Related provisions for APER 4.5.13
1 - 20 of 27 items.
1A relevant authorised person assessing the fitness and propriety of staff being assessed under FIT should consider:(1) the nature, scale and complexity of its business, the nature and range of financial services and activities undertaken in the course of that business; and(2) whether the candidate or person has the knowledge, skills and experience to perform the specific role that the candidate or person is intended to perform.
The criteria listed in FIT 2.1 to FIT 2.3 are guidance and will be applied in general terms when the FCA1 is determining a person's fitness and propriety. It would be impossible to produce a definitive list of all the matters which would be relevant to a particular determination. A relevant authorised person assessing the fitness and propriety of staff being assessed under FIT should be guided by substantially the same criteria in FIT 2.1 to FIT 2.3 (to the extent applicable to
If a matter comes to the FCA's1 attention which suggests that the person might not be fit and proper, the FCA1 will take into account how relevant and how important it is. In the same way, if a matter comes to the attention of a relevant authorised person which suggests that any staff being assessed under FIT might not be fit and proper, the firm should take into account how relevant and how important that matter is. 111
1A relevant authorised person assessing the continuing fitness and propriety of staff being assessed under FIT should assess the role that the individual is actually performing at the time the assessment is done. For this purpose, the assessor(s) should be provided with an up-to-date job description for that individual in advance of the assessment.
(1) Dual-regulated firms Remuneration Code staff comprises:(a) an employee of a dual-regulated firm whose professional activities have a material impact on the firm’s risk profile, including any employee who is deemed to have a material impact on the firm’s risk profile in accordance with Regulation (EU) 604/2014 of 4 March 2014 (Regulatory technical standards to identify staff who are material risk takers); or(b) subject to (2) and (3), an employee of an overseas firm in SYSC
(1) This Remuneration Principle is designed to manage the conflicts of interest which might arise if other business areas had undue influence over the remuneration of employees within control functions. Conflicts of interest can easily arise when employees are involved in the determination of remuneration for their own business area. Where these could arise, they need to be managed by having in place independent roles for control functions (including, notably, risk management
A firm may apply discretionary factors to the extent that is appropriate and consistent with the overall aims of the risk adjustment exercise. Where such further adjustments have been made, firms should provide clear quantification and explanation to ensure their risk adjustment frameworks are sufficiently transparent.
(1) A firm must ensure that where remuneration is performance-related:(a) the total amount of remuneration is based on a combination of the assessment of the performance of:(i) the individual;(ii) the business unit concerned; and(iii) the overall results of the firm; and(b) when assessing individual performance, financial as well as non-financial criteria are taken into account.[Note: article 94(1)(a) of the CRD and Standard 6 of the FSB Compensation Standards]
3Behaviour
of the type referred to in APER 4.5.8 G4 includes, but is not limited to:(1) failing
to review the competence, knowledge, skills and performance of staff to assess
their suitability to fulfil their duties, despite evidence that their performance
is unacceptable (see APER 4.5.14 G);(2) giving
undue weight to financial performance when considering the suitability or
continuing suitability of an individual for a particular role (see APER 4.5.14 G);(3) allowing
managerial
2The appropriate approved person performing an accountable higher management function3 should take reasonable steps to satisfy themselves3, on reasonable grounds, that each area of the business for which they are3 responsible has in place appropriate policies
and procedures for reviewing the competence, knowledge, skills and performance
of each individual member of staff.3
In organising the business, the approved person performing an accountable higher management function3 should pay attention to any temporary vacancies which exist (see APER 4.5.9G(3)3). They3 should take reasonable steps to ensure that suitable cover for responsibilities is arranged. This could include taking on temporary staff or external consultants. The approved person performing an accountable higher management function3 should assess the risk that is posed to compliance with
In assessing whether the systems and controls used by a UK recognised body in the performance of its relevant functions are adequate and appropriate for the scale and nature of its business, the FCA3 may have regard to the UK recognised body's:3(1) arrangements for managing, controlling and carrying out its relevant functions, including: (a) the distribution of duties and responsibilities among its key individuals and the departments of the UK recognised body responsible for performing
The FCA3 may also have regard to the contracts of employment, staff rules, letters of appointment for members of the governing body, members of relevant committees and other key individuals and other guidance given to individuals on handling conflicts of interest. Guidance to individuals may need to cover:3(1) the need for prompt disclosure of a conflict of interest to enable others, who are not affected by the conflict, to assist in deciding how it should be managed;(2) the circumstances
A UK recognised body's arrangements for internal and external audit will be an important part of its systems and controls. In assessing the adequacy of these arrangements, the FCA3 may have regard to: 3(1) the size, composition and terms of reference of any audit committee of the UK recognised body'sgoverning body;(2) the frequency and scope of external audit; (3) the provision and scope of internal audit; (4) the staffing and resources of the UK recognised body's internal audit
A firm should consult SYSC 3.2.2 G to SYSC 3.2.5 G for guidance on reporting lines and delegation of functions within a firm and SYSC 3.2.13 G to SYSC 3.2.14 G for guidance on the suitability of employees and appointed representatives or, where applicable, its tied agents1. This section provides additional guidance on management of employees and other human resources in the context of operational risk.
A firm should establish and maintain appropriate systems and controls for the management of operational risks that can arise from employees. In doing so, a firm should have regard to:(1) its operational risk culture, and any variations in this or its human resource management practices, across its operations (including, for example, the extent to which the compliance culture is extended to in-house IT staff);(2) whether the way employees are remunerated exposes the firm to the
A firm should ensure that all employees are capable of performing, and aware of, their operational risk management responsibilities, including by establishing and maintaining:(1) appropriate segregation of employees' duties and appropriate supervision of employees in the performance of their responsibilities (see SYSC 3.2.5 G);(2) appropriate recruitment and subsequent processes to review the fitness and propriety of employees (see SYSC 3.2.13 G and SYSC 3.2.14 G);(3) clear
Firms should ensure that employees are appropriately supervised at all times. It is expected that the level and intensity of that supervision will be significantly greater in the period before the firm has assessed the employee as competent, than after. A firm should therefore have clear criteria and procedures relating to the specific point at which the employee is assessed as competent in order to be able to demonstrate when and why a reduced level of supervision may be considered
Firms should ensure that those supervising employees carrying on an activity in TC Appendix 1 have the necessary coaching and assessment skills as well as technical knowledge and experience17 to act as a competent supervisor and assessor. In particular firms should consider whether it is appropriate to require those supervising employees not assessed as competent to attain 16an appropriate qualification 16as well except where the employee is giving advice on retail investment products or advising on P2P agreements, 24 see TC 2.1.5 R.
16161717Firms should ensure that their employees' training needs are assessed at the outset and at regular intervals (including if their role changes). Appropriate training and support should be provided to ensure that any relevant training needs are satisfied. Firms should also review at regular intervals the quality and effectiveness of such training.
A firm is permitted to suspend the requirements of TC 2.1.15 R in respect of a retail investment adviser for the period of time during which the retail investment adviser is continuously absent from work, if that absence is due to:17(1) maternity, paternity or adoption leave;(2) long-term illness or disability; (3) caring responsibilities for a family member who has a long-term illness or disability; or(4) any other absence allowed in order for the firm to meet its statutory duties
A CRR firm that has a nomination committee must ensure that the nomination committee:(1) engage a broad set of qualities and competences when recruiting members to the management body and for that purpose puts in place a policy promoting diversity on the management body; (2) identifies and recommends for approval, by the management body or by general meeting, candidates to fill management body vacancies, having evaluated the balance of knowledge, skills, diversity and experience
5A relevant authorised person determining the honesty, integrity and reputation of staff being assessed under FIT, should consider all relevant matters, including those set out in FIT 2.1.3G, which may have arisen either in the United Kingdom or elsewhere. Firms should inform themselves of relevant matters, including checking for convictions for criminal offences (where possible) and contacting previous employers who have employed that candidate or person. If any staff being assessed
A common platform firm and a management company6 must ensure that the performance of multiple functions by its relevant persons does not and is not likely to prevent those persons from discharging any particular functions soundly, honestly and professionally.[Note:article 5(1)(g) of the MiFID implementing Directive and article 5(3) of the UCITS implementing Directive]6
Afirm (with the exception of a sole trader who does not employ any person who is required to be approved under section 59 of the Act (Approval for particular arrangements)),2 when allocating functions internally, must ensure that senior personnel and, where appropriate, the supervisory function, are responsible for ensuring that the firm complies with its obligations under the regulatory system1. In particular, senior personnel and, where appropriate, the supervisory function
1Behaviour
of the type referred to in APER 4.6.8 G includes, but is not limited to:(1) failing
to take personal action where progress is unreasonably slow, or where implausible
or unsatisfactory explanations are provided;(2) failing
to review the performance of an outside contractor in connection with the
delegated issue or business.
The FCA1will not normally require a 1candidate to supply a statement of assets or liabilities. The fact that a person may be of limited financial means will not, in itself, affect their 1suitability to perform a controlled function. The FCA would expect a relevant authorised person to take a similar view in assessing whether staff being assessed under FIT, are fit and proper.1111
6The FCA would expect a relevant authorised person determining the competence and capability of staff being assessed under FIT to consider convictions, dismissals and suspensions from employment for drug or alcohol abuses or other abusive acts only in relation to a person's continuing ability to perform the particular FCA designated senior management function or an FCA-specified significant-harm function6for which the person is, or is to be, employed.
1A management company must establish and apply remuneration policies and practices for UCITS Remuneration Code staff that: (1) are consistent with and promote sound and effective risk management;(2) do not encourage risk taking which is inconsistent with the risk profiles or the instrument constituting the fund or the prospectus, as applicable, of the UCITS it manages; (3) do not impair the management company’s compliance with its duty to act in the best interests of the UCITS
The organisation of the business and the responsibilities of those within it should be clearly defined. Reporting lines should be clear to staff. Where staff have dual reporting lines there is a greater need to ensure that the responsibility and accountability of each individual line manager is clearly set out and understood.
- (1)
In the FCA's view:
- (a)
- (b)
a person who performs a significant influence function for, or is a senior manager of, a firm would normally be expected to be part of the firm'sBIPRU Remuneration Code staff;
- (c)
the table in (2) provides a non-exhaustive list of examples of key positions that should, subject to (d), be within a firm's definition of staff who are risk takers;
- (d)
firms should consider how the examples in the table in (2) apply to their own organisational structure;
1 - (e)
firms may find it useful to set their own metrics to identify their risk takers based, for example, on trading limits; and
- (f)
a firm should treat a person as being BIPRU Remuneration Code staff in relation to remuneration in respect of a given performance year if they were BIPRU Remuneration Code staff for any part of that year.
[Note: The FCA has published guidance on the application of particular rules on remuneration structures in relation to individuals who are BIPRU Remuneration Code staff for only part of a given performance year. This guidance is available at www.fca.org.uk/firms/remuneration
.]
- (2)
High-level category
Suggested business lines
Heads of significant business lines (including regional heads) and any individuals or groups within their control who have a material impact on the firm's risk profile
Fixed income
Foreign exchange
Commodities
Securitisation
Sales areas
Investment banking (including mergers and acquisitions advisory)
Commercial banking
Equities
Structured finance
Lending quality
Trading areas
Research
Heads of support and control functions and other individuals within their control who have a material impact on the firm's risk profile
Credit/market/operational risk
Legal
Treasury controls
Human resources
Compliance
Internal audit
(1) This Remuneration Principle is designed to manage the conflicts of interest which might arise if other business areas had undue influence over the remuneration of employees within control functions. Conflicts of interest can easily arise when employees are involved in the determination of remuneration for their own business area. Where these do arise they need to be managed by having in place independent roles for control functions (including, notably, risk management and
(1) The certification regime only applies to an employee.(2) This definition includes a person who:(a) personally provides, or is under an obligation personally to provide, services to the firm in question under an arrangement made between the firm and the person providing the services or another person; and(b) is subject to (or to the right of) supervision, direction or control by the firm as to the manner in which those services are provided.
(1) A person who works for an appointed representative of a firm may fall into the certification regime. In practice, however, they may not meet the conditions for the certification regime to apply.(2) One condition for the certification regime to apply to a person is that the person performs a specified significant-harm function under an arrangement entered into by the firm (see SYSC 5.2.4G). However, unlike the equivalent parts of the Act for the approved persons regime, the
(1) Depending on the nature, scale and complexity of its business, it may be appropriate for a credit union to have a separate compliance function.(2) The organisation and responsibilities of a compliance function should be documented.(3) A compliance function should be staffed by an appropriate number of competent staff who are sufficiently independent to perform their duties objectively. It should be adequately resourced and should have unrestricted access to the credit union's
A common platform firm, a management company, a full-scope UK AIFM53 and the UK branch of a non-EEA bank1must ensure that its management is undertaken by at least two persons meeting the requirements laid down in SYSC 4.2.1 R and, for a full-scope UK AIFM, SYSC 4.2.7 R5.[Note: article 9(4) first paragraph of MiFID, article 7(1)(b) of the UCITS Directive3, article 8(1)(c) of AIFMD5and article 13(1) of CRD]66