Related provisions for SUP 11.4.1

The Principles for Businesses (PRIN)

The Principles for Businesses (PRIN) set out 3high-level requirements 3imposed by the FCA3. They provide a general statement of regulatory requirements. The Principles apply to all12credit unions. In applying the Principles to credit unions, the FCA3 will be mindful of proportionality. In practice, the implications are likely to vary according to the size and complexity 3of the credit union.

Senior Management Arrangements, Systems and Controls (SYSC)

SYSC 1,3SYSC 4 to 10 and SYSC 213 apply to all credit unions in respect of the carrying on of their regulated activities and unregulated activities in a prudential context. SYSC 4.5 (Management responsibilities maps for relevant authorised persons), SYSC 4.7 (Senior management responsibilities for relevant authorised persons: allocation of responsibilities), SYSC 4.9 (Handover procedures and material), SYSC 5.2 (Certification regime) and SYSC 18 apply3 to all credit unions in respect of both their regulated activities and their unregulated activities3.

3Code of Conduct (COCON)

This contains rules and guidance that are directly applicable to a credit union’sSMF managers, certification employees and (from 2017) other conduct rules staff. There is also guidance for credit unions on giving their staff training about COCON.

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 FCA3 of its powers.

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The Fit and Proper test for Approved Persons (FIT)

The purpose of FIT is to set out and describe the criteria that a firm should3 consider when assessing the fitness and propriety of a person (1)3 in respect of whom an application is being made for approval to undertake a controlled function under the approved persons regime, (2)3 who has already been approved, (3) who is a certification employee or (4) whom a firm is considering appointing to be a certification employee3.

It also sets out and describes criteria that the FCA will consider when assessing the fitness and propriety of a candidate for a controlled function position and that it may consider when assessing the continuing fitness and propriety of approved persons.3

General Provisions (GEN)

GEN contains rules and guidance on general matters, including interpreting the Handbook, statutory status disclosure, the FCA's3 logo and insurance against financial penalties.

Fees manual (FEES)

This manual sets out the fees applying to credit unions.

3Prudential sourcebook for Mortgage and Home Finance Firms, and Insurance Intermediaries (MIPRU)

MIPRU applies to any credit union carrying out insurance mediation activity or home finance mediation activity, or using these services. In particular, it sets out requirements for allocation of responsibility for the credit union’sinsurance mediation activity (MIPRU 2), for the use of home finance intermediaries (MIPRU 5) and for professional indemnity insurance (MIPRU 3).

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.

3Insurance: Conduct of Business sourcebook (ICOBS)

ICOBS applies to any credit union carrying on non-investment insurance activities, such as arranging or advising on general insurance contracts to be taken out by members. But ICOBS does not apply to a credit union taking out an insurance policy for itself, such as a policy against default by members on their loans where the credit union is the beneficiary of the policy, since in this circumstance the credit union would not be acting as an insurance intermediary, but would itself be the customer. Credit unions are reminded that they are subject to the requirements of the appropriate legislation, including the Credit Unions Act 1979, relating to activities a credit union may carry on.

3Mortgages and Home Finance: Conduct of Business sourcebook (MCOB)

MCOB applies to any credit union that engages in any home finance activity. MCOB rules cover advising and selling standards, responsible lending (including affordability assessment), charges, and the fair treatment of customers in payment difficulties.

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 customers3and financial promotions (BCOBS 2), distance communications (BCOBS 3), information to be communicated to banking customers3(BCOBS 4), post sale requirements (BCOBS 5), and cancellation (BCOBS 6). 3The rules in BCOBS 3.1 that relate to distance contracts may apply 3to a credit union. This is because the Distance Marketing Directive3applies where there is "an organised distance sales or service-provision scheme run by the supplier" (Article 2(a)), i.e. if the credit union routinely sells any of its services by post, telephone, fax or the internet3.

Supervision manual (SUP)

The following provisions of SUP are relevant to credit unions: 13SUP 1A13 (The FCA’s 3 approach to supervision), SUP 2 (Information gathering by the FCA or PRA 3 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 10C (FCA senior management regime for approved persons in relevant authorised persons),3SUP 11 (Controllers and Close links), SUP 15 (Notifications to the FCA or PRA 3) and SUP 16 (Reporting Requirements).

Credit unions are reminded that they are subject to the requirements of the Act and SUP 11 on close links, and are bound to notify the FCA3 of changes. It may be unlikely, in practice, that credit unions will develop such relationships. It is possible, however, that a person may acquire close links with a 3credit union3 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 3close links.

3Consumer Credit sourcebook (CONC)

CONC contains rules that apply to firms carrying on credit-related regulated activities. PERG 2.7.19IG provides guidance on relevant exemptions. Most credit union lending is therefore outside the scope of CONC. However, subject to the constraints in the Credit Unions Act 1979 or the Credit Unions (Northern Ireland) Order 1985 (as relevant), credit unions may undertake credit-related regulated activities to which CONC does apply if the activity is carried out by way of business. This could include lending under a borrower-lender-supplier agreement, or debt adjusting or debt counselling where the credit union is not the lender. A credit union carrying on such activities should consider whether it requires permission to do so. Further information can be found on the FCA’s website.

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).

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 other legislation.2

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.

(1) A firm applies for approval for A to perform the executive director function and the money laundering function.

There should be a single statement of responsibilities document that covers the two functions.

The combined document should be included with the application for approval.

(2) Firm X applies for approval for A to perform the executive director function. Firm Y applies for approval for A to perform the money laundering function. Both firms are relevant authorised persons.

There should be separate statements of responsibilities for each firm.

This is the case even if Firm X and Firm Y are in the same group.

(3) A firm applies for approval for A to perform an FCA-designated senior management function and a PRA-designated senior management function.

The arrangements in SUP 10C.9 for FCA functions to be absorbed into PRA ones do not apply and so there are separate applications to the FCA and PRA.

The single statement of responsibilities document should cover both the FCA and the PRA functions.

(4) A has approval to perform the executive director function. Later, A is to be appointed to perform the money laundering function for the same firm. This will also result in substantial changes to A’s duties as an executive director.

The firm should not use Form J to notify the changes to A’s duties as an executive director.

The firm should submit a revised single statement of responsibilities document along with the application to perform the money laundering function.

The single statement of responsibilities document should cover both functions. The part relating to A’s duties as an executive director should be updated.

(5) A has approval to perform the executive director function. Later, A is to be appointed to perform the PRA's chief risk officer designated senior management function for the same firm. This will also result in substantial changes to A’s duties as an executive director.

The firm should not use Form J to notify the changes to A’s duties as an executive director.

The firm should submit a revised single statement of responsibilities document along with the application to perform the PRA function.

The firm should not submit the revised single statement of responsibilities document separately to the FCA. Instead, it should include it as part of the application to the PRA.

The single statement of responsibilities document should cover both the FCA and the PRA functions. The part relating to A’s duties as an executive director should be updated.

(6) A has approval to perform the money laundering function. The approval to perform the money laundering function is subject to a condition. The firm is applying to vary that condition.

The firm should include a revised statement of responsibilities with the application.

The firm should not use Form J. It should submit a revised statement of responsibilities along with the application to vary the approval.

(7) A has approval to perform the executive director function and the money laundering function for the same firm. The approval to perform the money laundering function is subject to a condition. The firm is applying to vary that condition. As part of the same arrangements, there are to be substantial changes to A’s job as an executive director.

The firm should not use Form J to notify the changes to A’s duties as an executive director.

The firm should submit a revised single statement of responsibilities document along with the application to vary the approval for the money laundering function.

The single statement of responsibilities document should be updated and should cover both functions.

(8) A has approval to perform the executive director function and the PRA's chief risk officer designated senior management function for the same firm. The arrangements in SUP 10C.9 for FCA functions to be absorbed into PRA ones do not apply and so there are separate FCA and PRA approvals.

The approval to perform the PRA's chief risk officer designated senior management function is subject to a condition. The firm is applying to vary that condition. As part of the same arrangements, there are to be substantial changes to A’s job as an executive director.

The firm should not use Form J to notify the changes to A’s duties as an executive director.

The firm should submit a revised single statement of responsibilities document along with the application to vary the PRA function.

The firm should not submit the revised document separately to the FCA. Instead it should include it as part of the application to the PRA.

The single statement of responsibilities document should cover both the FCA and the PRA functions and should be updated.

(9) A has approval to perform the executive director function and the money laundering function for the same firm.

Sometime later, A is to give up the

money laundering function and take up the PRA's chief risk officer designated senior management function. This will involve major changes to A’s role as executive director.

The answer to example (5) applies.

The application to the PRA to perform the PRA function should be accompanied by a single document that:

(1) contains the statement of responsibilities for the new function;

(2) contains the revised statement of responsibilities for the executive director function; and

(3) reflects the fact that A is no longer performing the money laundering function.

(10) A firm has approval for A to perform the executive director function and the money laundering function.

A then ceases to perform the money laundering function but continues to perform the executive director function.

The firm must submit:

(a) Form C for the money laundering function;

(b) Form J; and

(c) a single updated statement of responsibilities document that covers the executive director function.

(11) A has approval to perform the executive director function and the PRA's chief risk officer designated senior management function for the same firm. Later, A gives up his role as chief risk officer.

The firm must submit:

(a) Form C for the PRA function;

(b) Form J; and

(c) a single updated statement of responsibilities document that covers the executive director function.

The firm should not submit the revised single statement of responsibilities document separately to the FCA. Instead, it should include it as part of the notification to the PRA.

(12) A has approval to perform the executive director function. Later, A is to be appointed to perform the money laundering function for the same firm.

The application is rejected.

The single statement of responsibilities document submitted as part of the application will no longer be correct as it reflects the proposed new approval.

If the only changes to the single document in the version sent with the application are ones, clearly and exclusively tied to the new function, the firm will not need to amend the document as the changes will automatically fall away.

In any other case (for instance if the application is approved conditionally), it is likely that the firm will need to update it using Form J.

In any case, the FCA may contact the firm to agree a revised single statement of responsibilities document.

(13) A has approval to perform the executive director function. Later, A is to be appointed to perform the money laundering function for the same firm.

This will not result in any changes to A’s duties as an executive director. However, there have been some insignificant changes to A’s role as an executive director since the firm submitted the most recent single statement of responsibilities document. The changes are not connected to A’s appointment to perform the money laundering function.

The answer for example (4) applies.

The single statement of responsibilities document should be updated to cover the changes to A’s duties as executive director, as well as covering A’s new money laundering role. It does not matter that the changes to A’s role as an executive director are not significant.

(14) A has approval to perform the executive director function. Later, A’s business unit grows in size and so the firm needs to apply for A to be approved to perform the PRA's Head of Key Business Area designated senior management function. However, A’s responsibilities do not change.

The firm should submit a revised single statement of responsibilities document along with the application to perform the PRA function.

The firm should submit a single statement of responsibilities document that covers both the FCA and the PRA functions.

It should not submit the revised single statement of responsibilities document separately to the FCA. Instead, it should include it as part of the application to the PRA.

2(15) Firm X has a branch in the United Kingdom. Firm Y is a UK authorised subsidiary3 of firm X.

Firm X is a third-country relevant authorised person and firm3 Y is a UK relevant authorised person.

Both firms apply for approval for the same individual (P) to perform the executive3director function.

There should be separate statement of responsibilities for P for each firm.

The single statement of responsibilities document means the single document described in SUP 10C.11.13D