SYSC 25 Annex 1 Examples of the business activities and functions of an SMCR firm

(1) Payment services

This means:

(1) payment services;

(2) issuing and administering other means of payment (for example, cheques and bankers' drafts);

(3) issuing electronic money; and

(4) current accounts.

(2) Settlement

This means clearing and settlement of any transactions described in rows (3) and (6) to (9) of this annex, in relation to the assets covered by (9).

It also includes clearing and settlement of any transactions described in row (10).

(3) Investment management

This has the same meaning as managing investments with the following adjustments:

(a) it covers all types of assets; and

(b) the exclusions in the Regulated Activities Order do not apply.

It also covers fund management.

(4) Financial or investment advice

This includes advising on investments.

(5) Mortgage advice

This has the same meaning as advising on regulated mortgage contracts but is expanded to cover land anywhere in the world and to cover security of any kind over land.

(6) Corporate investments

This means acquiring, holding, managing and disposing a firm’s investments made for its own account.

(7) Wholesale sales

This means the selling of any investment to a person other than a retail customer.

It does not include the activities in (1).

(8) Retail sales

This means the selling of any investment to a retail customer.

It includes savings accounts. It does not include the activities in (1).

(9) Trading for clients

This means dealing in investments as agent and execution of orders on behalf of clients but the list of products also includes money market instruments and foreign exchange.

(10) Market making

This means the activities described in the Glossary definition of market maker4.

(11) Investment research

(12) Origination/syndication and underwriting

Origination and syndication include:

(1) entering into or acquiring (directly or indirectly) any commitment or investment with a view to transferring some or all of it to others, or with a view to others investing in the same transaction;

(2) sub-participation; and

(3) any transaction described in the Glossary definition of originator.

Underwriting includes underwriting that is not on a firm commitment basis.

A commitment or investment includes an economic interest in some or all of it.

This activity also includes the provision of services relating to such transactions.

(13) Retail lending decisions

Deciding whether, and on what terms, to lend to retail customers.

Lending includes granting credit, leasing and hire (including finance leasing).

(14) Wholesale lending decisions

Deciding whether, and on what terms, to lend to persons who are not retail customers.

Lending includes granting credit, leasing and hire (including finance leasing).

(15) Design and manufacturing of products intended for wholesale customers

Wholesale customers mean persons who are not retail customers.

(16) Design and manufacture of products intended for retail customers

(17) Production and distribution of marketing materials and communications

This includes financial promotions.

(18) Customer service

This means dealing with clients after the point of sale, including queries and fulfilment of client requests.

(19) Customer complaints handling

This includes the firm’s compliance with DISP.

It also includes:

(1) any similar procedures relating to activities that do not come under the jurisdiction of the Financial Ombudsman Service;

(2) activities that take place outside the UK; and

(3) activities that are not subject to any ombudsman service.

(20) Collection and recovering amounts owed to a firm by its customers

Dealing with customers in arrears

‘Customer’ means any person falling into any of the definitions of client in the Glossary so far as they apply to the FCA’s Handbook. The definition is extended to cover all services provided by the firm and not just those that are provided in the course of carrying on a regulated activity or an ancillary service.

(21) Middle office

This means risk management and controls in relation to, and accounting for, transactions in securities or derivatives.

(22) The firm’s information technology

This includes cybersecurity.

(23) Business continuity planning

If SYSC 4.1.6R and SYSC 4.1.7R (Business continuity) apply to the firm, this includes the systems and policies used to comply with those rules.

This business area of function includes operational continuity, resilience and strategy.

(24) Human resources

This includes recruitment, training and competence and performance monitoring.

(25) Incentive schemes for the firm’s staff

This is not limited to schemes based on sales.

(26) Contributing input data to a BMR benchmark administrator (other than an Annex II benchmark administrator)

(27) Administering a benchmark

(28) Administration of insurance

This means the activity described in SYSC 27.8.5G(1)(k)3 (examples of what the significant management FCA certification function can cover).

(29) Issuing commitments

This means the activity described in SYSC 27.8.5G(1)(i)3 (examples of what the significant management FCA certification function can cover).

(30) Processing

This means the activity described in SYSC 27.8.5G(1)(j)3 (examples of what the significant management FCA certification function can cover).

(31) Outsourcing, procurement and vendor management

Management of services shared with other group members

(32) Internal operations

2(33) The firm’s legal department

Note (1): The purpose of this annex is explained in SYSC 25.7 (Guidance about SYSC 25 Annex 1G) and SYSC 26.11.2G.

Note (2): A firm does not have to use the split of example activities in this annex for the purposes in Note (1). If a firm does decide to use it, the firm should adapt it to suit the firm’s management arrangements better.

For example, a firm may find the split of activities into retail and wholesale activities unsuitable. If so, the firm might:

(a) treat retail and wholesale activities together; or

(b) use its own definition of retail and wholesale activities.