Related provisions for SYSC 19D.3.28

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To access the FCA Handbook Archive choose a date between 1 January 2001 and 31 December 2004 (From field only).

DEPP 6.5A.2GRP
(1) The FCA2 will determine a figure that reflects the seriousness of the breach. In many cases, the amount of revenue generated by a firm from a particular product line or business area is indicative of the harm or potential harm that its breach may cause, and in such cases the FCA2 will determine a figure which will be based on a percentage of the firm’s revenue from the relevant products or business areas. The FCA2 also believes that the amount of revenue generated by a firm
INSPRU 1.5.11GRP
This section also sets out requirements for the separation of different types of insurance activity. However, in most circumstances the combination of different types of insurance activity within the same firm is a source of strength. Adequate pooling and diversification of insurance risk is fundamental to sound business practice. The requirements, therefore, only apply in two specific cases where without adequate protection the combination might operate to the detriment of policyholders.
BIPRU 14.4.6RRP
If the amount of positive exposure resulting from free delivery transactions is not material, a firm may apply a risk weight of 100% to these exposures.
IFPRU 4.8.22GRP
The FCA expects firms to investigate how their EAD estimates are impacted by exposures that are in excess of limits at either the observation date (if in the reference data set) or at the current reporting date (for the existing book to which estimates need to be applied). Unless a momentum approach is being used, exposures in excess of limit should be excluded from the reference data set (as the undrawn limit is negative and nonsensical answers would result from their inclusion).
BIPRU 8.5.8GRP
In general a collective portfolio management investment firm2 only calculates its capital and concentration risk requirements in relation to its designated investment business and does not calculate them with respect tomanaging an AIF or managing a UCITS. 2 The effect of BIPRU 8.5.7 R is that this does not apply on a consolidated basis. For the purpose of this chapter the calculations are carried out2 with respect to the whole of the activities of a collective portfolio management
CREDS 10.1.3GRP

Module

Relevance to Credit Unions

The Principles for Businesses (PRIN)

The Principles for Businesses (PRIN) set out, high-level requirements, some of which are imposed by the FCA and some by the PRA.12 They provide a general statement of regulatory requirements. The Principles apply to all12credit unions. In applying the Principles to credit unions, the appropriate regulator12 will be mindful of proportionality. In practice, the implications are likely to vary according to the size of the credit union.

121212

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 appropriate regulator12 of its powers.

1212

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 appropriate regulator12, 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.

12

The Fit and Proper test for Approved Persons (FIT)

The purpose of FIT is to set out and describe the criteria that the appropriate regulator12 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.

12

General Provisions (GEN)

GEN contains rules and guidance on general matters, including interpreting the Handbook, statutory status disclosure, the appropriate regulator's12 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: 13SUP 1A13 (The appropriate regulator's12 approach to supervision), SUP 2 (Information gathering by the appropriate regulator12 on its own initiative), SUP 3.1 to SUP 3.8 (Auditors), SUP 5 (Skilled persons), SUP 6 (Applications to vary or cancel Part 4A12permission), SUP 7 (Individual requirements), SUP 8 (Waiver and modification of rules), SUP 9 (Individual guidance), 13SUP 10A and SUP 10B13 (Approved persons), SUP 11 (Controllers and Close links), SUP 15 (Notifications to the appropriate regulator12) 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 appropriate regulator12 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.

1212121212

Decision, Procedure and Penalties manual (DEPP)

DEPP is relevant to credit unions because it sets out:

(1) the FCA's12 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 FCA's12 policy with respect to the imposition and amount of penalties under the Act (see DEPP 6).

1212

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.12

The Enforcement Guide (EG)

The Enforcement Guide (EG) describes the FCA's12 approach to exercising the main enforcement powers given to it by the Act and by regulation 12 of the Unfair Terms Regulations.

12

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.
IFPRU 11.3.9RRP
If the RRD group includes an IFPRU 730k firm that is not a significant IFPRU firm (and does not include an IFPRU 730k firm that is a significant IFPRU firm) the group recovery plan must include:(1) a summary of the key elements of the group recovery plan;(2) information on the governance of the group, including: (a) how the group recovery plan is integrated into the corporate governance of the group; and (b) the group's overall risk management framework;(3) a description of the
SUP 16.18.4EURP

Reporting to competent authorities

1.

In order to comply with the requirements of the second subparagraph of Article 24(1) and of point (d) of Article 3(3) of Directive 2011/61/EU, an AIFM shall provide the following information when reporting to competent authorities:

(a)

the main instruments in which it is trading, including a break-down of financial instruments and other assets, including the AIF's investment strategies and their geographical and sectoral investment focus;

(b)

the markets of which it is a member or where it actively trades;

(c)

the diversification of the AIF's portfolio, including, but not limited to, its principal exposures and most important concentrations.

The information shall be provided as soon as possible and not later than one month after the end of the period referred to in paragraph 3. Where the AIF is a fund of funds this period may be extended by the AIFM by 15 days.

2.

For each of the EU AIFs they manage and for each of the AIFs they market in the Union, AIFMs shall provide to the competent authorities of their home Member State the following information in accordance with Article 24(2) of Directive 2011/61/EU:

(a)

the percentage of the AIF's assets which are subject to special arrangements as defined in Article 1(5) of this Regulation arising from their illiquid nature as referred to in point (a) of Article 23(4) of Directive 2011/61/EU;

(b)

any new arrangements for managing the liquidity of the AIF;

(c)

the risk management systems employed by the AIFM to manage the market risk, liquidity risk, counterparty risk and other risks including operational risk;

(d)

the current risk profile of the AIF, including:

(i)

the market risk profile of the investments of the AIF, including the expected return and volatility of the AIF in normal market conditions;

(ii)

the liquidity profile of the investments of the AIF, including the liquidity profile of the AIF's assets, the profile of redemption terms and the terms of financing provided by counterparties to the AIF;

(e)

information on the main categories of assets in which the AIF invested including the corresponding short market value and long market value, the turnover and performance during the reporting period; and

(f)

the results of periodic stress tests, under normal and exceptional circumstances, performed in accordance with point (b) of Article 15(3) and the second subparagraph of Article 16(1) of Directive 2011/61/EU.

3.

The information referred to in paragraphs 1 and 2 shall be reported as follows:

(a)

on a half-yearly basis by AIFMs managing portfolios of AIFs whose assets under management calculated in accordance with Article 2 in total exceed the threshold of either EUR 100 million or EUR 500 million laid down in points (a) and (b) respectively of Article 3(2) of Directive 2011/61/EU but do not exceed EUR 1 billion, for each of the EU AIFs they manage and for each of the AIFs they market in the Union;

(b)

on a quarterly basis by AIFMs managing portfolios of AIFs whose assets under management calculated in accordance with Article 2 in total exceed EUR 1 billion, for each of the EU AIFs they manage, and for each of the AIFs they market in the Union;

(c)

on a quarterly basis by AIFMs which are subject to the requirements referred to in point (a) of this paragraph, for each AIF whose assets under management, including any assets acquired through use of leverage, in total exceed EUR 500 million, in respect of that AIF;

(d)

on an annual basis by AIFMs in respect of each unleveraged AIF under their management which, in accordance with its core investment policy, invests in non-listed companies and issuers in order to acquire control.

4.

By way of derogation from paragraph 3, the competent authority of the home Member State of the AIFM may deem it appropriate and necessary for the exercise of its function to require all or part of the information to be reported on a more frequent basis.

5.

AIFMs managing one or more AIFs which they have assessed to be employing leverage on a substantial basis in accordance with Article 111 of this Regulation shall provide the information required under Article 24(4) of Directive 2011/61/EU at the same time as that required under paragraph 2 of this Article.

6.

AIFMs shall provide the information specified under paragraphs 1, 2 and 5 in accordance with the pro-forma reporting template set out in the Annex IV.

7.

In accordance with point (a) of Article 42(1) of Directive 2011/61/EU, for non-EU AIFMs, any reference to the competent authorities of the home Member State shall mean the competent authority of the Member State of reference.

[Note: Article 110 of the AIFMD level 2 regulation]
DEPP 6.5C.2GRP
(1) The FCA3 will determine a figure dependent on the seriousness of the market abuse and whether or not it was referable to the individual’s employment. This reflects the FCA's3 view that where an individual has been put into a position where he can commit market abuse because of his employment the fine imposed should reflect this by reference to the gross amount of all benefits derived from that employment.33(2) In cases where the market abuse was referable to the individual’s
SYSC 14.1.29AGRP
10When determining the adequacy of its internal controls, a firm should consider both the potential risks that might hinder the achievement of the objectives listed in SYSC 14.1.28 G, and the extent to which it needs to control these risks. More specifically, this should normally include consideration of:(1) the appropriateness of its reporting and communication lines (see SYSC 3.2.2 G);(2) how the delegation or contracting of functions or activities to employees, appointed representatives
BIPRU 1.3.9DRP
For the purposes of BIPRU 1.3.8 D, the application of a firm must indicate whether and how diversification effects are intended to be factored in the risk measurement system.[Note:BCD annex X Part 3 point 31]
BIPRU 11.3.3RRP
(1) A firm must adopt a formal policy to comply with the disclosure requirements laid down in BIPRU 11.3.1 R and BIPRU 11.3.2 R and have policies for assessing the appropriateness of its disclosures, including their verification and frequency.2(2) A firm must also have policies for assessing whether its disclosures convey its risk profile comprehensively to market participants. Where those disclosures do not convey its risk profile comprehensively to market participants, a firm
SYSC 4.1.13GRP
7Firms should also consider the additional guidance on risk-centric governance arrangements for effective risk management contained in SYSC 21.
BIPRU 9.4.17GRP
2When considering an application for a waiver of the requirements in BIPRU 9.4.11R and BIPRU 9.4.12R, the appropriate regulator may undertake a visit to the firm in order to examine the firm's risk management and governance arrangements. Before such a visit, the appropriate regulator may request information from the firm additional or supplementary to that provided in the waiver application.
MAR 1.6.7GRP
It is unlikely that the behaviour of market or auction platform5 users when dealing5 at times and in sizes most beneficial to them (whether for the purpose of long term investment objectives, risk management or short term speculation) and seeking the maximum profit from their dealings will of itself amount to distortion. Such behaviour, generally speaking, improves the liquidity and efficiency of markets or auction platforms.55
COBS 19.1.7GRP
When a firm advises a retail client on a pension transfer, pension conversion5 or pension opt-out, it should consider the client’s attitude to risk including, where relevant, 5in relation to the rate of investment growth that would have to be achieved to replicate the benefits being given up.
PERG 5.11.13AGRP
(1) 2There are two types of travel risks covered by PERG 5.11.13G (4)(b). The first type covers damage to, or loss of, baggage and other risks linked to the travel booked with the provider where that travel relates to attendance at an event organised or managed by that provider and the party seeking insurance is not an individual (acting in his private capacity) or a small business.(2) "Small business" means a sole trader, body corporate, partnership or unincorporated association
DISP App 1.4.15GRP

12Example 9

Example 9

Term extends beyond retirement age: example of failure to explain investment risks

Background

45 year old male non-smoker, having taken out a £50,000 loan in 1998 for a term of 25 years. Unsuitable sale identified on the grounds of affordability and complaint raised on 12th anniversary.

It has always been the intention of the complainant to retire at state retirement age 65.

Term from date of sale to retirement is 20 years and the maturity date of the mortgage is five years after retirement.

In addition, an endowment does not meet the complainant's attitude to investment risk and a repayment mortgage would have been taken out if properly advised.

Established facts

Surrender value (on the 25 year policy) at time complaint assessed:

£12,500

Capital repaid under repayment mortgage of term to retirement date (20 years):

£21,000

Surrender value less capital repaid:

(£8.500)

Difference in outgoings (repayment - endowment):

£5,400

Cost of converting from endowment mortgage to repayment mortgage:

£200

Basis of compensation:

The surrender value of the (25 year term) endowment policy is compared to the capital that would have been repaid to date under a repayment mortgage arranged to repay the loan at retirement age, in this example, a repayment mortgage for a term of 20 years. The complainant has gained from lower outgoings of the endowment mortgage to date. In calculating the redress, the gain may be offset against the loss unless the complainant's particular circumstances are such that it would be unreasonable to take account of the gain. The conversion costs are also taken into account in calculating the redress.

Redress generally

Loss from surrender value less capital repaid:

(£8,500)

Gain from total lower outgoings under endowment mortgage:

£5,400

Cost of converting to a repayment mortgage:

(£200)

Net loss:

(£3,300)

Therefore total redress is:

£3,300

Redress if it is unreasonable to take account of gain from lower outgoings

Loss from surrender value less capital repaid:

(£8,500)

Gain from total lower outgoings under endowment mortgage:

Ignored

Cost of converting to a repayment mortgage:

(£8,700)

Therefore total redress is:

£8,700
DEPP 6.5B.2GRP
(1) The FCA3 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;