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SYSC 6.2 Internal audit

SYSC 6.2.1RRP

A 7management company5 must, where appropriate and proportionate in view of the nature, scale and complexity of its business and the nature and range of its financial services and activities,5 undertaken in the course of that business, establish and maintain an internal audit function which is separate and independent from the other functions and activities of the firm and which has the following responsibilities:

5
  1. (1)

    to establish, implement and maintain an audit plan to examine and evaluate the adequacy and effectiveness of the firm's systems, internal control mechanisms and arrangements;

  2. (2)

    to issue recommendations based on the result of work carried out in accordance with (1);

  3. (3)

    to verify compliance with those recommendations;

  4. (4)

    to report in relation to internal audit matters in accordance with SYSC 4.3.2 R.

[Note: 7article 11 of the UCITS implementing Directive]5

SYSC 6.2.1AGRP

2Other firms should take account of the internal audit rule (SYSC 6.2.1 R) as if it were guidance (and as if should appeared in that rule7 instead of must) as explained in SYSC 1 Annex 1 3.3 R(1)7.

3
SYSC 6.2.1BGRP
  1. (1)

    6This guidance is relevant to an SMCR firm8 required to establish and maintain an internal audit function under article 24 of the MiFID Org Regulation7.

  2. (2)

    Taking account of the nature, scale and complexity of its activities, the firm should have appropriate procedures to ensure that the removal or any other disciplinary sanctioning of the head of the internal audit function does not undermine the independence of the internal audit function.

  3. (3)

    In the FCA's view, it will be appropriate, in many cases, for the removal or any other disciplinary sanctioning of the head of the internal audit function to require the approval of a majority of the management body, including at least a majority of its members who do not perform any executive function in the firm.

SYSC 6.2.2GRP
  1. (1)

    The term 'internal audit function' in SYSC 6.2.1R (and SYSC 4.1.11G), and for a common platform firm in article 24 of the MiFID Org Regulation,7 refers to the generally understood concept of internal audit within a firm, that is, the function of assessing adherence to and the effectiveness of internal systems and controls, procedures and policies.6

  2. (2)

    6For a firm that is not an SMCR firm8, the internal audit function is not a controlled function itself, but is part of the systems and controls function 8(CF28).

  3. (3)

    6For an SMCR firm8, the internal audit function is a PRA controlled function (SMF5).