Related provisions for SYSC 3.1.1

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COLL 6.2.9GRP
(1) As the authorised fund manager normally controls the issue, cancellation, sale and redemption of an authorised fund'sunits, it occupies a position that could, without appropriate systems and controls, involve a conflict of interest between itself and its clients.(2) SYSC 3.1.1 R (Systems and controls) requires that a firm take reasonable care to establish and maintain such systems and controls as are appropriate to its business and Principle 8 requires a firm to manage conflicts
COLL 6.2.12GRP

Explanatory table: This table belongs to COLL 6.2.2 G (4) (Purpose).

Correction of box management errors

1

Controls by authorised fund managers

An authorised fund manager needs to be able to demonstrate that it has effective controls over:

(1)

its calculations of what units are owned by it (its 'box'); and

(2)

compliance with COLL 6.2.8 R which is intended to prevent a negative box.

2

Controls by depositaries

(1)

Under COLL 6.6.4 (General duties of the depositary), a depositary should take reasonable care to ensure that a scheme2 is managed in accordance with COLL 6.2 (Dealing) and COLL 6.3 (Pricing and valuation).

(2)

A depositary should therefore make a regular assessment of the authorised fund manager's box management procedures (including supporting systems) and controls. This should include reviewing the authorised fund manager's controls and procedures when the depositary assumes office, on any significant change and on a regular basis, to ensure that a series of otherwise minor changes do not have a cumulative and a significant effect on the accuracy of the controls and procedures.

3

Recording and reporting of box management errors

(1)

An authorised fund manager should record all errors which result in a breach of COLL 6.2.8 R (Controls over the issue and cancellation of units) and as soon as an error is discovered, the authorised fund manager should report the fact to the depositary, together with details of the action taken, or to be taken, to avoid repetition of the error.

(2)

A depositary should report material box management errors to the FSA immediately. Materiality should be determined by taking into account a number of factors including:

  • the implications of the error for the sufficiency of controls put into place by the authorised fund manager;
  • the significance of any breakdown in the authorised fund manager's management controls or other checking procedures;
  • the significance of any failure of systems or back-up arrangements;
  • the duration of an error; and
  • the level of compensation due to the scheme, and an authorised fund manager's ability (or otherwise) to meet claims for compensation in full.

(3)

A depositary should also make a return to the FSA (in the manner prescribed by SUP 16.6.8 R) on a quarterly basis.
COLL 5.2.20RRP
(1) A transaction in a derivative must:(a) be in an approved derivative; or(b) be one which complies with COLL 5.2.23 R (OTC transactions in derivatives).(2) The underlying of a transaction in a derivative must consist of any one or more of the following to which the scheme is dedicated:(a) transferable securities permitted under COLL 5.2.8 R (3)(a) to (c) and COLL 5.2.8 R (3)(e)7;(b) approved money-market instruments7 permitted underCOLL 5.2.8 R (3)(a) to COLL 5.2.8 R (3)(d)7;77(c)
COLL 5.2.23BRRP
10In respect of its obligations under COLL 6.6.4 R (1) (a) , the depositary must take reasonable care to ensure that the authorised fund manager has systems and controls that are adequate to ensure compliance with COLL 5.2.23 R (1) to (4).
INSPRU 7.1.27GRP
Firms should also consider whether their systems and controls provide sufficient information to permit senior management to identify the crystallisation of risks in a timely manner so as to provide them with the opportunity to respond and allow the firm to obtain the full value of the modelled management action. Firms should also analyse the wider implications of the management actions, particularly where they represent significant divergence from the business plan and use this
INSPRU 7.1.34GRP
Where the firm is relying on systems and controls in order to mitigate risks, the firm should consider the risk of those systems and controls failing at the confidence level at which the ICA is being carried out.
DTR 7.1.3RRP
An issuer must ensure that, as a minimum, the relevant body must:(1) monitor the financial reporting process;(2) monitor the effectiveness of the issuer’s internal control, internal audit where applicable, and risk management systems;(3) monitor the statutory audit of the annual and consolidated accounts;(4) review and monitor the independence of the statutory auditor, and in particular the provision of additional services to the issuer.
APER 4.6.11GRP
An approved person performing a significant influence function will not always manage the business on a day-to-day basis himself. The extent to which he does so will depend on a number of factors, including the nature, scale and complexity of the business and his position within it. The larger and more complex the business, the greater the need for clear and effective delegation and reporting lines. The FSA will look to the approved person performing a significant influence function
DEPP 6.5B.2GRP
(1) The FSA will determine a figure which will be based on a percentage of an individual’s “relevant income”. “Relevant income” will be the gross amount of all benefits received by the individual from the employment in connection with which the breach occurred (the “relevant employment”), and for the period of the breach. In determining an individual’s relevant income, “benefits” includes, but is not limited to, salary, bonus, pension contributions, share options and share schemes;
CASS 6.4.1RRP
(1) 1A firm must not enter into arrangements for securities financing transactions in respect of safe custody assets2 held by it on behalf of a client or otherwise use such safe custody assets2 for its own account or the account of another client of the firm, unless:22(a) the client has given express prior consent to the use of the safe custody assets2 on specified terms; and2(b) the use of that client'ssafe custody assets2 is restricted to the specified terms to which the
REC 2A.3.2GRP

The guidance in relation to the recognition requirements in the sections of REC 2 listed in Column A of the table below applies to an RAP in relation to the equivalent RAP recognition requirements listed in Column C and (if shown) with the modifications in Column B.

Table: Guidance on RAP recognition requirements

Column A

REC 2 guidance which applies to an RAP

Column B

Modification to REC 2 guidance for an RAP

Column C

Relevant RAP recognition requirement

REC 2.2.2 G to REC 2.2.7 G (Relevant circumstances and Outsourcing)

Reg 13

REC 2.3.3 G to REC 2.3.9 G (Financial resources)

Reg 14

REC 2.4.3 G to REC 2.4.6 G (Suitability)

In addition to the matters set out in REC 2.4.3 G to REC 2.4.6 G, the FSA will have regard to whether a key individual has been allocated responsibility for overseeing the auction platform of the UK recognised body.

Reg 15

REC 2.5.3 G to REC 2.5.20 G (Systems and controls and conflicts) and REC 2.5A (Guidance on Public Interest Disclosure Act: Whistleblowing)

Reg 16 and 17(2)(f)1

REC 2.6.26 G to REC 2.6.34 G (Safeguards for investors)

Reg 17

REC 2.7.3 G to REC 2.7.4 G (Access to facilities)

The FSA shall have regard to whether an RAP provides access to bid at auctions only to those persons eligible to bid under article 18 of the auction regulation.

Reg 17(2)(a) and1 20

REC 2.8.3 G to REC 2.8.4 G (Settlement and clearing services)

Reg 17(2)(d) and 21

REC 2.9.3 G to REC 2.9.4 G (Transaction recording)

Reg 17(2)(e)

REC 2.10.3 G to REC 2.10.4 G (Financial crime and market abuse)

Reg 17(2)(g)

REC 2.11.3 G to REC 2.11.4 G (Custody)

REC 2.11.4 G is replaced with the following for an RAP:

Where an RAP arranges for other persons to provide services for the safeguarding and administration services of assets belonging to users of its facilities, it will also need to satisfy the RAP recognition requirement in regulation 17(2)(h) of the RAP regulations (see REC 2A.2.1 UK).

Reg 17(2)(h)

REC 2.12.11 G to REC 2.12.12 G (Availability of relevant information)

REC 2.12.11 G to REC 2.12.12 G are replaced with the following for an RAP:

REC 2.12.11 G

In determining whether appropriate arrangements have been made to make relevant information available to persons engaged in dealing in emissions auction products2 the FSA may have regard to:

(1) the extent to which auction bidders are able to obtain information in a timely fashion about the terms of those emissions auction products2 and the terms on which they will be auctioned, either through accepted channels for dissemination of information or through other regularly and widely accessible communication media;

(2) what restrictions, if any, there are on the dissemination of relevant information to auction bidders; and

(3) whether relevant information is, or can be, kept to restricted groups of persons in such a way as to facilitate or encourage market abuse.

REC 2.12.12 G

An RAP does not need to maintain its own arrangements for providing information on the terms of emissions auction products2 to auction bidders where it has made adequate arrangements for other persons to do so on its behalf or there are other effective and reliable arrangements for this purpose.

222

Reg 17(2)(c)

REC 2.13.3 G to REC 2.13.6 G (Promotion and maintenance of standards)

Reg 18

REC 2.14.3 G to REC 2.14.6 G (Rules and consultation)

Reg 19

REC 2.15.3 G to REC 2.15.6 G (Discipline)

Reg 22

REC 2.16.3 G to REC 2.16.4 G (Complaints)

Reg 23
CASS 1A.3.1ARRP
1A CASS medium firm and a CASS large firm must allocate to a director or senior manager the function of:(1) oversight of the operational effectiveness of that firm’s systems and controls that are designed to achieve compliance with CASS;(2) reporting to the firm’sgoverning body in respect of that oversight; and(3) completing and submitting a CMAR to the FSA in accordance with SUP 16.14.
SYSC 21.1.2GRP
(1) A Chief Risk Officer should:(a) be accountable to the firm'sgoverning body for oversight of firm-wide risk management;(b) be fully independent of a firm's individual business units;(c) have sufficient authority, stature and resources for the effective execution of his responsibilities; (d) have unfettered access to any parts of the firm's business capable of having an impact on the firm's risk profile; (e) ensure that the data used by the firm to assess its risks are fit for
COLL 11.6.13RRP
Where the authorised fund manager of a feeder UCITS gives notice to the FSA under section 251 of the Act or regulation 21 of the OEIC Regulations that it intends to wind up the scheme, it must inform:(1) the unitholders of the feeder UCITS; and(2) where notice is given under COLL 11.6.5R (4) (Application for approval by a feeder UCITS where a master UCITS merges or divides), the authorised fund manager of the master UCITS;of its intention without undue delay.[Note: articles 20(3)
COLL 8.5.10RRP
(1) The authorised fund manager must:(a) ensure that at each valuation point there are at least as many units in issue of any class as there are units registered to unitholders of that class; and(b) not do, or omit anything that would, or might confer on itself a benefit or advantage at the expense of a unitholder or potential unitholder.(2) For the purposes of (1) the authorised fund manager may take into account sales and redemptions after the valuation point, provided it has
SUP 12.4.8BGRP
1In assessing, under SUP 12.4.8A R, whether an appointed representative, or prospective appointed representative, has established the knowledge and ability requirements for persons within its management structure and for those directly involved in its insurance mediation activity, a firm should refer to TC.
REC 2.1.4GRP

Location of recognition requirements and guidance

Recognition Requirements Regulations

Subject

Section in REC 2

Regulation 6

Method of satisfying recognition requirements

2.2

Part I of the Schedule

UK RIE recognition requirements

Paragraph 1

Financial resources

2.3

Paragraph 2

Suitability

2.4

Paragraph 3

Systems and controls

2.5

Paragraphs 4(1) and 4(2)(aa)2

2

General safeguards for investors

2.6

Paragraph 4(2)(a)

Access to facilities

2.7

Paragraph 4(2)(b)

Proper markets

2.12

Paragraph 4(2)(c)

Availability of relevant information

2.12

Paragraph 4(2)(d)

Settlement

2.8

Paragraph 4(2)(e)

Transaction recording

2.9

2Paragraph 4(2)(ea)

Conflicts

2.5

Paragraph 4(2)(f)

Financial crime and market abuse

2.10

Paragraph 4(2)(g)

Custody

2.11

Paragraph 4(3)

Definition of relevant information

2.12

2Paragraph 4A

Provision of pre-trade information about share trading

2.6

2Paragraph 4B

Provision of post-trade information about share trading

2.6

Paragraph 6

Promotion and maintenance of standards

2.13

Paragraph 7

Rules and consultation

2.14

2Paragraph 7A

Admission of financial instruments to trading

2.12

2Paragraph 7B and 7C

Access to facilities

2.7

2Paragraph 7D

Settlement

2.8

2Paragraph 7E

Suspension and removal of financial instruments from trading

2.6

Paragraph 8

Discipline

2.15

Paragraph 9

Complaints

2.16

2Paragraph 9A

Operation of a multilateral trading facility

2.16A

Part II of the Schedule

UK RIE default rules in respect of market contracts

2.17

Part III of the Schedule

UK RCH recognition requirements

Paragraph 16

Financial resources

2.3

Paragraph 17

Suitability

2.4

Paragraph 18

Systems and controls

2.5

Paragraph 19(1)

General safeguards for investors

2.6

Paragraph 19(2)(a)

Access to facilities

2.7

Paragraph 19(2)(b)

Clearing services

2.8

Paragraph 19(2)(c)

Transactions recording

2.9

Paragraph 19(2)(d)

Financial crime and market abuse

2.10

Paragraph 19(2)(e)

Custody

2.11

Paragraph 20

Promotion and maintenance of standards

2.13

Paragraph 21

Rules

2.14

Paragraph 22

Discipline

2.15

Paragraph 23

Complaints

2.16

Part IV of the Schedule

UK RCH default rules in respect of market contracts

2.17
SYSC 19A.2.2GRP
(1) If a firm'sremuneration policy is not aligned with effective risk management it is likely that employees will have incentives to act in ways that might undermine effective risk management.(2) The Remuneration Code covers all aspects of remuneration that could have a bearing on effective risk management including salaries, bonuses, long-term incentive plans, options, hiring bonuses, severance packages and pension arrangements. In applying the Remuneration Code, a firm should
CASS 9.3.2GRP
(1) Principle 10 (Clients’ assets) requires a firm to arrange adequate protection for client's assets when it is responsible for them. As part of these protections, the custody rules require a firm to take appropriate steps to protect safe custody assets for which it is responsible.(2) A prime brokerage firm should not enter into “right to use arrangements” for a client'ssafe custody assets unless:1(a) in the case of a CASS small firm or a firm to which CASS 1A.3.1C R applies2,
COLL 5.7.11GRP
An authorised fund manager carrying out due diligence for the purpose of the rules in this section should make enquiries or otherwise obtain information needed to enable him properly to consider:(1) whether the experience, expertise, qualifications and professional standing of the second scheme's investment manager is adequate for the type and complexity of the second scheme;(2) the adequacy of the regulatory, legal and accounting regimes applicable to the second scheme and its
DTR 2.5.4GRP
(1) does not envisage that an issuer will: DTR 2.5.3 R (1) does not allow an issuer to delay public disclosure of the fact that it is in financial difficulty or of its worsening financial condition and is limited to the fact or substance of the negotiations to deal with such a situation. An issuer cannot delay disclosure of inside information on the basis that its position in subsequent negotiations to deal with the situation will be jeopardised by the disclosure of its financial
COLL 3.3.5BGRP
(1) 1Before undertaking a class hedging transaction for a class of units, the authorised fund manager should:2(a) ensure that the relevant prospectus clearly:(i) states that such a transaction may be undertaken for the relevant class of units2; and(ii) explains the nature of the risks that such a transaction may pose to investors in all classes;(b) consult the depositary about the adequacy of the systems and controls it uses to ensure compliance with COLL 3.3.5A R (Hedging of