1 |
Does an individual to whom a function is allocated under SYSC
2.1.3 R need to be an approved person? |
An individual to whom a function is allocated under SYSC
2.1.3 R will be performing the apportionment and oversight function (CF 8,
see SUP 10.7.1 R) and an application must be made to the FSA for approval of the individual
before the function is performed under section 59 of the Act (Approval
for particular arrangements). There are exceptions from this
in SUP 10.1 (Approved persons - Application). In particular,
an incoming EEA firm is referred
to the EEA investment business oversight function (CF
9, see SUP 10.7.6 R). |
2 |
If the allocation is to more than one individual, can they perform
the functions, or aspects of the functions, separately? |
If the functions are allocated to joint chief
executives under SYSC
2.1.4 R, column 2, they are expected
to act jointly. If the functions
are allocated to an individual under SYSC
2.1.4 R, column 2, in addition
to individuals under SYSC
2.1.4 R, column 3, the former may normally be expected
to perform a leading role in relation to the functions that reflects his position. Otherwise, yes. |
3 |
What is meant by "appropriately allocate" in this context? |
The allocation of functions should be compatible with delivering
compliance with Principle 3, SYSC
2.1.1 R and SYSC
3.1.1 R. The FSA considers
that allocation to one or two individuals is likely to be appropriate for
most firms. |
4 |
If a committee of management governs a firm or group, can the functions be allocated to
every member of that committee? |
Yes, as long as the allocation remains appropriate (see Question
3).If the firm also
has an individual as chief executive,
then the functions must be allocated to that individual as well under SYSC
2.1.4 R, column 2 (see Question 7). |
5 |
Does the definition of chief executive include
the possessor of equivalent responsibilities with another title, such as a
managing director or managing partner? |
Yes. |
6 |
Is it possible for a firm to
have more than one individual as its chief
executive? |
Although unusual, some firm may
wish the responsibility of a chief executive to
be held jointly by more than one individual. In that case, each of them will
be a chief executive and the
functions must be allocated to all of them under SYSC
2.1.4 R,
column 2 (see also Questions 2 and 7). |
7 |
If a firm has an
individual as chief executive,
must the functions be allocated to that individual? |
Normally, yes, under SYSC
2.1.4 R, column 2. But if the firm is
a body corporate and a member
of a group, the functions may,
instead of to the firm's chief executive, be allocated to a director or senior
manager from the group responsible
for the overall management of the group or
of a relevant group division,
so long as this is appropriate (see Question 3). Such individuals willnevertheless require approval by the FSA (see
Question 1). If the firm chooses to allocate the functions to
a director or senior
manager responsible for the overall management of a relevant group division, the FSA would
expect that individual to be of a seniority equivalent to or greater than
a chief executive of the firm for the allocation to be appropriate. See also Question 14. |
8 |
If a firm has a chief executive, can the functions be allocated
to other individuals in addition to the chief
executive? |
Yes. SYSC
2.1.4 R, column 3, permits a firm to
allocate the functions, additionally, to the firm's (or
where applicable the group's)
directors and senior managers as
long as this is appropriate (see Question 3). |
9 |
What if a firm does
not have a chief executive? |
Normally, the functions must be allocated to one or more individuals
selected from the firm's (or
where applicable the group's) directors and senior
managers under SYSC
2.1.4 R, column 3. But if the firm: (1) is a body
corporate and a member of a group;
and (2) the group has a director or senior manager responsible for the overall
management of the group or of
a relevant group division; then the functions must be allocated
to that individual (together, optionally, with individuals from column 3 if
appropriate) under SYSC
2.1.4 R, column 2.2 |
10 |
What do you mean by "group division
within which some or all of the firm's regulated activities fall"? |
A "division" in this context should be interpreted by reference
to geographical operations, product lines or any other method by which the group's business is divided. If the firm's regulated activities fall within more than
one division and the firm does
not wish to allocate the functions to its chief
executive, the allocation must, under SYSC
2.1.4 R,
be to: (1) a director or senior
manager responsible for the overall management of the group; or (2) a director or senior manager responsible for the overall
management of one of those divisions; together, optionally, with individuals from column 3 if appropriate.
(See also Questions 7 and 9.) |
11 |
How does the requirement to allocate the functions in SYSC
2.1.3R apply to an overseas firm which
is not an incoming EEA firm, incoming Treaty firm or UCITS
qualifier? |
The firm must appropriately
allocate those functions to one or more individuals, in accordance with SYSC
2.1.4 R, but: (1) The
responsibilities that must be apportioned and the systems and controls that
must be overseen are those relating to activities carried on from a UK establishment with certain exceptions
(see SYSC
1.1.7 R). Note that SYSC
1.1.10 R does not extend the territorial scope of SYSC 2 for an overseas
firm. (2) The chief executive of an overseas
firm is the person responsible
for the conduct of the firm's business
within the United Kingdom (see
the definition of "chief executive").
This might, for example, be the manager of the firm's UK establishment, or it might be the chief executive of the firm as
a whole, if he has that responsibility. The apportionment and oversight
function applies to such a firm,
unless it falls within a particular exception from the approved
persons regime (see Question 1). |
12 |
How does the requirement to allocate the functions in SYSC
2.1.3R apply to an incoming EEA firm or incoming Treaty firm? |
SYSC 1.1.1 R (2) and SYSC
1.1.7 R restrict the application of SYSC
2.1.3 R for such a firm. Accordingly: (1) Such a firm is
not required to allocate the function of dealing with apportionment in SYSC
2.1.3 R (1). (2) Such a firm is required to allocate the function
of oversight in SYSC
2.1.3 R (2). However, the systems and controls that
must be overseen are those relating to matters which the FSA,
as Host State regulator, is
entitled to regulate (there is guidance on
this in SUP
13A Annex 2 G3). Those are primarily, but not
exclusively, the systems and controls relating to the conduct of the firm's activities carried on from its UK branch. (3) Such a firm need
not allocate the function of oversight to its chief
executive; it must allocate it to one or more directors and senior managers of the firm or
the firm's group under SYSC
2.1.4 R, row (2). (4)
An incoming EEA firm which has
provision only for cross border services is
not required to allocate either function if it does not carry on regulated activities in the United Kingdom; for example if they fall
within the overseas persons exclusions in article 72 of the Regulated
Activities Order. See
also Questions 1 and 15.1 3 |
13 |
What about a firm that
is a partnership or a limited liability partnership? |
The FSA envisages that most if not all partners or members will be either directors or senior
managers, but this will depend on the constitution of the partnership (particularly in the case of
a limited partnership) or limited liability partnership. A partnership or limited
liability partnership may also have a chief
executive (see Question 5). A limited
liability partnership is a body
corporate and, if a member of a group,
will fall within SYSC
2.1.4 R, row (1) or (2). |
14 |
What if generally accepted principles of good corporate governance
recommend that the chief executive should
not be involved in an aspect of corporate governance? |
The Note to SYSC
2.1.4 R provides that the chief
executive or other executive director or senior
manager need not be involved in such circumstances. For example,
the Combined
Code developed by the Committee on Corporate Governancerecommends that the board of a
listed company should establish an audit committee of non-executive directors
to be responsible for oversight of the audit. That aspect of the oversight
function may therefore be allocated to the members of such a committee without
involving the chief executive.
Such individuals may require approval by the FSA in relation to that function (see Question 1). |
15 |
What about incoming electronic commerce activities? |
ECO
1.1.6 R has the effect that SYSC does
not apply to an incoming ECA provider acting
as such.1 |
