Related provisions for SUP 16.12.3B

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SYSC 2.1.4RRP

Allocation of functions

This table belongs to SYSC 2.1.3 R

1: Firm type

2: Allocation of both functions must be to the following individual, if any (see Note):

3: Allocation to one or more individuals selected from this column is compulsory if there is no allocation to an individual in column 2, but is otherwise optional and additional:

(1) A firm which is a body corporate and is a member of a group, other than a firm in row (2)

(1) the firm's chief executive (and all of them jointly, if more than one); or

the firm's and its group's:

(1) directors; and(2) senior managers

(2) a director or senior manager responsible for the overall management of:

(a) the group; or(b) a group division within which some or all of the firm's regulated activities fall

(2) An incoming EEA firm or incoming Treaty firm (note: only the function in SYSC 2.1.3 R (2) must be allocated)

(not applicable)

the firm's and its group's:

(1) directors; and (2) senior managers

(3) Any other firm

the firm's chief executive (and all of them jointly, if more than one)

the firm's and its group's:

(1) directors; and (2) senior manager's

Note: Column 2 does not require the involvement of the chief executive or other executive director or senior manager in an aspect of corporate governance if that would be contrary to generally accepted principles of good corporate governance.
SYSC 2.1.6GRP

Frequently asked questions about allocation of functions in SYSC 2.1.3 R

This table belongs to SYSC 2.1.5 G

Question

Answer

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).

5

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 Annex 1.1.7 R)6. Note that SYSC 1 Annex 1.1.10 R6 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).

66

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 Annex 1.1.1R6and SYSC 1 Annex 1.1.8 R6restrict 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

663

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 electronic commerce activities carried on from an establishment in another EEA State with or for a person in the United Kingdom?4

4

SYSC does not apply to an incoming ECA provider acting as such.1

4
SUP 12.5.6ARRP
(1) 4A firm must ensure that, if appointing an appointed representative (other than an introducer appointed representative), to carry on any of the following regulated activities, its written contract prohibits the appointed representative from carrying on any of the specified activities as an appointed representative for another firm:4(a) any designated investment business for retail clients7: the prohibition must cover all designated investment business for retail clients7;477(b)
SUP 12.5.7RRP
A firm must ensure that its written contract with each of its introducer appointed representatives limits the scope of the appointment to:4(1) effecting introductions to the firm or other members of the firm's group; and4(2) distributing non-real time financial promotions which relate to products or services available from or through the firm or other members of the firm's group.4
FEES 4.3.7RRP
A firm which is a member of a group may pay all of the amounts due from other firms in the same group under FEES 4.2.1 R, if:(1) it notifies the FSA in writing of the name of each other firm within the group for which it will pay; and(2) it pays the fees, in accordance with this chapter, as a single amount as if that were the amount required from the firm under FEES 4.2.1 R.
FEES 4.3.9GRP
If the payment made does not satisfy in full the periodic fees payable by all of the members of the group notified to the FSA under FEES 4.3.7 R, the FSA will apply the sum received among the firms which have been identified in the notification given under FEES 4.3.7R (1) in proportion to the amounts due from them. Each firm will remain responsible for the payment of the outstanding balance attributable to it.
PERG 2.9.10GRP
These exclusions apply to intra-group dealings and activities and to dealings or activities involving participators in a joint enterprise which take place for the purposes of, or in connection with, the enterprise. The general principle here is that, as long as activities that would otherwise be regulated activities take place wholly within a group of companies, then there is no need for authorisation. The same principle applies to dealings or activities that take place wholly
PERG 2.9.14GRP
In broad terms, the exclusions apply to activities which further an employee share scheme, or are carried on in operation of such a scheme. They apply to activities carried on by the company whose securities or debentures (which are given an extended meaning for this exclusion) are the subject of the scheme. They also apply to activities of any company in the same group or of any trustee who holds certain types of securities or debentures under the scheme. They do not apply to
CASS 5.5.47RRP
Subject to CASS 5.5.41 R, a firm that holds or intends to hold client money with a bank which is in the same group as the firm must:(1) undertake a continuous review in relation to that bank which is at least as rigorous as the review of any bank which is not in the same group, in order to ensure that the decision to use a group bank is appropriate for the client;(2) disclose in writing to its client at the outset of the client relationship (whether by way of a client agreement,4terms of
CASS 5.5.48RRP
If a client has notified a firm in writing that he does not wish his money to be held with a bank in the same group as the firm, the firm must either:(1) place that client money in a client bank account with another bank in accordance with CASS 5.5.38 R; or(2) return that client money to, or pay it to the order of, the client.
COLL 5.6.19RRP
The following limits apply in respect of immovables held as part of scheme property of a scheme:(1) not more than 15% in value of the scheme property is to consist of any one immovable;(2) in (1), immovables within COLL 5.6.18 R (4) (b) (Investment in property) must be regarded as one immovable;(3) the figure of 15% in (1) may be increased to 25% once the immovable has been included in the scheme property in compliance with (1);(4) the income receivable from any one group in any
COLL 5.6.23AGRP
(1) 9Replication of the composition of an index shall be understood to be a reference to replication of the composition of the underlying assets of that index, including the use of techniques and instruments for the purpose of efficient portfolio management.(2) The composition of an index is sufficiently diversified if its components adhere to the spread requirements in this section.(3) An index is a representative benchmark if its provider uses a recognised methodology which
MCOB 10.4.4RRP
(1) The amounts of the following items are not included in the total charge for credit in relation to an agreement:(a) any charge payable under the transaction to the firm upon failure by the customer to do or to refrain from doing anything which he is required to do or to refrain from doing;(b) any charge:(i) which is payable by the firm to any person upon failure by the customer to do or to refrain from doing anything which he is required under the transaction to do or to refrain
PERG 8.10.12GRP
In the FSA's view, persons who may be engaging in investment activity jointly include:(1) a married couple;(2) two or more persons, who will invest jointly in a product (for example, a cohabiting couple who are not married or members of a family);(3) the directors of a company or partners in a firm;(4) members of a group of companies;(5) the participants in a joint commercial enterprise;(6) the members of an investment club; and(7) the managers or prospective managers of a company
LR 13.4.1RRP
A class 1 circular must also include the following information:(1) the information given in the notification (see LR 10.4.1R);(2) the information required by LR 13 Annex 1;(3) the information required by LR 13.5 (if applicable); and(4) a declaration by its directors in the following form (with appropriate modifications):"The directors of [the company], whose names appear on page [ ], accept responsibility for the information contained in this document. To the best of the knowledge
BIPRU 2.1.8RRP
(1) A firm that has a solo consolidation waiver must meet the obligations in SYSC 12.1.13 R (Application of certain systems and controls rules on a consolidated basis) on a consolidated basis with respect to the firm and each subsidiary undertaking to which the firm'ssolo consolidation waiver applies.(2) If (1) applies, SYSC 12.1.13 R applies to the group made up of the firm and its subsidiary undertakings referred to in (1) in the same way as it applies to a UK consolidation
REC 2.11.3GRP
In determining whether a UK recognised body has made satisfactory arrangements for the safeguarding and administration of assets belonging to the users of its facilities, the FSA may have regard to: (1) the level of protection which the arrangements provide against the risk of theft or other types or causes of loss;(2) whether the arrangements ensure that assets are only used or transferred in accordance with the instructions of the owner of those assets or in accordance with
BIPRU 3.7.2RRP

This table belongs to BIPRU 3.7.1 R

[Note: BCD Annex II]

Category

Item

Percentage

Full risk

Guarantees having the character of credit substitutes

Credit derivatives

Acceptances

Endorsements on bills not bearing the name of another credit institution

Transactions with recourse

Irrevocable standby letters of credit having the character of credit substitutes

Assets purchased under outright forward purchase agreements

Forward deposits

The unpaid portion of partly-paid shares and securities

Asset sale and repurchase agreements as defined in Article 12(3) and (5) of the Bank Accounts Directive

Other items also carrying full risk

100%

Medium risk

Documentary credits issued and confirmed (see also medium/low risk).

Warranties and indemnities (including tender, performance, customs and tax bonds) and guarantees not having the character of credit substitutes.

Irrevocable standby letters of credit not having the character of credit substitutes.

Undrawn credit facilities (agreements to lend, purchase securities, provide guarantees or acceptance facilities) with an original maturity of more than one year.

Note issuance facilities (NIFs) and revolving underwriting facilities (RUFs).

50%

Medium/low risk

Documentary credits in which underlying shipment acts as collateral and other self-liquidating transactions.

Undrawn credit facilities (agreements to lend, purchase securities, provide guarantees or acceptance facilities) with an original maturity of up to and including one year which may not be cancelled unconditionally at any time without notice or that do not effectively provide for automatic cancellation due to deterioration in a borrower's creditworthiness.

20%

Low risk

Undrawn credit facilities (agreements to lend, purchase securities, provide guarantees or acceptance facilities) which may be cancelled unconditionally at any time without notice, or that do effectively provide for automatic cancellation due to deterioration in a borrower's creditworthiness. Retail credit lines may be considered as unconditionally cancellable if the terms permit the firm to cancel them to the full extent allowable under consumer protection and related legislation.

0%
CASS 6.3.2GRP
In discharging its obligations under this section, a firm should also consider, together with any other relevant matters:(1) once a safe custody asset2 has been lodged by the firm with the third party, the third party's performance of its services to the firm;2(2) the arrangements that the third party has in place for holding and safeguarding the safe custody asset;22(3) current industry standard reports, for example Financial Reporting and Auditing Group (FRAG) 21 report or
PERG 6.7.13GRP
If a warranty is provided by a third party, the FSA will usually treat this as conclusive of the fact that there are different transactions and an assumption or transfer of risk. This conclusion would not usually depend on whether the provider is (or is not) a part of the same group of companies as the manufacturer or retailer. But it will be the third party (who assumes the risk) that is potentially effecting a contract of insurance.
LR 9.8.4RRP
In addition to the requirements set out in DTR 4.1 a listed company1 must include in its annual financial report1, where applicable, the following:1(1) a statement of the amount of interest capitalised by the group during the period under review with an indication of the amount and treatment of any related tax relief;(2) any information required by LR 9.2.18 R (Publication of unaudited financial information);(3) details of any small related party transaction as required by LR
PERG 2.5.5GRP
For persons who are MiFID2investment firms, the activities that must be caught by the Regulated Activities Order are those that are caught by MiFID2. To achieve this result, some of the exclusions in the Order (that will apply to persons who are not caught by MiFID2) have been made unavailable to MiFID2investment firms when they provide or perform investment services and activities. A "MiFID investment firm", for these purposes, includes credit institutions to which MiFID applies
SYSC 8.1.10RRP
If a common platform firm and the service provider are members of the same group, the firm may, for the purpose of complying with SYSC 8.1.7 R to SYSC 8.1.11 R and SYSC 8.2 and SYSC 8.3, take into account the extent to which the common platform firm controls the service provider or has the ability to influence its actions.[Note: article 14(4) of the MiFID implementing Directive]
ICOBS 4.1.3RRP
A firm whose contact with a customer is limited to effecting introductions (see PERG 5.6) need only provide its name and address and whether it is a member of the same group as the firm to which it makes the introduction.