SYSC TP 7 Bank of England and Financial Services Act 2016: Certification and regulatory references

17.1

Application, purpose and definitions

7.1.1

R

SYSC TP 7 applies as set out in the table in SYSC TP 7.1.2R.

7.1.2

R

Table: Application of SYSC TP 7

Type of firm

Parts of SYSC TP 7 that apply

An SMCR insurance firm2 except one in the following row

All applies except SYSC TP 7.7

An SMCR insurance firm2 that is a Solvency II firm (including a large non-directive insurer)

All applies except as follows:

(1) SYSC TP 7.4.2R to SYSC TP 7.4.3G do not apply.

(2) Subject to (3), SYSC TP 7.4.4R and SYSC TP 7.4.5G do not apply.

(3) SYSC TP 7.4.4R and SYSC TP 7.4.5G apply where the requirement to obtain a reference arises under SYSC 22.2.1R(1)(b) (certification).

(4) SYSC TP 7.7 does not apply.2

2A core SMCR firm, an enhanced scope SMCR firm and a limited scope SMCR firm

All applies, subject to the adjustments in SYSC TP 8 (Bank of England and Financial Services Act 2016: Application to claims management companies).

2A firm in SYSC TP 7.4.8R

Does not apply, except as follows.

SYSC TP 7.4.6R, SYSC TP 7.4.7G, SYSC TP 7.4.8R and SYSC TP 7.6 apply.

All other firms

Does not apply, except as follows.

SYSC TP 7.6 applies2.

SYSC TP 7.5 applies to the firms specified in SYSC TP 7.5.

7.1.3

G

SYSC TP 7:

(1)

explains how the certification regime described in SYSC 27 applies during the certification transitional periods2 described in SYSC TP 7.2.1G;

(2)

has certain transitional provisions dealing with SYSC 22 (Regulatory references) and with benchmark activities; 2

(3)

has certain other transitional provisions relating to the amendments made to the FCA Handbook by the Individual Accountability (Dual-Regulated Firms) Instrument 2018 and the Individual Accountability (FCA-Authorised Firms) Instrument 2019; and2

(4)

is adjusted and supplemented by SYSC TP 8 in relation to certain claims management firms.2

7.1.4

G

(1)

The main time period for which SYSC TP 7 operates is 2018 to 20202.

(2)

There are transitional provisions that can apply beyond that period. They are based on events occurring during that period.

7.1.5

R

The terms in the first column of the table in SYSC TP 7.1.6R, where they appear in bold in SYSC TP 7, have the meaning in the corresponding row of column 2 for the purposes of SYSC TP 7.

7.1.6

R

Table: glossary of bespoke terms used in SYSC TP 7

Part One: General

Defined term

Meaning

2commencement SIs

the insurance firms commencement SI and the solo firms commencement SI

2insurance firms commencement SI

the Bank of England and Financial Services Act 2016 (Commencement No. 5 and Transitional Provisions) Regulations 2018 (SI 2018/990)

2solo firms commencement SI

The Bank of England and Financial Services Act 2016 (Commencement No. 6 and Transitional Provisions) Regulations 2019 (SI 1136/2019)

[deleted]2

[deleted]2

Part Two: Dates

(1)2

Defined term

(2)2

Meaning Insurers2

2(3)

Meaning: Others

certification transitional period

the one year period beginning on 10 December 2018 and ending on 10 December 2019 referred to in regulation 2 of the insurance firms commencement SI (Appointed days for the coming into force of section 21 and Schedule 4 for insurers)

the one-year period beginning on the general commencement date and ending on 9 December 2020 (as referred to in regulation 2(6) of the solo firms commencement SI)2

general commencement date

10 December 2018

9 December 2019 (as referred to in regulation 2(4) of the solo firms commencement SI)2

2

2

2Note (1): Column (2) (Insurers) applies to an SMCR insurance firm (to the extent that SYSC TP 7 applies to such firms).

2Note (2): Column (3) (Others) applies to a core SMCR firm, an enhanced scope SMCR firm and a limited scope SMCR firm.

7.2

Certification: The certification transitional period

7.2.1

G

Under the commencement SIs2, the obligation in section 63E(1) of the Act for an SMCR firm to take reasonable care to ensure that no employee of the firm performs an FCA certification function, unless the firm has issued the employee with a valid certificate, does not apply until the end of the certification transitional period.

7.2.2

G

However, other parts of the FCA Handbook and the Act about certification employees apply in the certification transitional period.

7.2.3

G

The table in SYSC TP 7.2.4G explains how the requirements of the FCA Handbook and the Act about certification employees apply in the certification transitional period.

7.2.4

G

Table: How the certification regime applies in the certification transitional period

Provision in the Act or the Handbook

What that provision is about

How it applies in the certification transitional period

Glossary definition of certification employee

During the certification transitional period, the Glossary definition of certification employee covers everyone who would need a certificate to perform their job if the obligation to issue certificates were in force

SYSC 27.2 and the parts of the Act on which it gives guidance

Issuing certificates and fitness

Does not apply

SYSC 27.3

Territorial scope of the certification regime

Applies for the purpose of those parts of the FCA Handbook and the Act that are in force as described in this table

SYSC 27.4

General material about the scope of the certification regime

SYSC 27.5

Exclusions for emergency and temporary appointments

SYSC 27.6

Other exclusions

SYSC 27.7

Specification of functions

SYSC 27.8

Definitions of the FCA certification functions

2SYSC 27.9

Material relating to several FCA certification functions

SYSC 22

Regulatory references

Obligation to obtain a reference does not apply because the obligation to get a reference is triggered by issuing a certificate.

SYSC TP 7.4 has exemptions that apply after the certification transitional period.

SYSC 25

SYSC 25 says that the management responsibilities map should say whether persons described or identified in the management responsibilities map are certification employees

Applies to everyone who would need a certificate to perform their job if the obligation to issue certificates was in force

COCON

Applies to everyone who would need a certificate to perform their job if the obligation to issue certificates was in force.

This applies even if they have not been notified:

(a) that COCON applies to them; or

(b) of the rules that apply to them.

COCON also applies to those who would have been excluded from the certification regime by SYSC 27.5.1R (Emergency appointments) or SYSC 27.5.3R (Temporary UK role).

Section 64B of the Act

Firm should ensure that all persons subject to COCON are notified

Firm should take reasonable steps to ensure that those persons understand how COCON applies to them.

Applies to everyone who would need a certificate to perform their job if the obligation to issue certificates was in force

The parts of SUP 15.3 that deal with COCON breaches

Notifying a significant breach of COCON to the FCA

Section 64C of the Act and SUP 15.11

Notifying the FCA of disciplinary action

7.3

General material about certification

7.3.1

G

(1)

SYSC 27.5.1R (Emergency appointments) allows a firm to appoint someone (P) to perform a function which would normally be an FCA certification function without P becoming a certification employee. There is a maximum period for which the appointment can last.

(2)

When calculating the maximum time period in (1), the firm need not take into account any time spent by P before the general commencement date performing what will become the FCA certification function in (1).

(3)

When a firm, after the end of the certification transitional period, is calculating the maximum time period in (1), the firm should take into account any time spent by P during the certification transitional period performing the FCA certification function in (1).

7.3.2

G

(1)

SYSC 27.5.1R only applies where P (as referred to in SYSC TP 7.3.1G) is providing cover for a certification employee whose absence is reasonably unforeseen.

(2)

SYSC 27.5.1R may still apply if the absence referred to in (1) began before the general commencement date or during the certification transitional period.

7.3.3

G

(1)

Some FCA certification functions only apply where the place of performance of the function has a connection with the United Kingdom (for example, it is carried on there).

(2)

SYSC 27.5.3R (Temporary UK role (the 30-day rule)) allows a person (P) to carry on a function for a firm that would normally be an FCA certification function because of its connection with the United Kingdom without P becoming a certification employee. There is a time limit on how long the firm can allow P to do this.

(3)

When calculating the time limit in (2), the firm need not take into account any time spent by P before the general commencement date performing functions with a United Kingdom connection.

(4)

When a firm, after the end of the certification transitional period, is calculating the maximum time period in (1), the firm should take into account any time spent by P during the certification transitional period performing functions with a United Kingdom connection.

7.4

Transitional provisions about regulatory references

7.4.1

R

(1)

If on the general commencement date an employee (P) is already performing an FCA certification function for an SMCR firm (A), the obligation under SYSC 22 (Regulatory references) for A to obtain a reference when issuing a certificate (including reissuing a certificate) for P for that FCA certification function does not apply either on or after the end of the certification transitional period.

(2)

If there has been a significant change in P’s responsibilities forming part of that FCA certification function as compared to the position on the general commencement date, paragraph (1) ceases to apply from that time.

7.4.2

R

SYSC 22.2.1R (Obligation to obtain a regulatory reference) does not apply to an application for approval as an approved person that:

(1)

is made before the general commencement date and is continued in force by SUP TP 11.7 or SUP TP 11A.72 (In-flight applications: Conversion); or

(2)

is made under SUP TP 11.15 or SUP TP 11A.152 (Applications of approved persons to take effect from the commencement date).

7.4.3

G

SYSC 22.2.4R (Obligation to revise references) does not apply to references given before the general commencement date.

7.4.4

R

Question (F) (disciplinary action) in Part One of SYSC 22 Annex 1R (Template for regulatory references given by SMCR firms and disclosure requirements) does not require disclosure of breaches of individual conduct requirements referred to in question (F) if:

(1)

the disciplinary action referred to in that item took place before the general commencement date; and

(2)

the firm’s records do not show whether the conduct that was subject to disciplinary action amounted to a breach of those individual conduct requirements.

7.4.5

G

The term individual conduct requirements in SYSC TP 7.4.4R is defined in Section One of Part Two of SYSC 22 Annex 1R.

7.4.6

R

If:

(1)

a firm (A) asks another firm (B) for a reference before the general commencement date; but

(2)

B gives the reference after that date;

SYSC 22 (Regulatory references) in the form it is in at the time in (2) applies to B.

7.4.7

G

SYSC 22 in the form it is in after the general commencement date applies to a reference requested or given after the general commencement date even if the matters covered by the reference occurred before then.

27.4.8

R

(1)

SYSC 22 (Regulatory references) applies to a firm that is excluded from being an SMCR firm by SYSC 23 Annex 1 3.7R (benchmark firms) as it applies to an SMCR firm.

(2)

However, the provisions listed in SYSC 22.8.4R do not apply.

7.5

Transitional provisions about benchmarks and the certification regime

7.5.1

G

SYSC 27.6.4R excludes benchmark activities from the certification regime. SYSC TP 7.5 brings certain activities in relation to benchmarks back into the certification regime.

7.5.2

R

SYSC 27 (Senior managers and certification regime: Certification regime) applies to a person with permission to carry on the regulated activity of administering a specified benchmark acting as such.

7.5.3

G

As a consequence of the benchmarks regulation, the regulated activities referred to in SYSC TP 7.5.2R will cease to apply in certain circumstances (see SUP TP 10 for an explanation of those circumstances).

7.5.4

G

The effect of SYSC TP 7.5.2R is that SYSC 27 continues to apply to firms which still have permission to carry on the regulated activity in SYSC TP 7.5.2R when carrying on that activity.

7.6

Miscellaneous

Common platform requirements

7.6.1

G

The Individual Accountability (Dual-Regulated Firms) Instrument 2018 renumbered material that used to be in SYSC 4 and SYSC 5 so that it now appears in SYSC 24 to SYSC 27. That instrument updated FCA Handbook cross-references accordingly.

7.6.2

G

The requirements of chapters SYSC 24 to SYSC 27 no longer form part of the common platform organisational requirements and a reference to anything in SYSC 4 or SYSC 5 does not include any material referred to in SYSC TP 7.6.1G.

27.7

Qualification conditions for FCA-authorised firms

Firm classification: Effect of pre-commencement events

27.7.1

R

If a firm is treated as a core SMCR firm, an enhanced scope SMCR firm or a limited scope SMCR firm immediately before the general commencement date for the purposes of SUP TP 11A (Bank of England and Financial Services Act 2016: Approved persons in solo-regulated firms) it retains that status after the general commencement date unless and until it changes under SYSC 23 Annex 1 (Definition of SMCR firm and different types of SMCR firms).

27.7.2

G

For example if before the general commencement date a firm has opted up to be an enhanced scope SMCR firm it remains an enhanced scope SMCR firm after the general commencement date. It may then elect to cease being an enhanced scope SMCR firm using a Form O under the procedure in SYSC 23 Annex 1 unless it also meets one of the other qualifications for being an enhanced scope SMCR firm.

27.7.3

G

A calculation period, an averaging period or a reporting period as referred to in Part Eight of SYSC 23 Annex 1 (Part Eight: Financial qualification condition for being an enhanced scope SMCR firm) may begin or end before the general commencement date.

Financial qualification conditions for enhanced scope SMCR firms

27.7.4

R

(1)

This rule applies to a firm that:

(a)

does not meet one of the qualification conditions for being an enhanced scope SMCR firm in Part 8 of SYSC 23 Annex 1 (Financial qualification condition for being an enhanced scope SMCR firm) at the date in SUP TP 11A.23.3R(2) (Deciding which category a firm is in); but

(b)

meets it between that date and the general commencement date.

(2)

The one-year period referred to in Part 10 of SYSC 23 Annex 1 (When a firm becomes an enhanced scope SMCR firm) begins on the date the firm met that qualification condition, even though that date is before the general commencement date.

27.7.5

G

The situation in SYSC TP 7.7.4R may apply to a firm because, for example, its accounting reference date falls between the date in SUP TP 11A.23.3R(2) and the general commencement date.

Consumer credit reporting

27.7.6

G

(1)

SYSC 23 Annex 1 8.15R deals with cases in which the period in relation to which the financial calculations are made to test whether a firm meets one of the financial qualification conditions for being an enhanced scope SMCR firm is adjusted because the relevant reporting requirements did not apply for the whole period. SYSC 23 Annex 1 8.16G gives examples of why this may happen.

(2)

One example in SYSC 23 Annex 1 8.16G is that the relevant reporting requirements have not existed for the whole of the period. A particular example of this is consumer credit reporting requirements. At the time the financial qualification conditions for being an enhanced scope SMCR firm first came into force in 2019, the relevant reporting requirements had not existed for a full three years.