Related provisions for LR 10.8.6

The Principles for Businesses (PRIN)

The Principles for Businesses (PRIN) set out, in a small number of high-level requirements, the basic obligations of all regulated firms. They provide a general statement of regulatory requirements, and the FSA considers that the Principles are appropriate expressions of the standards of conduct to be expected of all financial firms including credit unions. In applying the Principles to credit unions, the FSA will be mindful of proportionality. In practice, the implications are likely to vary according to the size of the credit union.

Senior Management Arrangements, Systems and Controls (SYSC)

SYSC 1 and SYSC 4 to 10 apply to all credit unions in respect of the carrying on of their regulated activities and unregulated activities in a prudential context. SYSC 18 applies to all credit unions without restriction.

Threshold Conditions (COND)

In order to become authorised under the Act all firms must meet the threshold conditions. The threshold conditions must be met on a continuing basis by credit unions. Failure to meet one of the conditions is sufficient grounds for the exercise by the FSA of its powers (see EG).

Statements of Principle and Code of Practice for Approved Persons (APER)

The purpose of the Statements of Principle contained in APER 2 is to provide guidance to approved persons in relation to the conduct expected of them in the performance of a controlled function. The Code of Practice for Approved Persons sets out descriptions of conduct which, in the opinion of the FSA, do not comply with a Statement of Principle and, in the case of Statement of Principle 3, conduct which tends to show compliance within that statement.

The Fit and Proper test for Approved Persons (FIT)

The purpose of FIT is to set out and describe the criteria that the FSA will consider when assessing the fitness and propriety of a person in respect of whom an application is being made for approval to undertake a controlled function under the approved persons regime. The criteria are also relevant in assessing the continuing fitness and propriety of persons who have already been approved.

General Provisions (GEN)

GEN contains rules and guidance on general matters, including interpreting the Handbook, statutory status disclosure, the FSA logo and insurance against financial penalties.

Fees manual (FEES)

This manual sets out the fees applying to credit unions.

Conduct of Business sourcebook (COBS)

A credit union which acts as a CTF provider or provides a cash-deposit ISA will need to be aware of the relevant requirements in COBS. COBS 4.6 (Past, simulated past and future performance), COBS 4.7.1 R (Direct offer financial promotions), COBS 4.10 (Systems and controls and approving and communicating financial promotions), COBS 13 (Preparing product information) and COBS 14 (Providing product information to clients) apply with respect to accepting deposits as set out in those provisions, COBS 4.1 and BCOBS.

Banking: Conduct of Business sourcebook (BCOBS)

BCOBS sets out rules and guidance for credit unions on how they should conduct their business with their customers. In particular there are rules and guidance relating to communications with banking customers and financial promotions (BCOBS 2), distance communications (BCOBS 3), information to be communicated to banking customers (BCOBS 4), post sale requirements (BCOBS 5), and cancellation (BCOBS 6). BCOBS 5.1.13 R (Value dating) does not apply to credit unions. The rules in BCOBS 3.1 that relate to distance contracts for accepting deposits are likely to have limited application to a credit union. This is because the Distance Marketing Directive only applies where there is "an organised distance sales or service-provision scheme run by the supplier" (Article 2(a)). If, therefore, the credit union normally operates face to face and has not set up facilities to enable customers to deal with it at a distance, such as facilities for a customer to deal with it purely by post, telephone, fax or the Internet, the provisions will not be relevant.

Supervision manual (SUP)

The following provisions of SUP are relevant to credit unions: SUP 1 (The FSA approach to supervision), SUP 2 (Information gathering by the FSA on its own initiative), SUP 3.1 to SUP 3.8 (Auditors), SUP 5 (Skilled persons), SUP 6 (Applications to vary or cancel Part IVpermission), SUP 7 (Individual requirements), SUP 8 (Waiver and modification of rules), SUP 9 (Individual guidance), SUP 10 (Approved persons), SUP 11 (Controllers and Close links), SUP 15 (Notifications to the FSA) and SUP 16 (Reporting Requirements).

Credit unions are reminded that they are subject to the requirements of the Act and SUP 11 on

controllers and close links, and are bound to notify the FSA of changes. It may be unlikely, in practice, that credit unions will develop such relationships. It is possible, however, that a person may acquire control of a credit union within the meaning of the Act by reason of holding the prescribed proportion of deferred shares in the credit union.

In relation to SUP 16, credit unions are exempted from the requirement to submit annual reports of

controllers and close links.

Decision, Procedure and Penalties manual (DEPP)

DEPP is relevant to credit unions because it sets out:

(1) the FSA's decision-making procedure for giving statutory notices. These are warning notices, decision notices and supervisory notices (DEPP 1.2 to DEPP 5); and

(2) the FSA's policy with respect to the imposition and amount of penalties under the Act (see DEPP 6).

Dispute Resolution: Complaints (DISP)

DISP sets out rules and guidance in relation to treating complainants fairly and the Financial Ombudsman Service.

Compensation (COMP)

COMP sets out rules relating to the scheme for compensating consumers when authorised firms are unable, or likely to be unable, to satisfy claims against them.

Complaints against the FSA (COAF)

This relates to complaints against the FSA.

The Enforcement Guide (EG)

The Enforcement Guide (EG) describes the FSA's approach to exercising the main enforcement powers given to it by the Act and by regulation 12 of the Unfair Terms Regulations.

Financial crime: a guide for firms (FC)

FC provides guidance on steps that a firm can take to reduce the risk that it might be used to further financial crime.

1Introduction

1.

TC Appendix 4E contains a list of appropriate qualifications for the purposes of TC 2.1.10 E.

2.

This Appendix sets out:

(1)

the criteria which the FSA may take into account when assessing a qualification provider; and

(2)

the information the FSA will expect the qualification provider to provide if it asks the FSA to add a qualification to the list of appropriate qualifications in TC Appendix 4 E.

Criteria for assessing a qualification provider

3.

The FSA will expect the qualification provider of an appropriate qualification to have, in the FSA's opinion:

(1)

assessors and qualification developers who are trained and qualified;

(2)

valid, reliable and robust assessment methods;

(3)

robust governance and a clear separation of function between its qualification services and any other services it performs, including effective procedures for managing any conflicts of interest;

(4)

procedures for reviewing and refreshing its syllabus and question banks to ensure that they are relevant and up to date;

(5)

robust and credible procedures for assessing a candidate's demonstration of the learning outcomes specified in the relevant examination standards;

(6)

robust arrangements for contingency and business continuity planning in relation to its qualification services;

(7)

appropriate records management procedures in relation to its qualification services;

(8)

procedures for dealing with inappropriate conduct by candidates, for example, attempting to obtain or obtaining qualifications dishonestly;

(9)

robust procedures for the setting of assessments and marking of results; and

(10)

adequate resources in order to be financially viable.

Information about the qualification to be provided to the FSA

4.

If a qualification provider asks the FSA to add a qualification to the list of appropriate qualifications in TC Appendix 4 E, the FSA will expect the qualification provider to:

(1)

where relevant, specify the qualifications framework within which the qualification is placed;

(2)

specify the activity in TC Appendix 1 to which the qualification relates;

(3)

set out the recommended prior knowledge, attainment or experience for candidates;

(4)

where relevant, set out the exemption policy for a candidate's prior learning or achievement;

(5)

provide the relevant learning materials to the FSA together with an explanation of how those learning materials correspond to the content of the most recent examination standards. Any content of the examination standards which has been excluded from the learning materials must be justified;

(6)

where applicable, explain how grading is applied;

(7)

where applicable, explain the provider's rules of combination;

(8)

provide details of expected learning hours or any other similar arrangements;

(9)

where applicable, specify the level of the overall qualification with reference to the relevant qualification framework or, if there is no relevant qualification framework, the European Qualifications Framework and the percentage of the qualification at that level, as well as the percentages and the levels for the remainder of the qualification;

(10)

provide details of any credit for prior learning included in the qualification together with an explanation of how it meets the most recent examination standards; and

(11)

provide an explanation of how the qualification compares in quality and standard to other similar qualifications.

Information about the qualification provider to be provided to the FSA

5.

When considering whether to include or retain a qualification in the list of appropriate qualifications, the FSA may consider, where relevant:

(1)

whether the qualification provider has in place suitable arrangements for:

(a)

meeting its statutory duties in relation to equality and diversity; and

(b)

reducing barriers to learning, for example, for candidates with learning difficulties;

(2)

any concerns, issues or investigations which have been raised by the qualification provider's qualifications regulator;

(3)

the annual pass rates of each of the relevant qualifications;

(4)

the quality of the service the qualification provider provides to candidates in relation to qualifications and its complaints procedures;

(5)

how the qualification provider maintains its qualifications to ensure they remain comparable to other qualifications in the same sector; and

(6)

whether the qualification provider gives candidates reasonable notice of any syllabus change, change in method of assessment or pass standards;

(7)

information supporting the criteria in TC Appendix 5G paragraph 3.

1Introduction

1.

An accredited body is a body recognised by the FSA to act as an accredited body.

2.

Information on accredited bodies, including guidance on the process for including an applicant body in the list, is set out below and the obligation to pay the application fee is set out in FEES 3.2.

3.

The role of an accredited body relates to rules in TC which come into force on 31 December 2012.

Process for including a body in the list of accredited bodies

4.

In considering the compatibility of a proposed addition with the regulatory objectives, the FSA will determine whether the applicant will, if accredited, contribute to securing an appropriate degree of protection for consumers having regard in particular to:

(1)

the matters set out in paragraphs 10 to 20; and

(2)

the rules and practices of the applicant.

5.

An application to the FSA to be added to the list of accredited bodies should set out how the applicant will satisfy the criteria in paragraphs 10 to 20. The application should be accompanied by a report from a suitable auditor which sets out its independent assessment of the applicant's ability to meet these criteria. An application form is available from the FSA upon request.

6.

When considering an application for accredited body status the FSA may:

(1)

carry out any enquiries and request any further information that it considers appropriate, including consulting other regulators;

(2)

ask the applicant or its specified representative to answer questions and explain any matter the FSA considers relevant to the application;

(3)

take into account any information which the FSA considers appropriate to the application; and

(4)

request that any information provided by the applicant or its specified representative is verified in such a manner as the FSA may specify.

7.

The FSA will confirm its decision in writing to the applicant.

8.

The FSA will enter into an agreement with the applicant or accredited body which will specify the requirements that the accredited body must meet. These will include the matters set out in paragraphs 10 to 20. Approval as an accredited body becomes effective only when the name of the applicant is added to the Glossary definition of accredited body.

9.

Paragraphs 10 to 20 set out the criteria which an applicant should meet to become an accredited body and which an accredited body should meet at all times.

Acting in the public interest and furthering the development of the profession

10.

The FSA will expect an accredited body to act in the public interest, to contribute to raising consumer confidence and professional standards in the retail investment advice market and to promoting the profession.

Carrying out effective verification services

11.

If independent verification of a retail investment adviser's professional standards has been carried out by an accredited body, the FSA will expect the accredited body to provide the retail investment adviser with evidence of that verification in a durable medium and in a form agreed by the FSA. This is referred to in this Appendix and TC 2.1.28 R as a 'statement of professional standing'.

12.

The FSA will expect an accredited body to have in place effective procedures for carrying out its verification activities. These should include:

(1)

verifying that each retail investment adviser who is a member of or subscriber to the accredited body's verification service has made an annual declaration in writing that the retail investment adviser has, in the preceding 12 months, complied with APER and completed the continuing professional development required;

(2)

verifying annually the continuing professional development records of no less than 10% of the retail investment advisers who have used its service in the previous 12 months to ensure that the records are accurate and the continuing professional development completed by the retail investment advisers is appropriate; and

(3)

verifying that, if required by TC, the retail investment advisers who use its services have attained an appropriate qualification. This should include, where relevant, checking that appropriate qualification gap-fill records have been completed by the retail investment advisers.

13.

The FSA will not expect an accredited body to carry out the verification in paragraph 12(3) if a retail investment adviser provides the accredited body with evidence in a durable medium which demonstrates that another accredited body has previously verified the retail investment adviser's appropriate qualification, including, where relevant, appropriate qualification gap-fill.

14.

The FSA will expect an accredited body to make it a contractual condition of membership (where a retail investment adviser is a member of the accredited body) or of using its verification service (where a retail investment adviser is not a member of the accredited body) that, as a minimum, the accredited body will not continue to verify a retail investment adviser's standards and will withdraw its statement of professional standing if the accredited body is provided with false information in relation to a retail investment adviser's qualifications or continuing professional development or a false declaration in relation to a retail investment adviser's compliance with APER.

In this regard, an accredited body must have in place appropriate decision-making procedures with a suitable degree of independence and transparency.

Having appropriate systems and controls in place and providing evidence to the FSA of continuing effectiveness

15.

The FSA will expect an accredited body to ensure that it has adequate resources and systems and controls in place in relation to its role as an accredited body.

16.

The FSA will expect an accredited body to have effective procedures in place for the management of conflicts of interest and have a well-balanced governance structure with at least one member who is independent of the sector.

17.

The FSA will expect an accredited body to have a code of ethics and to ensure that its code of ethics and verification service terms and conditions do not contain any provisions that conflict with APER.

Ongoing cooperation with the FSA

18.

The FSA will expect an accredited body to provide the FSA with such documents and information as the FSA reasonably requires, and to cooperate with the FSA in an open and transparent manner.

19.

The FSA will expect an accredited body to share information with the FSA (subject to any legal constraints) in relation to the professional standards of the retail investment advisers who use its service as appropriate. Examples might include conduct issues, complaints, dishonestly obtaining or falsifying qualifications or continuing professional development or a failure to complete appropriate continuing professional development. The FSA will expect an accredited body to notify the firm if issues such as these arise.

20.

The FSA will expect an accredited body to submit to the FSA an annual report by a suitable independent auditor which sets out that auditor's assessment of the quality of the body's satisfaction of the criteria in paragraphs 10 to 19 in the preceding 12 months and whether, in the auditor's view, the body is capable of satisfying the criteria in the subsequent 12 months. The FSA will expect this annual report to be submitted to the FSA within three months of the anniversary of the date on which the accredited body was added to the Glossary definition of accredited body.

Withdrawal of accreditation

21.

If an accredited body fails or, in the FSA's view, is likely to fail to satisfy the criteria, the FSA will discuss this with the accredited body concerned. If, following a period of discussion, the accredited body has failed to take appropriate corrective action to ensure that it satisfies and will continue to satisfy the criteria, the FSA will withdraw the accredited body's accreditation by removing its name from the list of accredited bodies published in the Glossary. The FSA will expect the body to notify each retail investment adviser holding a current statement of professional standing of the FSA's decision. A statement of professional standing issued by the accredited body before the withdrawal of accreditation will continue to be valid until its expiration.