21For a MiFID optional exemption firm and a third country firm:

1. (1)

   the rules and guidance in this chapter apply to them as if they were rules or as guidance in accordance with SYSC 1 Annex 1 3.2CR(1); and

2. (2)

   those articles of the MiFID Org Regulation in SYSC 1 Annex 1 2.8AR and 3.2CR apply to them as if they were rules or as guidance in accordance with SYSC 1 Annex 1 3.2CR(2).

19 SYSC 18 (Guidance on Public Interest Disclosure Act: Whistleblowing) contains further guidance on the effect of the Public Interest Disclosure Act 1998 in the context of the relationship between firms and the FCA.

3Other firms should take account of the comprehensiveness and proportionality rule (SYSC 4.1.2 R) as if it were guidance (and as if "should" appeared in that rule21 instead of "must") as explained in SYSC 1 Annex 1 3.3 R(1)21.9

14Articles 16 to 29 of the AIFMD level 2 regulation provide detailed rules supplementing the provisions of article 12(1) of AIFMD, articles 57 to 66 of the AIFMD level 2 regulation provide detailed rules supplementing articles 12 and 18 of AIFMD.

3A firm that is not a common platform firm or a management company10 should take into account the decision-making procedures and effective internal reporting rules (SYSC 4.1.4R (1),10(3) and (4))10 as if they were guidance (and as if "should" appeared in those rules21 instead of "must") as explained in SYSC 1 Annex 1 3.3 R(1)21.

3Other firms should take account of the business continuity rules (SYSC 4.1.6 R and 4.1.7 R) as if they were guidance (and as if "should" appeared in those rules21 instead of "must") as explained in SYSC 1 Annex 1 3.3 R(1)21.

The matters dealt with in a business continuity policy should include:

1. (1)

   resource requirements such as people, systems and other assets, and arrangements for obtaining these resources;

2. (2)

   the recovery priorities for the firm's operations;

3. (3)

   communication arrangements for internal and external concerned parties (including the FCA21, clients and the press);

4. (4)

   escalation and invocation plans that outline the processes for implementing the business continuity plans, together with relevant contact information;

5. (5)

   processes to validate the integrity of information affected by the disruption; and

6. (6)

   regular testing of the business continuity policy in an appropriate and proportionate manner in accordance with SYSC 4.1.10R and for a common platform firm with article 21(5) of the MiFID Org Regulation21.

16Arrangements to ensure P2P agreements facilitated by the firm continue to be managed and administered may include:

1. (1)

   entering into an arrangement with another firm to take over the management and administration of P2P agreements if the operator ceases to operate the electronic system in relation to lending; or

2. (2)

   holding sufficient collateral in a segregated account to cover the cost of management and administration while the loan book is wound down; or

3. (3)

   entering into an arrangement for another firm to act as guarantor for the P2P agreements which includes a legally enforceable arrangement to meet the costs of the guarantee in full; or

4. (4)

   managing the loan book in a way that ensures that income from P2P agreements facilitated by the firm is sufficient to cover the costs of managing and administering those agreements during the winding down process, taking into account the reduction of the loan pool and fee income from it.

16When designing its arrangements, a firm should take into account insolvency law to ensure that the insolvency of the firm does not prejudice the operation of arrangements that the firm has put in place.

3Other firms should take account of the regular monitoring rule (SYSC 4.1.10 R) as if it were guidance (and as if "should" appeared in that rule21 instead of "must") as explained in SYSC 1 Annex 1 3.3 R(1)21, but ignoring the cross-reference to SYSC 4.1.5 R and SYSC 4.1.9R21.

Depending on the nature, scale and complexity of its business, it may be appropriate for a firm to form an audit committee. An audit committee could typically examine management's process for ensuring the appropriateness and effectiveness of systems and controls, examine the arrangements made by management to ensure compliance with requirements and standards under the regulatory system, oversee the functioning of the internal audit function (if applicable) and provide an interface between management and external auditors. It should have an appropriate number of non-executive directors and it should have formal terms of reference.

7 Firms should also consider the additional guidance on risk-centric governance arrangements for effective risk management contained in SYSC 21.

7The role undertaken by a non-executive director will vary from one firm to another. Where a non-executive director is an approved person, for example where the firm is a body corporate, his responsibility and therefore liability will be limited by the role that he undertakes.

1Other firms should take account of the senior personnel rule (SYSC 4.2.1 R) as if it were guidance (and as if "should" appeared in that rule9 instead of "must") as explained in SYSC 1 Annex 1 3.3 R(1)9.

In the case of a body corporate, the persons referred to in SYSC 4.2.2 R should either be executive directors or persons granted executive powers by, and reporting immediately to, the governing body. In the case of a partnership, they should be active partners.

At least two independent minds should be applied to the formulation and implementation of the policies of a common platform firm, a management company3, a full-scope UK AIFM5 and the UK branch of a third country firm9. Where a firm1 nominates just two individuals to direct its business, the FCA9 will not regard them as both effectively directing the business where one of them makes some, albeit significant, decisions relating to only a few aspects of the business. Each should play a part in the decision-making process on all significant decisions. Both should demonstrate the qualities and application to influence strategy, day-to-day policy and its implementation. This does not require their day-to-day involvement in the execution and implementation of policy. It does, however, require involvement in strategy and general direction, as well as knowledge of, and influence on, the way in which strategy is being implemented through day-to-day policy.

Where there are more than two individuals directing the business of a common platform firm, a management company3, a full-scope UK AIFM5 or the UK branch of a third country firm9,1 the FCA9 does not regard it as necessary for all of these individuals to be involved in all decisions relating to the determination of strategy and general direction. However, at least two individuals should be involved in all such decisions. Both individuals' judgement should be engaged so that major errors leading to difficulties for the firm are less likely to occur. Similarly, each individual should have sufficient experience and knowledge of the business and the necessary personal qualities and skills to detect and resist any imprudence, dishonesty or other irregularities by the other individual. Where a single individual, whether a chief executive, managing director or otherwise, is particularly dominant in such 1a firm this will raise doubts about whether SYSC 4.2.2 R is met.

Where the senior personnel of a full-scope UK AIFM will carry out a FCA8governing function and the firm has applied for the FCA's approval under section 59 of the Act, this will be considered sufficient to comply with SYSC 4.2.7 R.8

2Other firms should take account of the written reports rule (SYSC 4.3.2 R) as if it were guidance (and as if "should" appeared in that rule5 instead of "must") as explained in SYSC 1 Annex 1 3.3 R(1)5.

The supervisory function does not include a general meeting of the shareholders of a firm,2 or equivalent bodies, but could involve, for example, a separate supervisory board within a two-tier board structure or the establishment of a non-executive committee of a single-tier board structure.

4A firm may apply to the FCA under section 138A of the Act to waive SYSC 4.3A.2R.

This section does not apply to a common platform firm.

1. (1)

   One purpose of the management responsibilities map is to help the firm and the FCA satisfy themselves that the firm has a clear organisational structure (as required by SYSC).

2. (2)

   It also helps the FCA to identify who it needs to speak to about particular issues and who is accountable if something goes wrong.

1. (1)

   The management responsibilities map should be consistent with the statements of responsibilities.

2. (2)

   The statements of responsibilities and the management responsibilities map should all be prepared in a way that makes it simple to see how the responsibilities allocated in a particular statement of responsibilities fit into the overall system of management and governance of the firm.

The management responsibilities map should include functions that are:

1. (1)

   included in a PRA controlled function under SUP 10C.9 (Minimising overlap with the PRA approved persons regime); or

2. (2)

   excluded from the other overall responsibility function under SUP 10C.7.1R(2) (Exclusion for approved person with approval to perform other designated senior management functions).

A firm'smanagement responsibilities map should demonstrate that there are no gaps in the allocation of responsibilities among its management.

1. (1)

   This provision gives guidance on specific aspects of SYSC 4.5.5R and SYSC 4.5.7R.

2. (2)

   A firm need only include summary details of the persons in SYSC 4.5.7R(1).

3. (3)

   A firm'sSMF managers and members of its governing body may overlap with its senior management and senior personnel. If so, the firm does not have to give the same details twice.

4. (4)

   A firm should include details of individuals in addition to those in SYSC 4.5.7R(1), (3) and (5) if they are needed to make the management responsibilities map clear. For example, it may be necessary to include these details if the same individual has responsibilities in a number of different areas of the firm.

5. (5)

   A firm should only include summary details about statements of responsibilities under SYSC 4.5.7R(2). There is no need to duplicate the statements of responsibilities. The main aim of including material about statements of responsibilities in the management responsibilities map is to show how the material:

   1. (a)

      fits into the firm's overall governance structure; and

   2. (b)

      for each statement of responsibilities, fits with the others.

6. (6)

   The executive director function and the other overall responsibility function are defined generally and generically and can be performed by several people. Therefore, there is no need to explain why several people perform one of the functions.

7. (7)

   A management responsibilities map should include a checklist confirming that all FCA-prescribed senior management responsibilities have been allocated or, if some have not been allocated, the reason why.

8. (8)

   If:

   1. (a)

      any designated senior management function is performed by; or

   2. (b)

      any FCA-prescribed senior management responsibility is allocated to;

9. more than one person, a firm'smanagement responsibilities map should give details of how the performance or discharge of the responsibilities is to be carried out by those persons.

10. (9)

    The material in SUP 10C.11.31G and SUP 10C.11.32G (recording sharing and splitting of responsibilities in statements of responsibilities) also applies to a management responsibilities map.

1. (1)

   The FCA expects that the management responsibilities map of a small and non-complex firm is likely to be simple and short. It may be no more than a single sheet of paper.

2. (2)

   A firm is likely to be small and non-complex for these purposes if:

   1. (a)

      it is:

      1. (i)

         a small CRR firm as defined in the part of the PRA's rulebook called “Allocation of responsibilities”; or

      2. (ii)

         a credit union that meets the size requirements for small CRR firms under the PRA's requirements in (a)(i);

   2. (b)

      it conducts a limited number of simple business lines; and

   3. (c)

      it does not rely on group governance arrangements.

1. (1)

   The requirement for a management responsibilities map to be a single document does not mean that it has to be a single sheet of paper or must be capable of being reproduced as one.

2. (2)

   A management responsibilities map may be made up of a folder with several files or items in it.

3. (3)

   However, a firm that creates a management responsibilities map in this way should ensure that its approach is compatible with it being a single document. In particular:

   1. (a)

      there should be a single item that identifies every item making up the management responsibilities map and shows where each item can be found;

   2. (b)

      for example, this could be a contents list of the items making up the management responsibilities map with electronic links to each of them;

   3. (c)

      the management responsibilities map should be complete by itself and should not refer to documents not forming part of it;

   4. (d)

      every item in the management responsibilities map should only contain material about the matters required by this section;

   5. (e)

      for example, if there is relevant material in the firm's report and accounts, the folder should only contain the relevant parts or a link to those parts.

4. (4)

   The folder and its contents should be easily identifiable as the firm'smanagement responsibilities map.

5. (5)

   Although a management responsibilities map can be large and complex, SYSC 4.5.13G explains that, for small non-complex firms, it may be small and simple.

1. (1)

   This provision explains the purpose of SYSC 4 Annex 1G.

2. (2)

   A firm may use it as a checklist to see whether its management responsibilities map covers all its business activities.

3. (3)

   A firm may wish to prepare its management responsibilities map using the same split of activities.

4. (4)

   If a firm uses SYSC 4 Annex 1G to help it prepare its management responsibilities map, it should bear in mind that it is not comprehensive (see SYSC 4.5.20G).

5. (5)

   As mentioned in SYSC 4.7.37G, a firm may also use it as a checklist when allocating responsibilities under SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions).

There is no direct link between SYSC 4 Annex 1G and the senior management regime for relevant authorised persons.

SYSC 4 Annex 1G sets out the main business activities and functions that the FCA thinks are likely to be relevant to most firms, although the FCA does not require firms to organise themselves in this way.

Most or all of these activities and functions will normally apply to a complex firm. Many of them may not apply to a non-complex firm.

1. (1)

   SYSC 4 Annex 1G is not comprehensive. While it is intended to cover most front-line business activities of a relevant authorised person, it does not cover all internal oversight and monitoring functions.

2. (2)

   For example, it does not cover compliance or internal audit or the firm'sgoverning body or its committees.

A firm should consider past versions of its management responsibilities map as an important part of its records and as an important resource for the FCA in supervising the firm.

Past versions of a firm'smanagement responsibilities map form part of its records under SYSC 9.1 (General rules on record-keeping).

EEA relevant authorised persons and third-country relevant authorised persons are referred to as non-UK relevant authorised persons.

1. (1)

   This section sets out the rules about management responsibilities maps for branches maintained in the United Kingdom by:

   1. (a)

      third-country relevant authorised persons (see SYSC 4.6.6R to SYSC 4.6.14G and SYSC 4.6.29G);

   2. (b)

      EEA relevant authorised persons (see SYSC 4.6.15R to SYSC 4.6.28G and SYSC 4.6.29G).

2. (2)

   This section is not intended to extend the application of the common platform requirements to matters which are reserved by an EU instrument to the firm’sHome State regulator in relation to EEA relevant authorised persons.

1. (1)

   One purpose of the management responsibilities map for third country relevant authorised persons is to help the firm and the FCA satisfy themselves that the branch has a clear organisational structure (as required by SYSC, where applicable).

2. (2)

   It also helps the FCA to identify who it needs to speak to about particular issues and who is accountable if something goes wrong.

1. (1)

   The management responsibilities map should be consistent with the statements of responsibilities.

2. (2)

   The statements of responsibilities and the management responsibilities map should all be prepared in a way that makes it simple to see how the responsibilities allocated in a particular statement of responsibilities fit into the overall system of management and governance of the firm.

The management responsibilities map for a branch maintained by a third-country relevant authorised person should include functions that are:

1. (1)

   included in a PRA controlled function under SUP 10C.9 (Minimising overlap with the PRA approved persons regime); or

2. (2)

   excluded from the other local responsibility function under SUP 10C.8.1R (Exclusion for approved person with approval to perform other designated senior management functions).

1. (1)

   The management responsibilities map is an important support to the FCA’s functions as Host Statecompetent authority.

2. (2)

   Having requirements and powers that apply directly to individuals helps to make the requirements on firms that the FCA is required or entitled to impose as Host Statecompetent authority more effective.

3. (3)

   The management responsibilities map helps the FCA to operate its powers and requirements for individuals. For example it helps the FCA:

   1. (a)

      to identify who is accountable if something goes wrong;

   2. (b)

      to understand the role of the approved person (or candidate) in the branch and therefore to judge how to use its powers under the approved persons regime, such as the power to grant or refuse approval.

4. (4)

   By helping the FCA to better understand how the branch is structured, the management responsibilities map also helps the FCA to carry out more effective supervision of conduct of business, money laundering and other Host State responsibilities.

Information contained in SYSC 4.6.20R(1) and (2) covers:

1. (1)

   details about the branch contained in the notice given by the firm’sHome Statecompetent authority as part of the process for establishing the branch in the United Kingdom; and

2. (2)

   any updates to that information under the EEA Passport Rights Regulations.

The management responsibilities map of an EEA relevant authorised person may therefore consist of information:

1. (1)

   that has changed since its requisite details were supplied or were last changed; or

2. (2)

   that is not covered in the firm’sHome Statecompetent authority’s passport notification.

The FCA expects that an EEA relevant authorised person that excludes information from its management responsibilities map under SYSC 4.6.20R will identify in its management responsibilities map the documents supplied to the FCA or the PRA where the omitted information can be found.

In practice an EEA relevant authorised person may find it easier to prepare its management responsibilities map without omitting any information under SYSC 4.6.20R so that all the information referred to in SYSC 4.6.15R to SYSC 4.6.19R can be found in a single integrated document.

SYSC 4.6.27G and SYSC 4.6.28G do not take into account the right of a firm to omit information under SYSC 4.6.20R. They assume that the firm will prepare a single document under SYSC 4.6.24G. However SYSC 4.6.27G and SYSC 4.6.28G are not intended to take away the right to omit information under SYSC 4.6.20R.

1. (1)

   The management responsibilities map should be consistent with the statements of responsibilities.

2. (2)

   The statements of responsibilities and the management responsibilities map should be prepared in a way that makes it simple to see how the responsibilities allocated in a particular statement of responsibilities fit into the overall system of management and governance of the branch.

1. (1)

   This provision gives guidance on specific aspects of SYSC 4.6.16R and SYSC 4.6.18R.

2. (2)

   A firm need only include summary details of the persons in SYSC 4.6.18R(1).

3. (3)

   A branch’sSMF managers and members of its governing body or equivalent may overlap with its senior management and senior personnel. If so, the firm does not have to give the same details twice.

4. (4)

   A firm should include details of individuals in addition to those in SYSC 4.6.18R(1) if they are needed to make the management responsibilities map clear. For example, it may be necessary to include these details if the same individual has responsibilities in a number of different areas of the branch.

5. (5)

   A firm should only include summary details about statements of responsibilities under SYSC 4.6.18R(2). There is no need to duplicate the statements of responsibilities.

6. (6)

   If any designated senior management function is performed by more than one person, a firm’smanagement responsibilities map should give details of how the performance or discharge of the responsibilities is to be carried out by those persons.

7. (7)

   The guidance below applies to EEA relevant authorised persons subject to the modifications in (8):

   1. (a)

      SYSC 4.5.15G (Single document);

   2. (b)

      SYSC 4.5.21G to SYSC 4.5.22G (Records).

8. (8)

   Unless the context otherwise requires, any reference in the guidance in (7) to:

   1. (a)

      the firm should be treated as a reference to the branch:

   2. (b)

      the reference to SYSC 4.5.13G in SYSC 4.5.15G(5) should be treated as a reference to SYSC 4.6.29G.

1. (1)

   The guidance in this paragraph applies to EEA relevant authorised persons and third-country relevant authorised persons.

2. (2)

   The FCA expects that the management responsibilities map of a small and non-complex branch is likely to be simple and short. It may be no more than a single sheet of paper.

3. (3)

   A branch is likely to be small and non-complex if it:

   1. (a)

      conducts a limited number of simple business lines; and

   2. (b)

      does not rely on group governance arrangements or on governance arrangements for other parts of the firm.

The purpose of this section is to ensure, together with the equivalent PRA requirements, that an SMF manager is responsible and accountable for every area of a firm's activities.

The purpose of SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions) is to avoid gaps. It is to make sure that an SMF manager has responsibility for every part of a firm's activities, business areas and management functions not otherwise covered by other parts of this section or by the equivalent PRA requirements.

As explained in SYSC 4.7.18G, SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions) does not apply to non-executive functions.

When SYSC 4.7 refers to a person having overall responsibility for a function, it means a person who has:

1. (1)

   ultimate responsibility (under the governing body) for managing or supervising that function; and

2. (2)

   primary and direct responsibility for:

   1. (a)

      briefing and reporting to the governing body about that function; and

   2. (b)

      putting matters for decision about that function to the governing body.

Having overall responsibility for a matter does not mean having ultimate authority over it. The ultimate decision-making body of a firm is its governing body, acting collectively.

1. (1)

   A person with overall responsibility for a matter will either be a member of the governing body or will report directly to the governing body for that matter.

2. (2)

   For example, a firm appoints A to be head of sales. A is not on the governing body. A reports to an executive director (B) and B reports to the governing body about the sales function. In this example B, rather than A, has overall responsibility for sales.

1. (1)

   A person who reports to another, or is subject to oversight by another, may still have overall responsibility for a function.

2. (2)

   For example, a head of compliance may report direct to the governing body but be subject to performance appraisal by the chief executive. In this example, the head of compliance will still have overall responsibility for compliance.

3. (3)

   If a person (A):

   1. (a)

      reports directly to the firm'sgoverning body about a particular matter; but

   2. (b)

      is not a member of the governing body; and

   3. (c)

      reports to a member of the governing body (B) about that matter;

4. B has overall responsibility for that matter.

5. (4)

   If:

   1. (a)

      a person (A) reports directly to the firm'sgoverning body about a particular matter;

   2. (b)

      A also reports to another person (B) about that matter;

   3. (c)

      neither A nor B is a member of the governing body; and

   4. (d)

      B also reports directly to the firm'sgoverning body about that matter;

6. B has overall responsibility for that matter.

7. (5)

   A member of the governing body who reports to the chief executive may still have overall responsibility for a function.

8. (6)

   If:

   1. (a)

      a person (A) reports directly to the firm'sgoverning body about a particular matter; and

   2. (b)

      A’s function is subject to oversight by a non-executive director (B) or by a committee of the firm'sgoverning body chaired by B;

9. A (not B) has overall responsibility for that matter.

When this section refers to a person having overall responsibility for a function, it does not mean that that person has day-to-day management control of that function.

In general, the FCA expects that a person to whom overall responsibility for an area of a firm is allocated under SYSC 4.7.8R will be the most senior employee or officer responsible for managing that area.

1. (1)

   SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions) does not mean that the firm has to allocate overall responsibility for the running of the governing body itself.

2. (2)

   This is because SYSC 4.7.8R is about assigning responsibility subject to the overall control of the governing body (see SYSC 4.7.12G).

3. (3)

   This means that a person does not have overall responsibility for a function under SYSC 4.7.8R just by being a member of a firm'sgoverning body.

1. (1)

   A person who just provides oversight of a function does not have overall responsibility for that function under SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions).

2. (2)

   Paragraph (1) and SYSC 4.7.17G mean that a non-executive director acting as such does not have overall responsibility for a function under SYSC 4.7.8R or perform the other overall responsibility function.

3. (3)

   Paragraph (1) and SYSC 4.7.17G mean that a non-executive director:

   1. (a)

      providing oversight of a function; or

   2. (b)

      being responsible for the independence of a function;

   3. does not have overall responsibility for that function under SYSC 4.7.8R or perform the other overall responsibility function.

The FCA expects a firm to allocate all the functions in SYSC 4.7.5R (Allocation of FCA-prescribed senior management responsibilities) and SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions) to an individual and not to a legal person.

The FCA would not consider it unusual if a person who has overall responsibility for a particular function was not a member of the governing body. For example, in some firms, the head of compliance reports directly to the governing body even though the head compliance is not a member of the governing body.

1. (1)

   A person may have overall responsibility for a matter without being a member of the firm'sgoverning body, which means that (ignoring (2)) a relatively junior person could have overall responsibility for an activity of a firm.

2. (2)

   However, the FCA expects that anyone who has overall responsibility for a matter:

   1. (a)

      will be sufficiently senior and credible; and

   2. (b)

      will have sufficient resources and authority;

3. to be able to exercise his management and oversight responsibilities effectively.

SYSC 4.7.21G(2) also applies to someone who has responsibility for an FCA-prescribed senior management responsibility.

1. (1)

   It will be common for a small non-complex firm to divide overall responsibility for its activities between members of its governing body and not to assign overall responsibility for any activity to someone who is not a member.

2. (2)

   However, when deciding how to divide up overall responsibility for its activities, a firm should avoid assigning such a wide range of responsibilities to a particular person so that the person is not able to carry out those responsibilities effectively.

3. (3)

   Therefore, in a large or complex firm, the FCA expects overall responsibility for some functions to be assigned to persons in the layer of management below the governing body. Anyone in that layer having overall responsibility for an activity will be performing a designated senior management function.

1. (1)

   The FCA expects that normally a firm will allocate the FCA-prescribed senior management responsibility in rows (5), (7), (8), (9) and (10) of the table in SYSC 4.7.7R to an SMF manager who is a non-executive director of the firm.

2. (2)

   The FCA expects that normally a firm will allocate:

   1. (a)

      the other FCA-prescribed senior management responsibilities; and

   2. (b)

      functions under SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions);

   3. to an SMF manager who performs executive functions for the firm.

3. (3)

   In general, the FCA expects that a person who has responsibility for an FCA-prescribed senior management responsibility in (2) will be the most senior employee or officer responsible for managing that area.

4. (4)

   Paragraphs (1) to (3) do not apply to a small non-complex firm to the extent that they deal with those FCA-prescribed senior management responsibilities that, under the table in SYSC 4.7.7R, do not apply to small firms.

5. (5)

   The FCA accepts that it may not be practical for a small non-complex firm (see SYSC 4.5.13G) to comply with the parts of (1), (2) and (3) that would otherwise apply to it.

1. (1)

   The FCA expects that a firm will not normally split an FCA-prescribed senior management responsibility between several SMF managers, with each only having responsibility for part.

2. (2)

   The FCA expects that a firm will not normally allocate responsibility for:

   1. (a)

      an FCA-prescribed senior management responsibility; or

   2. (b)

      a function under SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions);

3. to two or more SMF managers jointly.

1. (1)

   Although the norm should be for a firm to have a single individual performing each FCA-prescribed senior management responsibility or function allocated under SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions), there may be circumstances in which responsibilities can be divided or shared (see (2)).

2. (2)

   A firm should only divide or share a responsibility where this is appropriate and can be justified.

3. (3)

   For example, it would be justified to share a function or responsibility if that is done:

   1. (a)

      as part of a job share; or

   2. (b)

      where departing and incoming senior managers work together temporarily as part of a handover.

4. (4)

   A firm may have co-heads of a department or business unit if this can be justified under (1) to (3).

1. (1)

   The FCA expects a firm to divide and allocate responsibilities under:

   1. (a)

      SYSC 4.7.5R (Allocation of FCA-prescribed senior management responsibilities); and

   2. (a)

      SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions);

2. between its SMF managers so that responsibilities are grouped together appropriately.

3. (2)

   The firm should make the judgement:

   1. (a)

      in (1); and

   2. (b)

      about whether and how responsibilities and functions should be shared;

   3. under:

   4. (c)

      SYSC 4.1.1R (robust governance arrangements); and

   5. (d)

      any other applicable Handbook requirements, including SYSC 4.7.25G and SYSC 4.7.26G.

4. (3)

   The firm should take into account the way it is organised, the business it carries out and the need not to allocate too many responsibilities to one individual (see SYSC 4.7.23G).

5. (4)

   The FCA expects a firm to allocate FCA-prescribed senior management responsibilities and responsibilities allocated under SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions) to the SMF managers they are most closely linked to.

SUP 10C.11.31G to SUP 10C.11.33G (Statements of responsibilities) contains material about:

1. (1)

   how to prepare statements of responsibilities where a responsibility or function is shared or divided between several SMF managers; and

2. (2)

   dividing and sharing responsibilities.

1. (1)

   A firm may allocate more than one FCA-prescribed senior management responsibility to the same SMF manager.

2. (2)

   This is subject to:

   1. (a)

      SYSC 4.7.23G (should not give too many responsibilities to one person); and

   2. (b)

      SYSC 4.7.27G (what responsibilities should be grouped together).

1. (1)

   As explained in SYSC 4.7.2R, there is no territorial limitation to the application of this section.

2. (2)

   This means that a firm should allocate:

   1. (a)

      the FCA-prescribed senior management responsibilities; and

   2. (b)

      overall responsibilities under SYSC 4.7.8R;

   3. so that they cover activities, transactions, business areas and management functions that are located or take place wholly or partly outside, as well as ones in, the United Kingdom.

1. (1)

   SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions) requires overall responsibility for various aspects of a firm's affairs to be allocated to an SMF manager.

2. (2)

   This requirement does not prevent a firm from relying on an employee of a company in the same group to perform the function.

3. (3)

   A firm has two main choices about how to fit such arrangements into the senior management regime for relevant authorised persons.

   1. (a)

      The group employee is appointed by the firm'sgoverning body to perform the function. This means that the firm will have entered into an arrangement with that person. As explained in SUP 10C.3.9G, an arrangement with the firm is one of the factors that makes the senior management regime for relevant authorised persons apply. The result is that the group official will be performing a controlled function and will need to be approved as an SMF manager.

   2. (b)

      The firm appoints someone (A) to oversee what the group employee does (so far as it concerns the firm) and to take overall responsibility for the function. A will need to be approved as an SMF manager.

1. (1)

   SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions) does not cover responsibility for an aspect of a firm's affairs managed by an individual approved to perform the Group Entity Senior Manager PRA-designated senior management function.

2. (2)

   Where a responsibility is held by someone approved to perform the Group Entity Senior Manager PRA-designated senior management function for the firm, there is no need to apply the arrangements in SYSC 4.7.31G.

3. (3)
   1. (a)

      The statement of responsibilities for the individual performing the Group Entity Senior Manager PRA-designated senior management function; and

   2. (b)

      the firm'smanagement responsibilities map;

   should clearly show what responsibilities are held by that individual.

A firm may rely on an employee of a company in the same group to perform an FCA-prescribed senior management responsibility. However, SYSC 4.7.5R (Allocation of FCA-prescribed senior management responsibilities) also requires this to be arranged in such a way that the person performing the responsibility is approved as an SMF manager of the firm.

SYSC 4.7.31G and SYSC 4.7.33G also apply to a firm that outsources functions to a third party and is relying on an individual from the outsourced services provider to carry out the functions in those paragraphs.

1. (1)

   A firm should allocate between its SMF managers responsibility for every area of its activities.

2. (2)

   This is required by a mixture of:

   1. (a)

      SYSC 4.7.5R (Allocation of FCA-prescribed senior management responsibilities);

   2. (b)

      SYSC 4.7.8R (Allocation of overall responsibility for a firm’s activities, business areas and management functions);

   3. (c)

      the requirements for FCA-designated senior management functions; and

   4. (d)

      the corresponding PRA requirements.

1. (1)

   Having overall responsibility for an activity under SYSC 4.7.8R requires approval as an SMF manager. This is because a person who has overall responsibility for an activity will be:

   1. (a)

      performing the other overall responsibility function; or

   2. (b)

      approved to perform another designated senior management function.

2. (2)

   The other overall responsibility function applies because this is the effect of SUP 10C.7.1R (definition of other overall responsibility function).

3. (3)

   SUP 10C.7.1R says that the other overall responsibility function does not apply to a person who is approved to perform another designated senior management function.

1. (1)

   The purpose of SYSC 4 Annex 1G (The main business activities and functions of a relevant authorised person) is to help a firm to prepare its management responsibilities map (see SYSC 4.5.16G).

2. (2)

   There is no direct link between SYSC 4 Annex 1G and this section.

3. (3)

   However, a firm may find SYSC 4 Annex 1G useful as a checklist to help it make sure that it has not failed to allocate overall responsibility under SYSC 4.7.8R for a particular activity of the firm.

4. (4)

   If a firm uses SYSC 4 Annex 1G to help it check whether it has allocated overall responsibility as described in (3), it should bear in mind that it is not comprehensive (see SYSC 4.5.20G).

SYSC 4.7.26G (a firm should normally allocate responsibility for particular areas to a single SMF manager) does not mean that the FCA expects there to be a separate person with overall responsibility for each individual business area in SYSC 4 Annex 1G (The main business activities and functions of a relevant authorised person).

The purpose of this section is to ensure, together with the equivalent PRA requirements, that an SMF manager is responsible and accountable for every area of a branch’s activities.

The FCA-prescribed senior management responsibilities relate to the activities of the third-country relevant authorised person’sbranch in the United Kingdom.

1. (1)

   The purpose of SYSC 4.8.10R is to avoid gaps. It is to ensure that an SMF manager has responsibility for every part of a branch’s activities, business areas and management functions not otherwise covered by other parts of this section or by the equivalent PRA requirements.

2. (2)

   SYSC 4.8.10R(1) refers to the activities, business areas and management functions of the branch that are under the management of the branch’sgoverning body. However, the FCA recognises that for some branches, some activities, business areas and functions of the branches may not be under the management of the branch’sgoverning body. This may be the case where the branch does not have its own governing body or where it is organised in such a way that certain functions are under the management of a person or body outside the branch’s management structure. In those circumstances, it would not be appropriate to require the firm to allocate overall responsibility for that matter to a person who is part of the management structure of the branch.

3. (3)

   The requirements to allocate responsibility for activities, business areas and functions of a branch under SYSC 4.8.10R(1) and (2) respectively are intended to allow for the difference described in (2). In particular:

   1. (a)

      SYSC 4.8.10R(1) is intended to cater for the situation where a particular activity, business area or function of the branch is under the management of the branch’sgoverning body. In that situation, the firm should allocate overall responsibility for that matter under SYSC 4.8.10R(1);

   2. (b)

      SYSC 4.8.10R(2) is intended to cater for the situation where a particular activity, business area or function of the branch is not under the management of branch’sgoverning body. In that situation, the firm should allocate responsibility for that matter under SYSC 4.8.10R(2).

4. (4)

   A person who is allocated responsibility for a matter under SYSC 4.8.10R(1) or (2) will have local responsibility for that matter and will be performing the other local responsibility function unless that person has been approved to perform another designated senior management function (see SYSC 4.8.10R(4) and SYSC 4.8.33G for more information on this).

5. (5)

   The provisions listed below provide further guidance and explanations about local responsibility:

   1. (a)

      SYSC 4.8.12G to SYSC 4.8.14G provides guidance on the meaning of local responsibility in general;

   2. (b)

      SYSC 4.8.15G to SYSC 4.8.19G provide guidance on the meaning of overall responsibility under SYSC 4.8.10R(1);

   3. (c)

      SYSC 4.8.20G provides further guidance about local responsibility under SYSC 4.8.10R(2).

6. (6)

   As explained in SYSC 4.8.14G, SYSC 4.8.10R does not apply to non-executive functions.

SYSC 4.8.10R(4) states that a person who has responsibility for an activity, business area or management function under SYSC 4.8.10R(1) or (2) will have local responsibility for that matter. Having local responsibility for a matter does not mean:

1. (1)

   having ultimate authority over it; or

2. (2)

   having day-to-day management control of that function.

1. (1)

   SYSC 4.8.10R does not mean that the firm has to allocate local responsibility for the running of the branch’sgoverning body or equivalent itself.

2. (2)

   This means that a person does not have local responsibility for a function under SYSC 4.8.10R just by being a member of a branch’sgoverning body or equivalent.

1. (1)

   A person who just provides oversight of a function does not have local responsibility for that function under SYSC 4.8.10R.

2. (2)

   Paragraph (1) and SYSC 4.8.13G mean that a non-executive director acting as such does not have local responsibility for a function under SYSC 4.8.10R or perform the other local responsibility function.

3. (3)

   Paragraph (1) and SYSC 4.8.13G mean that a non-executive director:

   1. (a)

      providing oversight of a function; or

   2. (b)

      being responsible for the independence of a function;

   does not have local responsibility for that function under SYSC 4.8.10R and does not perform the other local responsibility function.

1. (1)

   SYSC 4.8.10R(1) relates to the allocation of overall responsibility for activities, business areas or functions of the branch which are under the management of the branch’sgoverning body.

2. (2)

   SYSC 4.8.10R(1) refers to overall responsibility.

3. (3)

   As explained in SYSC 4.8.10R(4), a person who has overall responsibility for a function under SYSC 4.8.10R(1) will have local responsibility for that function.

4. (4)

   Overall responsibility means the same as it does in SYSC 4.7.8R (Allocation of overall responsibility for a UKfirm’s activities, business areas and management functions) except that:

   1. (a)

      it applies to the branch rather than the firm as a whole; and

   2. (b)

      it refers to responsibility under the governing body of the branch rather than of the firm as a whole.

5. (5)

   SYSC 4.7.11G to SYSC 4.7.18G provide guidance on the meaning of overall responsibility in SYSC 4.7.8R.

In accordance with SYSC 4.8.15G(4), when SYSC 4.8.10R(1) refers to a person having overall responsibility for a function, it means a person who has:

1. (1)

   ultimate responsibility (under the governing body of the branch) for managing or supervising that function; and

2. (2)

   primary and direct responsibility for:

   1. (a)

      briefing and reporting about that function to the branch’sgoverning body or equivalent; and

   2. (b)

      putting matters for decision about that function to the branch’sgoverning body or equivalent.

In general, the FCA expects that a person to whom overall responsibility for a function is allocated under SYSC 4.8.10R(1) will be the most senior employee or officer responsible for managing or supervising that function under the management of the branch’sgoverning body.

A person may have overall responsibility for a function under SYSC 4.8.10R(1) even though that person also reports to a person outside the branch.

SYSC 4.7.13G and SYSC 4.7.14G (meaning of overall responsibility for UK relevant authorised persons) apply to the meaning of overall responsibility in this section but as if:

1. (1)

   references to the firm were to the branch; and

2. (2)

   references to the chief executive were to the branchmanager or the person performing the PRA’s Head of Overseas Branch designated senior management function.

1. (1)

   SYSC 4.8.10R(2) relates to the allocation of local responsibility for any activities, business areas and functions of the branch which are not under the management of the branch’sgoverning body.

2. (2)

   SYSC 4.8.10R(3) states that a person who has local responsibility under SYSC 4.8.10R(2) must be directly involved in the management of the activity, business area or management function for which they have responsibility under (2).

3. (3)

   A person having local responsibility for a function under SYSC 4.8.10R(2) does not need to be part of the management structure of the branch in order to have local responsibility for the function.

4. (4)

   SYSC 4.8.25G and SYSC 4.8.27G provide further guidance on the allocation of local responsibility under SYSC 4.8.10R(2).

The FCA expects a firm to allocate all the functions in SYSC 4.8.6R (FCA-prescribed senior management responsibilities) and SYSC 4.8.10R (Local responsibility for each of the activities, business areas and management functions of the branch) to an individual and not to a legal person.

1. (1)

   The FCA would not consider it unusual if a person who has local responsibility for a particular function was not a member of the branch’sgoverning body or equivalent.

2. (2)

   For example, in some branches, the head of compliance may report directly to the branch’sgoverning body even though the head of compliance is not a member of the governing body.

The FCA expects that anyone who has local responsibility for a matter:

1. (1)

   will be sufficiently senior and credible; and

2. (2)

   will have sufficient resources and authority;

to be able to exercise their management and oversight responsibilities effectively.

SYSC 4.8.23G also applies to someone who has responsibility for an FCA-prescribed senior management responsibility.

1. (1)

   The FCA expects that a firm appointing someone to have local responsibility for a function under SYSC 4.8.10R(2) (responsibility for a branch’s activities, business areas and management functions not under the management of a branch’sgoverning body) will appoint the most senior employee or officer of the firm with responsibility for that activity, business area or management function.

2. (2)

   However, as explained in SYSC 4.8.27G (Setting overall strategy for a branch), the firm should not appoint someone under SYSC 4.8.10R(2) whose responsibilities are just strategic.

3. (3)

   SYSC 4.8.17G deals with the seniority of someone appointed by the firm to have local responsibility for a function under SYSC 4.8.10R(1) (responsibility for a branch’s activities, business areas and management functions under the management of a branch’sgoverning body).

1. (1)

   In some cases, a person who has local responsibility for a particular function may be very senior within the firm as a whole.

2. (2)

   For instance, in some branches, an individual with local responsibility for a function may also be the head of the firm’s Europe and Middle East division for a business line and may be more senior within the firm as a whole than the person performing the PRA’s Head of Overseas Branch designated senior management function.

1. (1)

   Generally, where a firm allocates responsibility under SYSC 4.8.10R to one of the firm’sSMF managers who is not based in the branch the FCA would expect:

   1. (a)

      that the responsibility would not be allocated to a manager whose responsibilities for the branch are limited to setting overall strategy for the branch; and

   2. (b)

      that, instead, the firm would allocate it to a manager who is the most senior person responsible for implementing the strategy for the branch.

2. (2)

   See SUP 10C.1.5AG for more about how the difference between strategic and implementing responsibilities affects the FCA senior management regime for approved persons in third-country relevant authorised persons.

1. (1)

   It will be common for a small non-complex branch to divide local responsibility for its activities under the management of the branch’sgoverning body between members of the branchgoverning body or equivalent and not to assign responsibility for any activity to someone who is not a member.

2. (2)

   However, when deciding how to divide up responsibility for the activities of a branch, a firm should avoid assigning such a wide range of responsibilities to a single individual that they are unable to carry out those responsibilities effectively.

3. (3)

   Therefore, in a branch of a large or complex firm, the FCA expects local responsibility for some functions to be assigned to persons in the layer of management below the branch’sgoverning body or equivalent. Anyone in that layer having local responsibility for an activity will be performing a designated senior management function.

4. (4)

   Some of the activities, business areas and management functions of a branch may not be under the management of the branch’sgoverning body. In that case, a firm may allocate responsibility for the function to someone who is not a member of the branch’sgoverning body or in the management layer below it.

5. (5)

   Paragraph (2) also applies to allocating responsibility for functions that are not under the management of the branch’sgoverning body.

1. (1)

   SYSC 4.8.10R (Local responsibility for a branch’s activities, business areas and management functions) requires local responsibility for various aspects of a firm’s affairs to be allocated to an SMF manager.

2. (2)

   This requirement does not prevent a firm from relying on an employee of a company in the same group to perform the function.

3. (3)

   The group employee will need to be an SMF manager of the firm.

4. (4)

   SUP 10C.3.9G explains the arrangements that should be put in place before the firm can apply for a group employee to be approved as an SMF manager for the firm.

5. (5)

   Paragraphs (1) to (4) also apply to a firm that:

   1. (a)

      outsources functions to a third party and is relying on an individual from the outsourced services provider; or

   2. (b)

      is relying on an individual working for the wider firm from outside the branch;

   to carry out the functions in (1).

1. (1)

   It is common for a branch to carry out only part of a transaction. For instance, a transaction may be booked in a branch but negotiated and arranged elsewhere or vice versa.

2. (2)

   When allocating responsibility to an SMF manager for activities in relation to transactions under SYSC 4.8.10R, a firm should not exclude a transaction which is arranged, booked or negotiated in the branch merely because other elements of the transaction occur outside the United Kingdom.

1. (1)

   A third-country relevant authorised person should allocate responsibility to its SMF managers for every area of the activities of its branch.

2. (2)

   This is required by a mixture of:

   1. (a)

      SYSC 4.8.6R (FCA-prescribed senior management responsibility);

   2. (b)

      SYSC 4.8.10R (Local responsibility for a firm’s activities, business areas and management functions);

   3. (c)

      the requirements for FCA-designated senior management functions; and

   4. (d)

      the corresponding PRA requirements.

1. (1)

   Having local responsibility for an activity, business area or management function of the branch under SYSC 4.8.10R requires approval under section 59 of the Act (Approval for particular arrangements) as an SMF manager. This is because a person who has local responsibility for an activity will be:

   1. (a)

      performing the other local responsibility function; or

   2. (b)

      approved to perform another designated senior management function.

2. (2)

   The other local responsibility function applies because this is the effect of SUP 10C.8.1R (Definition of the other local responsibility function (SMF22)).

SUP 10C.8.1R(2) says that the other local responsibility function does not apply to a person who is approved to perform another designated senior management function in relation to the branch.

SYSC 4.7.37G to SYSC 4.7.38G provides guidance on the link between SYSC 4 Annex 1G and SYSC 4.7. That guidance is also relevant to this section.

The information and material in SYSC 4.9.4R that should be made available includes details:

1. (1)

   about unresolved or possible breaches of the requirements of the regulatory system; and

2. (2)

   of any unresolved concerns expressed by the FCA, the PRA or another regulatory body.

1. (1)

   The main purpose of SYSC 4.9.4R is to help the SMF manager with his new or revised responsibilities or job and to help the managers of SMF managers.

2. (2)

   It should be a practical and helpful document and not just a record.

3. (3)

   The material should include an assessment of what issues should be prioritised.

4. (4)

   It should include judgement and opinion, not just facts and figures.

1. (1)

   Where the responsibilities or job in SYSC 4.9.4R are being taken over from another person, the firm should have arrangements for an orderly transition.

2. (2)

   As part of these arrangements, the firm should take reasonable steps to ensure that the predecessor contributes to the information and material in SYSC 4.9.4R all that would be reasonable to expect the predecessor to know and consider relevant, including the predecessor’s opinions.

3. (3)

   One way of doing this could be for the predecessor to prepare a handover certificate.

4. (4)

   However, the FCA accepts that there will be cases in which it will be impractical to ask the predecessor to prepare a handover certificate.

A firm should consider whether to apply the procedures in this section to other parts of its management.