SYSC 27.8 Definitions of the FCA certification functions

1 SYSC 27.8.1R(1) only applies to a firm to the extent that CASS applies to that firm.

1A senior manager carrying on the significant management FCA certification function under SYSC 27.8.4R could, for example, be:

1. (1)

   the head of a unit carrying on the activities of:

   1. (a)

      retail banking;

   2. (b)

      personal lending;

   3. (c)

      corporate lending;

   4. (d)

      salvage or loan recovery;

   5. (e)

      proprietary trading;

   6. (f)

      designated investment business;

   7. (g)

      effecting contracts of insurance;

   8. (h)

      credit-related regulated activity;

   9. (i)

      making material decisions on the commitment of the firm’s financial resources, its financial commitments, its assets acquisitions, its liability management or its overall cash and capital planning;

   10. (j)

       processing confirmations, payments, settlements, insurance claims, client money and similar matters;

   11. (k)

       administration of contracts of insurance;

   12. (l)

       complaints handling; or

   13. (m)

       determining whether an applicant should be accepted for credit (including lending) and on what terms; or

2. (2)

   a member of a committee (that is, a person who, together with others, has authority to commit the firm) making decisions in these functions.

1The examples in SYSC 27.8.5G are illustrative only. They are not intended to be exhaustive.

1A business unit is not limited to one that carries on commercial activities with customers and third parties or that earns revenue. A business unit can be an internal support department that has no contact with people outside the firm. It may include, for example, human resources, the legal department,2 operations or information technology.

1. (1)

   2An example of SYSC 27.7.5G is that a person performs the significant management FCA certification function if:

   1. (a)

      the person performs a role coming within the definition of one of the following roles:

      1. (i)

         an FCA-designated senior management function described in SUP 10C.6A (Systems and controls functions: Finance, risk and internal audit); or

      2. (ii)

         the chief operations function; and

   2. (b)

      that FCA-designated senior management function does not apply to the firm.

2. (2)

   For example, if a core SMCR firm has a chief risk officer, the chief risk officer will not be performing the chief risk officer function because the chief risk officer function does not apply to core SMCR firms. Instead that person will perform the significant management FCA certification function.

3. (3)

   (2) does not apply if the chief risk officer performs that role as part of their job as an executive director. The executive director function applies to core SMCR firms and so that person will be performing the executive director function rather than the significant management FCA certification function.

1For the purposes of the definition of the significant management FCA certification function, the following additional factors about the firm should be considered:

1. (1)

   the size and significance of the firm’s business in the United Kingdom – for example, a firm carrying on designated investment business may have a large number of certification employees (for example, in excess of 100 individuals); or a firm carrying on general insurance business may have gross written premiums in excess of £100m;

2. (2)

   the number of regulated activities carried on, or proposed to be carried on, by the firm and (if relevant) other members of the group;

3. (3)

   its group structure (if it is a member of a group);

4. (4)

   its management structure (for example, matrix management); and

5. (5)

   the size and significance of its international operations, if any.

1When considering whether a business unit is significant for the purposes of SYSC 27.8.4R, the firm should take into account all relevant factors in the light of the firm’s current circumstances and its plans for the future, including:

1. (1)

   the risk profile of the unit;

2. (2)

   its use or commitment of the firm’s capital;

3. (3)

   its contribution to the profit and loss account;

4. (4)

   the number of employees, certification employees or SMF managers in the unit;

5. (5)

   the number of customers of the unit; and

6. (6)

   any other factor which makes the unit significant to the conduct of the firm’s affairs so far as relating to the regulated activity.

1. (1)

   1SYSC 27.8.10R (Functions requiring qualifications) may still apply to an SMCR firm where one of the exclusions in TC App 3.1 (Circumstances in which TC does not apply) or elsewhere in TC applies.

2. (2)

   SYSC 27.8.10R applies to an overseas SMCR firm irrespective of whether the function in TC App 1.1.1R (Activities and Products/Sectors to which TC applies) applies to EEA PTV firms 3 or overseas firms for the purposes of TC.

3. (3)

   The territorial scope of qualification requirements as specified in TC App 2.1.1R (Territorial Scope subject to the limitation in TC Appendix 3) does not apply to the FCA certification function in SYSC 27.8.10R. However SYSC 27.3.1R (Territorial scope) restricts the scope of this chapter outside the United Kingdom.

1 SYSC 27.8.10R(3) means that a person performs the FCA certification function in SYSC 27.8.10R even if for example they are:

1. (1)

   still in training and do not yet need to have the qualification; or

2. (2)

   exempt under TC 2.1.9R (Exemption from appropriate qualification requirements).

1If the definitions or requirements in the ‘Employees included’ column of the table in SYSC 27.8.15R (as adjusted) do not apply to a firm in the corresponding entry in the ‘Type of SMCR firm’ column, that row of the table does not apply to the firm.

1One example of SYSC 27.8.16G is that a credit union is excluded from the table in SYSC 27.8.15R. Therefore the material risk taker FCA certification function does not apply to a credit union. However, it is subject to equivalent PRA requirements.

1 SYSC 27.3.2G (the FCA interprets the phrase ‘dealing with’ as including having contact with and extending beyond ‘dealing’ as used in ‘dealing in investments’) applies to SYSC 27.8.18R.

1The client-dealing FCA certification function generally involves dealing with any person with or for whom the activities in the table in SYSC 27.8.19R are carried out (or their property). That person need not be a client of the firm.

1The restrictions in SYSC 27.7.1R (FCA certification function should require the person performing it to be involved in one or more aspects of the firm’s affairs so far as they relate to regulated activities) also applies to the client-dealing FCA certification function.

1. (1)

   2The client-dealing FCA certification function does not apply to purely administrative roles even though they involve customer contact.

2. (2)

   SYSC 27.8.22AR excludes someone who has no scope to choose, decide or reach a judgement on what should be done in a given situation, and whose tasks do not require them to exercise significant technical skill.

3. (3)

   SYSC 27.8.22AR is likely to exclude a role that is simple or largely automated.

4. (4)

   There is no need to apply SYSC 27.8.22AR to row (1)(b) or (2)(b) of the table in SYSC 27.8.19R, because a person must also be carrying out the functions in row (1)(a) or (2)(a) for the client-dealing FCA certification function to apply and the functions in row (1)(a) or (2)(a) require judgment and skill.

1 Algorithmic trading is not limited to high-frequency algorithmic trading.

1Deploying a trading algorithm includes deploying one on a trading venue on which the firm has not traded before where the firm is already using that trading algorithm on another trading venue.

1 SYSC 27.8.23R(1)(b) (monitoring or deciding whether or not a trading algorithm is compliant) includes testing, such as validation and stress testing.

1. (1)

   1Sometimes an approval or a decision involves sign-off from different people about different aspects of the decision or approval.

2. (2)

   If this is the case, all will have given the approval or decision for the purposes of SYSC 27.8.23R.

1. (1)

   1Sometimes an approval or decision involves sign-off by a number of people of different levels of seniority about the same aspects of the decision.

2. (2)

   If this is the case, only the most senior decision-taker gives the approval or decision for the purposes of SYSC 27.8.23R.

3. (3)

   Where the firm’s procedures do not require the more senior person to carry out a detailed review of the decision of the more junior, both the junior and the senior person will give the approval or decision.

1A firm may have deployed an algorithm even though:

1. (1)

   it has not yet actually been used in the generation or acceptance of orders; or

2. (2)

   it is not actually being used in the generation or acceptance of orders at the moment; or

3. (3)

   it is not currently being used in the generation or acceptance of orders because the circumstances have not arisen for it to start doing so.

1In the examples in SYSC 27.8.30G the algorithm is capable of being used in the generation or acceptance of orders but is not actually generating or accepting them at the moment. However, a firm does not deploy an algorithm if the algorithm is not yet capable of generating or accepting orders because, for example, it is still in development.

1The algorithmic trading FCA certification function applies whether the firm develops the algorithm itself or buys one from a third party.