SYSC 8.2 Outsourcing of portfolio management for retail clients to a non-EEA State
- (1)
1In addition to the requirements set out in the MiFID outsourcing rules, when a MiFID investment firm outsources the investment service of portfolio management to retail clients to a service provider located in a non-EEA state, it must ensure that the following conditions are satisfied:
- (a)
the service provider must be authorised or registered in its home country to provide that service and must be subject to prudential supervision;
- (b)
there must be an appropriate cooperation agreement between the FCA and the supervisor in the non-EEA state;2
2
- (a)
(in this chapter the "conditions").
[Note: article 15(1) of the MiFID implementing Directive]
- (2)
In addition to complying with the common platform outsourcing rules, if one or both of the conditions are not satisfied, a MiFID investment firm may enter into such an outsourcing only if it gives prior notification in writing to the FCA containing adequate details of the proposed outsourcing and the FCA does not object to that arrangement within a reasonable time following receipt of that notification.
[Note: article 15(2) and (4) of the MiFID implementing Directive]
- (3)
For the purposes of this rule a "reasonable time" is within one month of receipt of a notification. However, the FCA may seek further information from the MiFID investment firm in relation to the outsourcing proposal if this is necessary to enable the FCA to make a decision. Any effect this may have on the FCA's response time will be notified to the MiFID investment firm and that revised response time will constitute a reasonable time for the purposes of this rule.
The conditions do not apply if the outsourcing only concerns ancillary activities connected with portfolio management, for example IT processes or execution only activities.
If a firm has received no notice of objection or no request for further information from the FCA within one month of the FCA receiving the notification, it may outsource the portfolio management on the basis set out in the notification.
The FCA would use its powers under section 55J of the Act to vary a firm's permission if it objected to such a notification.
Notification requirements: timing of notification
A firm should only make an outsourcing proposal notification to the FCA after it has carried out due diligence on the service provider and has had regard to the guidance set out in SYSC 8.3. The FCA will expect a firm to only submit an outsourcing proposal notification in respect of a service provider that the firm has determined is suitable to carry on the outsourcing activity.
Notification requirements: content
A notification under this section should include:
- (1)
details on which of the conditions is not met;
- (2)
if applicable, details and evidence of the service provider's authorisation or regulation including the regulator's contact details;
- (3)
the firm's proposals for meeting its obligations under this chapter on an ongoing basis;
- (4)
- (5)
a draft of the outsourcing agreement between the service provider and the firm;
- (6)
the proposed start date of the outsourcing; and
- (7)
confirmation that the firm has had regard to the guidance in SYSC 8.3, or if it has not, why not.
Notification requirements additional guidance
Where the FCA has not objected to the outsourcing agreement, the firm should have regard to its obligations under SUP 15 which include making the FCA aware of any matters which could affect the firm's ability to provide adequate services to its customers or could result in serious detriment to its customers or where there has been material change in the information previously provided to the FCA in relation to the outsourcing.