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You are viewing the version of the document as on 2023-11-07.

SYSC 19D.1 1Application and purpose

Who? What? Where?

SYSC 19D.1.1RRP
  1. (1)

    The dual-regulated firms Remuneration Code applies to:

    1. (a)

      a building society;

    2. (b)

      a UK bank2;

    3. (c)

      a UK designated investment firm;

    4. (d)

      an overseas firm that would be a firm in (a), (b) or (c) if it had been a UK domestic firm, had carried on all of its business in the United Kingdom and had obtained whatever authorisations for doing so as are required under the Act.3

  2. (2)

    For a firm which falls under (1)(a), (1)(b) or (1)(c), the dual-regulated firms Remuneration Code applies2 in relation to:

    1. (a)

      its UK activities; and3

    2. (b)

      [deleted]3

    3. (c)

      a UK domestic firm's activities wherever they are carried on.

  3. (3)

    For a firm that falls under (1)(d), the dual-regulated firms Remuneration Code applies only in relation to activities carried on from an establishment in the United Kingdom.

  4. (4)

    Otherwise, the dual-regulated firms Remuneration Code applies to a firm within (1) in the same way as SYSC 4.1.1R (General requirements).2

SYSC 19D.1.1AGRP

2SYSC 19D.1.1R(2) is applied to the extent of the FCA’s powers and regulatory responsibilities.

SYSC 19D.1.2RRP

Under Part 2 of SYSC 1 Annex 1 in relation to SYSC 4.1.1R (General requirements), and subject2 to the provisions on group risk systems and controls requirements in SYSC 12 (Group risk systems and controls requirements), the dual-regulated firms Remuneration Code:

  1. (1)

    applies in relation to regulated activities, activities that constitute dealing in investments as principal (disregarding the exclusion in article 15 of the Regulated Activities Order (Absence of holding out etc)), ancillary activities and (in relation to MiFID business) ancillary services;

  2. (2)

    applies in relation to the carrying on of unregulated activities in a prudential context; and

  3. (3)

    takes into account activities of other group members.

When?

SYSC 19D.1.3RRP
  1. (1)

    Except as set out in 4(3), a firm must apply the remuneration requirements in SYSC 19D.3 (Remuneration principles) in relation to:

    1. (a)

      remuneration awarded, whether pursuant to a contract or otherwise, on or after 1 January 2011;

    2. (b)

      remuneration due on the basis of contracts concluded before 1 January 2011 which is awarded or paid on or after 1 January 2011; and

    3. (c)

      remuneration awarded, but not yet paid, before 1 January 2011, for services provided in 2010.

      [Note: article 3(2) of Directive 2010/76/EU]

  2. (2)

    [deleted]4

  3. (3)

    A firm must apply the remuneration requirements in SYSC 19D.3.59R(1)(b), SYSC 19D.3.61R(2), SYSC 19D.3.61R(3), SYSC 19D.3.61R(4), SYSC 19D.3.61R(5), SYSC 19D.3.64R and SYSC 19D.3.67R(1)(c) in relation to variable remuneration awarded in relation to the performance year starting on or after 1 January 2016.

SYSC 19D.1.4GRP

Subject to SYSC 19D.1.5R, SYSC 19D.1.3R does not require a firm to breach requirements of applicable contract or employment law.

[Note: recital 14 of Directive 2010/76/EU]

Conflict with other obligations

SYSC 19D.1.5RRP
  1. (1)

    Where a firm is unable to comply with the dual-regulated firms Remuneration Code because to do so would breach a provision of a prior contract (including a provision in a contract with a dual-regulated firms Remuneration Code staff member), it must take reasonable steps to amend or to terminate the provision in question in a way which enables it to comply with the dual-regulated firms Remuneration Code at the earliest opportunity.

  2. (2)

    Until the provision in (1) ceases to prevent the firm from complying with the dual-regulated firms Remuneration Code, it must adopt specific and effective arrangements, processes and mechanisms to manage the risks raised by the provision.

Purpose

SYSC 19D.1.6GRP
  1. (1)

    The aim of the dual-regulated firms Remuneration Code is to ensure that firms have risk-focused remuneration policies, which are consistent with and promote effective risk management and do not expose them to excessive risk. It expands upon the general organisational requirements in SYSC 4.

  2. (2)

    The dual-regulated firms Remuneration Code implements the main provisions of the CRD which relate to remuneration. In applying the rules in the dual-regulated firms Remuneration Code, firms should comply with the EBA “Guidelines on sound remuneration policies under Articles 74(3) and 75(2) of Directive 2013/36/EU and disclosures under Article 450 of Regulation (EU) No 575/2013”, 21 December 2015 (EBA/GL/2015/22).3

    2

Notifications to the FCA

SYSC 19D.1.7GRP
  1. (1)

    In addition to the notification requirements in the dual-regulated firms Remuneration Code2, general circumstances in which the FCA expects to be notified by firms of matters relating to their compliance with requirements under the regulatory system are set out in SUP 15.3 (General notification requirements).

  2. (2)

    For remuneration matters in particular, those circumstances should take into account unregulated activities, as well as regulated activities and the activities of other members of a group, and would include each of the following:

    1. (a)

      significant breaches of the dual-regulated firms Remuneration Code, including any breach of a rule to which the provisions on voiding and recovery in SYSC 19D Annex 1 apply;

    2. (b)

      any proposed remuneration policies, procedures or practices which could:

      1. (i)

        have a significant adverse impact on the firm’s reputation; or

      2. (ii)

        affect the firm’s ability to continue to provide adequate services to its customers and which could result in serious detriment to a customer of the firm; or

      3. (iii)

        result in serious financial consequences to the financial system or to other firms;

    3. (c)

      any proposed changes to remuneration policies, practices or procedures which could have a significant impact on the firm’s risk profile or resources;

    4. (d)

      fraud, errors and other irregularities described in SUP 15.3.17R (notification of fraud, errors and other irregularities) which may suggest weaknesses in, or be motivated by, the firm’s remuneration policies, procedures or practices.

  3. (3)

    Notifications should be made immediately as the firm becomes aware or has information which reasonably suggests that those circumstances have occurred, may have occurred or may occur in the foreseeable future.

Individual guidance

SYSC 19D.1.8GRP

The FCA's policy on individual guidance is set out in SUP 9. Firms should particularly note the policy on what the FCA considers to be a reasonable request for guidance (see SUP 9.2.5G). For example, where a firm is seeking guidance on a proposed remuneration structure, the FCA will expect the firm to provide a detailed analysis of how the structure complies with the dual-regulated firms Remuneration Code, including the general requirement for remuneration policies, procedures and practices to be consistent with, and promote, sound and effective risk management.

Interpretation

SYSC 19D.1.9GRP

Except as provided in the Glossary, any expression used in, or for the purpose of, this chapter which is defined or used in UK CRR3 has the meaning given by, or used in, those Regulations.