the extent that this comprises the function of investment management referred to in Annex II of the UCITS Directive;

   6. (f)

      managing an AIF to the extent that this comprises the function of portfolio management referred to in Annex I of the AIFMD;

   7. (g)

      establishing, operating or winding up a collective investment scheme to the extent that this comprises scheme management activity,

   only with respect to a firm’s activities carried on from an establishment (including a branch) maintained by the firm in the United Kingdom.

[Note: article 16(7) and 16(11) of MiFID]

For a firm in SYSC 10A.1.1R(1) (other than a MiFID investment firm or a third country investment firm) MiFIR, and any EU Regulation adopted under MiFIR or MiFID, apply to the extent relevant to the subject matter of this chapter as if it were a MiFID investment firm providing investment services or performing investment activities in accordance with article 16(7) of MiFID.

This chapter does not apply to the carrying on of:

1. (1)

   activities between operators and depositaries, of the same fund (when acting in that capacity); or

2. (2)

   energy market activity and oil market activity which is not MiFID or equivalent third country business but which, if the firm carrying it on were not authorised, would not be a regulated activity because of article 16 of the Regulated Activities Order (Dealing in contractually based investments) or article 22 of the Regulated Activities Order (Deals with or through authorised persons etc.); or

3. (3)

   any activity referred to in SYSC 10A.1.1R(2), to the extent that it is carried out by a firm that is not a MiFID investment firm, MiFID optional exemption firm or third country investment firm, in financial instruments that are not:

   1. (a)

      admitted to trading on a trading venue; or

   2. (b)

      traded on a trading venue; or

   3. (c)

      instruments for which a request has been made for admission to trading on a trading venue; or

   4. (d)

      instruments covered by paragraph (a), (b) or (c), but the price or value of which depends on, or has an effect on, the price or value of a financial instrument referred to in those paragraphs; or

4. (3A)

   2the activities referred to in SYSC 10A.1.1R(2)(d) to (g), to the extent that they are carried out by a MiFID investment firm or third country investment firm in financial instruments that are not:

   1. (a)

      admitted to trading on a trading venue; or

   2. (b)

      traded on a trading venue; or

   3. (c)

      instruments for which a request has been made for admission to trading on a trading venue; or

   4. (d)

      instruments covered by paragraph (a), (b) or (c), but the price or value of which depends on, or has an effect on, the price or value of a financial instrument referred to in those paragraphs; or

5. (4)

   activities which comprise:

   1. (a)

      underwriting of financial instruments on a firm commitment basis; or

   2. (b)

      placing of financial instruments with or without a firm commitment basis,

   within the meaning of section A(6) or A(7) of Annex 1 of MiFID.

6. (5)

   ancillary services.

A firm must take all reasonable steps to record telephone conversations, and keep a copy of electronic communications, that relate to the activities in financial instruments referred to in SYSC 10A.1.1R(2) (and that are not excluded by SYSC 10A.1.4R), and that are made with, sent from, or received on, equipment:

1. (1)

   provided by the firm to an employee or contractor; or

2. (2)

   the use of which by an employee or contractor has been accepted or permitted by the firm.

[Note: article 16(7) of MiFID, third subparagraph]

A firm must take all reasonable steps to prevent an employee or contractor from making, sending, or receiving relevant telephone conversations and electronic communications on privately-owned equipment which the firm is unable to record or copy.

[Note: article 16(7) of MiFID, eighth subparagraph]

The telephone conversations and electronic communications referred to in SYSC 10A.1.6R include those that are intended to result in the performance of the activities in financial instruments referred to in SYSC 10A.1.1R(2), even if those conversations or communications do not in fact result in the performance of such activities.

[Note: article 16(7) of MiFID, second subparagraph]

A MiFID optional exemption firm that provides services solely or mainly to retail clients is not required to comply with the requirements of SYSC 10A.1.6R, SYSC 10A.1.7R and SYSC 10A.1.11R in relation to telephone conversations, subject to compliance with the following requirements:

1. (1)

   a telephone conversation that would be subject to SYSC 10A.1.6R must be recorded instead using a written minute or note; and

2. (2)

   the minute or note must include all relevant, and at least the following, information:

   1. (a)

      date and time of the conversation;

   2. (b)

      identity of the individual participants in the conversation;

   3. (c)

      initiator of the conversation; and

   4. (d)

      relevant information about the client order, including the price, volume, type of order and when it will be transmitted or executed.

A firm must notify new and existing clients that telephone communications or conversations between the firm and its clients that result or may result in activities in financial instruments referred to in SYSC 10A.1.1R(2) (and that are not excluded by SYSC 10A.1.4R) will be recorded. The notification must be made before the provision of any investment services to new and existing clients.

[Note: article 16(7) of MiFID, fourth subparagraph]

Client instructions given otherwise than by telephone must be made in a durable medium such as by mail, faxes, emails or documentation of client instructions issued at meetings. In particular, the content of relevant face-to-face conversations with a client may be recorded by using written minutes or notes.

[Note: article 16(7) of MiFID, seventh subparagraph]

The records kept in accordance with this chapter must be:

1. (1)

   provided by the firm to the client involved upon request; and

2. (2)

   kept for a period of five years and, where requested by the FCA, for a period of up to seven years.

[Note: article 16(7) of MiFID, ninth subparagraph]