Related provisions for SYSC 4.4.2
1 - 20 of 20 items.
1A common platform firm4 must ensure that the management body defines, oversees and is accountable for the implementation of governance arrangements that ensure effective and prudent management of the firm, including the segregation of duties in the organisation and the prevention of conflicts of interest, and in a manner that promotes the integrity of the market and the interests of clients4. The firm must ensure that the management body:(1) has overall responsibility for the
4Without prejudice to SYSC 4.3A.1R, a common platform firm must ensure that the management body defines, approves and oversees:(1) the organisation of the firm for the provision of investment services and/or activities and ancillary services, including the skills, knowledge and expertise required by personnel, the resources, the procedures and the arrangements for the provision of services and activities, taking into account the nature, scale and complexity of its business and
A common platform firm4 must ensure that the members of the management body of the firm: (1) are of sufficiently good repute;(2) possess sufficient knowledge, skills and experience to perform their duties;(3) possess adequate collective knowledge, skills and experience to understand the firm's activities, including the main risks;(4) reflect an adequately broad range of experiences; (5) commit sufficient time to perform their functions in the firm; and(6) act with honesty, integrity
A common platform firm4 must ensure that the members of the management body of the firm do not hold more directorships than is appropriate taking into account individual circumstances and the nature, scale and complexity of the firm's activities.[Note: article 91(3) of CRD and article 9(1) of MiFID4]
2(1) A common platform firm4 that is significant must ensure that the members of the management body of the firm do not hold more than one of the following combinations of directorship in any organisation at the same time:(a) one executive directorship with two non-executive directorships; and(b) four non-executive directorships. (2) Paragraph (1) does not apply to members of the management body that represent the United Kingdom.[Note: article 91(3) of CRD and article 9(1)
A common platform firm4 that is significant must:(1) establish a nomination committee composed of members of the management body who do not perform any executive function in the firm;(2) ensure that the nomination committee is able to use any forms of resources the nomination committee deems appropriate, including external advice; and(3) ensure that the nomination committee receives appropriate funding. [Note: article 88(2) of CRD and article 9(1) of MiFID4]
A common platform firm4 that has a nomination committee must ensure that the nomination committee:(1) engages 4a 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
A common platform firm4 that does not have a nomination committee must engage a broad set of qualities and competences when recruiting members to the management body. For that purpose a common platform firm4 that does not have a nomination committee must put in place a policy promoting diversity on the management body.[Note: article 91(10) of CRD and article 9(1) of MiFID4]
7For a common platform firm:
- (1)
the MiFID Org Regulation applies, as summarised in SYSC 1 Annex 1 3.2G, SYSC 1 Annex 1 3.2-AR and SYSC 1 Annex 1 3.2-BR; and
- (2)
the rules and guidance apply as set out in the table below:
Subject
Applicable rule or guidance
General requirements
1A common
platform firm must:(1) when relying on a third party for
the performance of operational functions which are critical for the performance
of regulated activities, listed activities or ancillary
services (in this chapter "relevant services and activities")
on a continuous and satisfactory basis, ensure that it takes reasonable steps
to avoid undue additional operational risk; and7(2) not undertake the outsourcing of important operational functions
in such a way as to impair
SYSC 4.1.1 R requires
a firm to have effective processes to
identify, manage, monitor and report risks and internal control mechanisms.
Except in relation to those functions described in SYSC 8.1.5R and (for a common platform firm in article 30(2) of the MiFID Org Regulation)7, where a firm relies on a third party for the performance
of operational functions which are not critical or important for the performance
of relevant services and activities (see SYSC 8.1.1 R (1)) on a
For the
purposes of this chapter an operational function is regarded as critical or
important if a defect or failure in its performance would materially impair
the continuing compliance of a firm (other than a common platform firm)7 with the conditions and obligations of its authorisation or its other obligations under
the regulatory system, or its
financial performance, or the soundness or the continuity of its relevant
services and activities.7
If a firm (other than a common platform firm)7 outsources critical
or important operational functions or any relevant services and activities,
it remains fully responsible for discharging all of its obligations under
the regulatory system and must
comply, in particular, with the following conditions:2(1) the outsourcing must
not result in the delegation by senior personnel of
their responsibility;(2) the relationship and obligations
of the firm towards its clients under the regulatory
system
A firm (other than a common platform firm)7 must make available
on request to the FCA7 and
any other relevant competent authority all
information necessary to enable the FCA7 and
any other relevant competent authority to
supervise the compliance of the performance of the outsourced activities
with the requirements of the regulatory system.7
The senior personnel of a common platform firm, a management company3, a full-scope UK AIFM,5 or of the UK branch of a non-EEA bank1must be of sufficiently good repute and sufficiently experienced as to ensure the sound and prudent management of the firm.[Note: article 9(1)(4) 9of MiFID, article 7(1)(b) of the UCITS Directive,9 article 8(1)(c) of AIFMD9 and article 91(1) 9of CRD4]35
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 : 9(a) for a full-scope UK AIFM, SYSC 4.2.7R; or9(b) for a common platform firm, SYSC 4.3A.3R.9[Note: article 9(6) 9first paragraph of MiFID, article 7(1)(b) of the UCITS Directive3, article 8(1)(c) of AIFMD5and article 13(1) of CRD]566
At least two independent minds should be applied to the formulation and implementation of the policies of a common platform firm, a management company3, a full-scope UK AIFM5 and the UK branch of a third country firm9. Where a firm1 nominates just two individuals to direct its business, the FCA9 will not regard them as both effectively directing the business where one of them makes some, albeit significant, decisions relating to only a few aspects of the business. Each should
Where there are more than two individuals directing the business of a common platform firm, a management company3, a full-scope UK AIFM5 or the UK branch of a third country firm9,1 the FCA9 does not regard it as necessary for all of these individuals to be involved in all decisions relating to the determination of strategy and general direction. However, at least two individuals should be involved in all such decisions. Both individuals' judgement should be engaged so that major
If a common platform firm, (other than a credit institution or AIFM investment firm5) or the UK branch of a third country firm9, is:11(1) a natural person; or(2) a legal person managed by a single natural person; then:9(3) it must have alternative arrangements in place which ensure: 9(a) sound and prudent management of the firm; and9(b) adequate consideration of the interests of clients and the integrity of the market; and9(4) the natural persons concerned must be of sufficiently
5For a common platform firm:
- (1)
the MiFID Org Regulation applies, as summarised in SYSC 1 Annex 1 3.2G, SYSC 1 Annex 1 3.2-AR and SYSC 1 Annex 1 3.2-BR; and
- (2)
the rules and guidance apply as set out in the table below:
Subject
Applicable rule or guidance
General requirements
Guidance on record-keeping
A firm (other than a common platform firm)5 must arrange for orderly records to
be kept of its business and internal organisation, including all services
and transactions undertaken by it, which must be sufficient to enable the FCA5 or any other
relevant competent authority under 5the UCITS Directive4 to monitor the firm's compliance
with the requirements under the regulatory
system, and in particular to ascertain that the firm has complied with all obligations with
respect to
(1) 5A common platform firm must arrange for records to be kept of all services, activities and transactions undertaken by it. (2) The records in (1) must be sufficient to enable the FCA to fulfil its supervisory tasks and to perform the enforcement actions under the regulatory system including MiFID, MiFIR and the Market Abuse Regulation, and in particular to ascertain that the common platform firm has complied with all obligations including those with respect to clients or potential
9For a common platform firm:
- (1)
the MiFID Org Regulation applies, as summarised in SYSC 1 Annex 1 3.2G, SYSC 1 Annex 1 3.2-AR and SYSC 1 Annex 1 3.2-BR; and
- (2)
the rules and guidance in the table below apply:
Subject
Applicable rule or guidance
Provision of services
Identifying conflicts
Types of conflicts
Managing conflicts
Conflicts policy
9A firm (other than a common platform firm) should assess and periodically review, on an at least an annual basis, the conflicts of interest policy established in accordance with SYSC 10.1.10R and SYSC 10.1.11R and should take all appropriate measures to address any deficiencies (such as over reliance on disclosure of conflicts of interest).
3The rules relating to:(1) types of conflict (see SYSC 10.1.4 R);(2) records of conflicts (see SYSC 10.1.6 R); and(3) conflicts of interest policies (see SYSC 10.1.10 R and SYSC 10.1.11 R);also apply to a firm which is not a common platform firm when it produces, or arranges for the production of, investment research that is intended or likely to be subsequently disseminated to clients of the firm or to the public10, and when it produces or disseminates non-independent research,10
21For a common platform firm:
- (1)
the MiFID Org Regulation applies, as summarised in SYSC 1 Annex 1 3.2G, SYSC 1 Annex 1 3.2-AR and SYSC 1 Annex 1 3.2-BR; and
- (2)
the rules and guidance apply as set out in the table below:
Subject
Applicable rule or guidance
General requirements
Business continuity
Audit committee
Persons who effectively direct the business
SYSC 4.2.1R, SYSC 4.2.2R, SYSC 4.2.3G, SYSC 4.2.4G, SYSC 4.2.5G, SYSC 4.2.6R
Responsibility of senior personnel
Management body
Nominations committee
Management responsibilities maps for UK relevant authorised persons
Management responsibilities maps for non-UK relevant authorised persons
Senior management responsibilities for UK relevant authorised persons
Handover procedures and material
3(1) A firm must have robust governance arrangements, which include a clear organisational structure with well defined, transparent and consistent lines of responsibility, effective processes to identify, manage, monitor and report the risks it is or might be exposed to, and internal control mechanisms, including sound administrative and accounting procedures and effective control and safeguard arrangements for information processing systems.8(2) [deleted]1313[Note: article 74
For a common platform firm, the 3 arrangements, processes and mechanisms referred to in SYSC 4.1.1 R must be comprehensive and proportionate to the nature, scale and complexity of the risks inherent in the business model and of13 the common platform firm's activities and must take into account the specific technical criteria described in article 21(3) of the MiFID Org Regulation21, SYSC 5.1.7 R, SYSC 7 and whichever of the following as applicable:3817131312817(1) (for a
A firm (with the exception of a common platform firm and a 21sole trader who does not employ any person who is required to be approved under section 59 of the Act (Approval for particular arrangements))3 must, taking into account the nature, scale and complexity of the business of the firm, and the nature and range of the financial services and activities 3undertaken in the course of that business:310(1) (if it is 21a management company)10 establish, implement and maintain decision-making
3A firm that is not a common platform firm or a management company10 should take into account the decision-making procedures and effective internal reporting rules (SYSC 4.1.4R (1),10(3) and (4))10 as if they were guidance (and as if "should" appeared in those rules21 instead of "must") as explained in SYSC 1 Annex 1 3.3 R(1)21.5
The matters dealt with in a business continuity policy should include:(1) resource requirements such as people, systems and other assets, and arrangements for obtaining these resources;(2) the recovery priorities for the firm's operations; (3) communication arrangements for internal and external concerned parties (including the FCA21, clients and the press);(4) escalation and invocation plans that outline the processes for implementing the business continuity plans, together with
10For a common platform firm:
- (1)
the MiFID Org Regulation applies, as summarised in SYSC 1 Annex 1 3.2G, SYSC 1 Annex 1 3.2-AR and SYSC 1 Annex 1 3.2-BR; and
- (2)
the rules and guidance apply as set out in the table below:
Subject
Applicable rule or guidance
Competent employees rule, knowledge and competence and segregation11 of functions
SYSC 5.1.2G to SYSC 5.1.5AG, SYSC 5.1.5AAR, SYSC 5.1.5ABR, SYSC 5.1.5ACG to SYSC 5.1.5AEG,11SYSC 5.1.7R, SYSC 5.1.8G to SYSC 5.1.11G
Certification regime
11SYSC 5.1.5ABR applies to a common platform firm and a third country firm:(1) in relation to its MiFID or equivalent third country business;(2) in respect of any natural persons (“relevant individuals”) who, on behalf of the firm:(a) make personal recommendations to clients in relation to financial instruments or structured deposits; or(b) provide information to retail clients or professional clients about financial instruments, structured deposits, investment services or ancillary
The systems, internal control mechanisms and arrangements established by a firm (other than a common platform firm) 10in accordance with this chapter must take into account the nature, scale and complexity of its business and the nature and range of financial services and activities 3undertaken in the course of that business.[Note:10 articles 4(1) final paragraph and 5(4) of the UCITS implementing Directive]66
16For a common platform firm:
- (1)
the MiFID Org Regulation applies, as summarised in SYSC 1 Annex 1 3.2G, SYSC 1 Annex 1 3.2-AR and SYSC 1 Annex 1 3.2-BR; and
- (2)
the rules and guidance apply as set out in the table below:
Subject
Applicable rule or guidance
Adequate policy and procedures
Compliance function
Internal audit
Financial crime
(1) 4A firm which is not a common platform firm or management company8 and which carries on designated investment business with or for retail clients or professional clients must allocate to a director or senior manager the function of:(a) having responsibility for oversight of the firm's compliance; and(b) reporting to the governing body in respect of that responsibility.(2) In SYSC 6.1.4A R (1) compliance means compliance with the rules in:(a) COBS (Conduct of Business sourcebook);(b)
(1) 9This rule applies to a common platform firm conducting investment services and activities from a branch in another EEA State.(2) References to the regulatory system in SYSC 6.1.1R, SYSC 6.1.2 R and SYSC 6.1.3 R apply in respect of a firm'sbranch as if regulatory system includes a Host State's requirements under MiFID and the MiFID Org Regulation16 which are applicable to the investment services and activities conducted from the firm'sbranch.[Note: article 16 16of MiFID]
19For a common platform firm:
- (1)
the MiFID Org Regulation applies, as summarised in SYSC 1 Annex 1 3.2G, SYSC 1 Annex 1 3.2-AR and SYSC 1 Annex 1 3.2-BR; and
- (2)
the rules and guidance apply as set out in the table below:
Subject
Applicable rule or guidance
Risk assessment
Risk management
Risk control: remuneration
Risk control: additional provisions
Additional rules for CCR firms
The management body13 of a common platform firm must approve and periodically review the strategies and policies for taking up, managing, monitoring and mitigating the risks the firm is or might be exposed to, including those posed by the macroeconomic environment in which it operates in relation to the status of the business cycle.[Note: 13article 76(1) of CRD]1313
For a common platform firm included within the scope of SYSC 20 (Reverse stress testing), the strategies, policies and procedures for identifying, taking up, managing, monitoring and mitigating the risks to which the firm is or might be exposed include conducting reverse stress testing in accordance with SYSC 20. A common platform firm which falls outside the scope of SYSC 20 should consider conducting reverse stress tests on its business plan as well. This would further senior
2(1) [deleted]1313(2) The term 'risk management function' in SYSC 7.1.6 R and SYSC 7.1.7R, and for a common platform firm in article 23(2) of the MiFID Org Regulation,19 refers to the generally understood concept of risk assessment within a firm, that is, the function of setting and controlling risk exposure.32917(3) For a firm that is not a relevant authorised person, the risk
management function is not a controlled function itself, but is part of
the systems and controls function
A firm must provide a client6 with the following general information, if relevant:(1) the name and address of the firm, and the contact details necessary to enable a client to communicate effectively with the firm;(2) [deleted]6(3) the methods of communication to be used between the firm and the client including, where relevant, those for the sending and reception of orders;(4) a statement of the fact that the firm is authorised and the name of the competent authority that has
Afirm (with the exception of a common platform firm and 5a 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,
(1) The term 'internal audit function' in SYSC 6.2.1R (and SYSC
4.1.11G), and for a common platform firm in article 24 of the MiFID Org Regulation,7 refers to the generally understood concept of internal audit
within a firm, that is, the function of assessing adherence to and the
effectiveness of internal systems and controls, procedures and
policies.6(2) 6For a firm that is not a relevant authorised person, the internal audit
function is not a controlled function itself, but
(1) [deleted]2(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.2(3) As with other aspects of a firm's systems and controls, in accordance with SYSC 4.1.2 Rremuneration policies, procedures and practices must be comprehensive and proportionate to the nature, scale and complexity of the common
In requiring someone to apportion responsibility, neither4 a common platform firm nor a Solvency II firm4 or small non-directive insurer5 should 4apply for that person or persons to be FCA-approved to perform the apportionment and oversight function (see SUP 10A.7.1 R, SYSC 2.1.3 R and SYSC 1 Annex 1).
(1) The dual-regulated firms 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.(2) As with other aspects of a firm's systems and controls, in accordance with SYSC 4.1.2R (general organisational requirements) remuneration policies, procedures and practices must be comprehensive and proportionate to
A contravention of a rule in SYSC 11 to 2SYSC 21,7SYSC 22.8.1R or SYSC 22.9.1R7 does not give rise to a right of action by a private person under section 138D of the Act (and each of those rules is specified under section 138D(3) of the Act as a provision giving rise to no such right of action). 3443